<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999 or
--------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________to________________
Commission file number 0-21580
------------------------------------------------------
Wells Real Estate Fund V, L.P.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1936904
- ------------------------------- -----------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
--------------
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------
1
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund V, L.P.
------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1999
and December 31, 1998............................... 3
Statements of Income for the Three
Months Ended March 31, 1999
and 1998............................................ 4
Statement of Partners' Capital
for the Year Ended December 31, 1998,
and the Three Months Ended March 31, 1999........... 5
Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998....................... 6
Condensed Notes to Financial Statements.............. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................... 8
PART II. OTHER INFORMATION.............................................. 16
2
<PAGE>
WELLS REAL ESTATE FUND V, L.P.
(a Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1999 December 31, 1998
------ -------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $12,550,621 $12,673,831
Cash and cash equivalents 42,524 63,998
Due from affiliates 310,410 300,674
----------- -----------
Total assets $12,903,555 $13,038,503
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 0 $ 4,274
Partnership distributions payable 283,810 273,916
----------- -----------
283,810 278,190
----------- -----------
Partners' capital:
Limited partners
Class A - 1,556,416 units outstanding 12,619,745 12,760,313
Class B - 144,186 units outstanding 0 0
----------- -----------
Total partners' capital 12,619,745 12,760,313
----------- -----------
Total liabilities and partners' capital $12,903,555 $13,038,503
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND V, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Interest income $ 630 $ 1,287
Equity in income of joint ventures
(Note 2) 169,843 168,590
------- -------
170,473 169,877
------- -------
Expenses:
Legal and accounting 5,740 4,771
Computer costs 2,820 2,017
Partnership administration 18,670 10,293
------- -------
27,230 17,081
------- -------
Net income $ 143,243 $ 152,796
======= =======
Net income allocated to Class A $ 143,243 $ 152,796
Limited
Net loss allocated to Class B $ 0 $ 0
Limited Partners
Net income per Class A Limited $ 0.09 $ 0.10
Partner Unit
Net loss per Class B Limited Partner $ 0 $ 0
Unit
Cash distribution per Class A
Limited $ 0.18 $ 0.19
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND V, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE THREE MONTHS ENDED
MARCH 31, 1999
<TABLE>
<CAPTION>
Limited Partners Total
-------------------------------------------
Class A Class B General Partners'
------------------------- ----------------
Units Amount Units Amount Partners Capital
---------- ------------- -------- ------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 1,551,416 $13,297,946 149,186 $0 $0 $13,297,946
Net income 0 622,106 0 0 0 622,106
Partnership distributions 0 (1,159,739) 0 0 0 (1,159,739)
Class B conversion elections 7,605 0 (7,605) 0 0 0
--------- ----------- ------- -- -- -----------
BALANCE, December 31, 1998 1,559,021 12,760,313 141,581 0 0 12,760,313
Net income 0 143,243 0 0 0 143,243
Partnership distributions 0 (283,811) 0 0 0 (283,811)
Class B conversion elections (2,605) 0 2,605 0 0 0
--------- ----------- ------- -- -- -----------
BALANCE, March 31, 1999 1,556,416 $12,619,745 144,186 $0 $0 $12,619,745
========= =========== ======= == == ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND V, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 143,243 $ 152,796
Adjustments to reconcile net income to
net cash used in operating activities:
Equity in income of joint venture (169,843) (168,590)
Changes in assets and liabilities:
Accounts payable (4,274) 0
--------- ---------
Net cash used in operating
activities (30,874) (15,794)
--------- ---------
Cash flow from investing activities:
Distributions received from
joint ventures 300,674 305,709
Investment in joint ventures (17,357) 0
--------- ---------
Net cash provided by
investing activities 283,317 305,709
--------- ---------
Cash flow from financing activities:
Partnership distributions paid (273,917) (288,503)
--------- ---------
Net increase (decrease) in
cash and cash equivalents (21,474) 1,412
Cash and cash equivalents, beginning 63,998 91,678
of year --------- ---------
Cash and cash equivalents, end of $ 42,524 $ 93,090
period ========= =========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND V, L.P
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-----------
Wells Real Estate Fund V, L.P. ("the Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The Partnership was formed on October 25, 1990, for the
purpose of acquiring, developing, owning, operating, improving, leasing,
and otherwise managing for investment purposes income producing commercial
or industrial properties.
On March 6, 1992, the Partnership commenced an offering of up to
$25,000,000 of Class A or Class B limited partnership units ($10.00 per
unit) pursuant to a Registration Statement on Form S-11 filed under the
Securities Act of 1933. The Partnership did not commence active operations
until it received and accepted subscriptions for a minimum of 125,000 units
on April 27, 1992. The offering was terminated on March 3, 1993, at which
time the Partnership had sold 1,520,967 Class A Units and 179,635 Class B
Units representing $17,006,020 of capital contributions by investors who
were admitted to the Partnership as Limited Partners.
The Partnership owns interests in properties through its equity ownership
in the following joint ventures: (i) Fund IV and Fund V Associates, a joint
venture between the Partnership and Wells Real Estate Fund IV, L.P. (the
"Fund IV - Fund V Joint Venture"); (ii) Fund V and Fund VI Associates, a
joint venture between the Partnership and Wells Real Estate Fund VI, L.P.
(the "Fund V - Fund VI Joint Venture"); and (iii) Fund V, Fund VI, and Fund
VII Associates, a joint venture between the Partnership, Wells Real Estate
Fund VI, L.P. and Wells Real Estate Fund VII, L.P. (the "Fund V-VI-VII
Joint Venture").
As of March 31, 1999, the Partnership owned interests in the following
properties through its ownership in the foregoing joint ventures: (i) a
four-story office building located in Jacksonville, Florida ("IBM
Jacksonville"), which is owned by the Fund IV - Fund V Joint Venture; (ii)
two substantially identical two-story office buildings located in Clayton
County, Georgia (the "Medical Center"), which are owned by the Fund IV -
Fund V Joint Venture; (iii) a four-story office building located in
metropolitan Hartford, Connecticut (the "Hartford Building"), which is
owned by the Fund V - Fund VI Joint Venture; (iv) two retail buildings
located in Clayton County, Georgia ("Stockbridge Village II"), which are
owned by the Fund V - Fund VI Joint Venture; and (v) a three-story office
building located in Appleton, Wisconsin (the "Marathon Building"), which is
owned by the Fund V-VI-VII Joint Venture. All of the foregoing properties
were acquired on an all cash basis. For further information regarding
these joint ventures and properties, refer to the Partnership's Form 10-K
for the year ended December 31, 1998.
7
<PAGE>
(B) Basis of Presentation
-------------------------
The financial statements of the Partnership have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These quarterly statements
have not been examined by independent accountants, but in the opinion of
the General Partners, the statements for the unaudited interim periods
presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for such
periods. For further information, refer to the financial statements and
footnotes included in the Partnership's Form 10-K for year ended December
31, 1998.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interests in five properties through its investment in
joint ventures of which four are office building properties and one is a
retail property. The Partnership does not have control over the operations
of the joint ventures; however, it does exercise significant influence.
Accordingly, investment in joint ventures is recorded on the equity method.
For further information, refer to the financial statements and footnotes
included in the Partnership's Form 10-K for the year ended December 31,
1998.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes thereto.
This Report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially form any forward-looking
statement made in this Report, which include construction costs which may
exceed estimates, construction delays, lease-up risks, inability to obtain
new tenants upon expiration of existing leases, and the potential need to
fund tenant improvements or other capital expenditures out of operating
cash flow.
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of March 31, 1999, the developed properties of the Partnership were 96%
occupied as compared to 95% occupied at March 31, 1998. Gross revenues of
the Partnership were $170,473 for the three months ended March 31, 1999, as
compared to $169,877 for the three
8
<PAGE>
months ended March 31, 1998. Net income has decreased for the three months
ended March 31, 1999, over 1998 levels due chiefly to increased partnership
administrative costs.
Net cash used in operating activities increased from $15,794 for the three
months ended March 31, 1998 to $30,874 for the same period in 1999. The
decrease in cash and cash equivalents from $1,412 for the three months
ended March 31, 1998, to $(21,474) for the three months ended March 31,
1999, was due primarily to an increase in investments in joint ventures.
The Partnership made cash distributions to the Limited Partners holding
Class A Units of $.18 per Class A Unit for the three months ended March 31,
1999, as compared to distributions of $.19 per Class A Unit for the three
months ended March 31, 1998. No cash distributions were made to the Limited
Partners holding Class B Units or to the General Partners.
Year 2000
---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A
full assessment of Year 2000 compliance issues was begun in late 1997 and
was completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted. The costs incurred by the
Partnership and its affiliates thus far for renovations and replacements
have been immaterial. Some testing of systems has begun and all testing is
expected to be complete by June 30, 1999.
As to the status of the Partnerships' information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant. The Partnerships' affiliated entities are purchasing the
upgrade for the accounting and property management package system; however,
it is not slated to be available until the end of the second quarter of
1999. At the present time, it is believed that all non-major information
technology systems are Year 2000 compliant. The cost to upgrade any
noncompliant systems is believed to be immaterial.
The Partnership is in the process of confirming with the Partnership's
vendors, including third-party service providers such as banks, that their
systems will be Year 2000 compliant. Based on the information received
thus far, the primary third-party service providers with which the
Partnership has relationships have confirmed their Year 2000 readiness.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use
with its accounting, property management and investment portfolio tracking.
The Partnership has preliminary determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000
issues are not expected to have a material impact on the future operations
or financial condition of the Partnership. The Partnership will perform
due diligence as to the Year 2000 readiness of each property owned by the
Partnership and each property contemplated for purchase by the Partnership.
9
<PAGE>
The Partnership's reliance on embedded computer systems (i.e.
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
The Partnership is currently formulating contingency plans to cover any
areas of concern. Alternate means of operating the business are being
developed in the unlikely circumstance that the computer and phone systems
are rendered inoperable. An off-site facility from which the Partnership
could operate is being sought as well as alternate means of communication
with key third-party vendors. A written plan is being developed for
testing and dispensation to each staff member of the General Partner of the
Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case
scenarios would include the risks that the elevator or security systems
within the Partnership's properties would fail or the key third-party
vendors upon which the Partnership relies would be unable to provide
accurate investor information. In the event that the elevator shuts down,
the Partnership has devised a plan for each building whereby the tenants
will use the stairs until the elevators are fixed. In the event that the
security system shuts down, the Partnership has devised a plan for each
building to hire temporary on-site security guards. In the event that a
third-party vendor has Year 2000 problems relating to investor information,
the Partnership intends to perform a full system back-up of all investor
information as of December 31, 1999, so that the Partnership will have
accurate hard-copy investor information.
10
<PAGE>
Property Operations
- -------------------
As of March 31, 1999, the Partnership owned interests in the following
operational properties:
The Marathon Building/Fund V-VI-VII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
March 31, 1999 March 31, 1998
-------------------------- ---------------------
<S> <C> <C>
Revenues:
Rental Income $242,754 $242,754
-------- --------
Expenses:
Depreciation 87,646 87,646
Management & leasing expenses 16,244 9,890
Other operating expenses 7,546 3,642
-------- --------
111,436 101,178
-------- --------
Net income $131,318 $141,576
======== ========
Occupied % 100% 100%
Partnership Ownership % 16.5% 16.5%
Cash Distribution to Partnership $ 36,396 $ 38,114
Net Income Allocated to the
Partnership $ 21,615 $ 23,304
</TABLE>
The increase in management and leasing fees in first quarter 1999, over first
quarter 1998, was due to an underaccrual of fees from 1998. The increase in
operating expenses was due primarily to increases in accounting and
administrative fees. Cash distributions allocated to the Partnership remained
relatively stable for the three months ended March 31, 1999 and 1998.
11
<PAGE>
IBM Jacksonville /Fund IV - Fund V Joint Venture
- ------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------
March 31, 1999 March 31, 1998
------------------------- -----------------------
<S> <C> <C>
Revenues:
Rental Income $364,385 $365,992
-------- --------
Expenses:
Depreciation 79,524 79,524
Management & leasing expenses 49,785 46,676
Other operating expenses 114,977 105,360
-------- --------
244,286 231,560
-------- --------
Net income $120,099 $134,432
======== ========
Occupied % 93.5% 100%
Partnership Ownership % 62.4% 62.4%
Cash Distribution to Partnership $136,606 $124,633
Net Income Allocated to the
Partnership $ 74,972 $ 83,838
</TABLE>
Rental income for the IBM Jacksonville Property remained relatively stable in
1999, as compared to 1998 figures. Operating expenses increased in 1999, due to
increased management and leasing expenses as well as an increase in the
landscaping expenses. Cash distributions increased for 1999 over 1998. The
Partnership and Wells Fund IV contributed cash fundings to the Joint Venture for
tenant improvement in proportion to their ownership interests, and therefore,
this did not affect the Partnership's ownership interest in the Fund IV - Fund V
Joint Venture.
12
<PAGE>
The Medical Center Property/Fund IV - Fund V Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31, 1999 March 31, 1998
---------------------------- ----------------------
<S> <C> <C>
Revenues:
Rental Income $144,578 $117,327
Interest Income 575 1,947
-------- --------
145,153 119,274
-------- --------
Expenses:
Depreciation 44,524 44,524
Management & leasing expenses 17,773 14,796
Other operating expenses 45,404 47,676
-------- --------
107,701 106,996
-------- --------
Net income $ 37,452 $ 12,278
======== ========
Occupied % 92% 81%
Partnership Ownership % 62.4% 62.4%
Cash Distribution to Partnership $ 45,672 $ 40,005
Net Income Allocated to the
Partnership $ 23,380 $ 7,657
</TABLE>
Rental income increased in 1999 over 1998, due primarily to an increase in the
occupancy level of the property. Operating expenses remained relatively stable
in 1999, as compared to 1998 figures. Cash distributions increased slightly over
the 1998 figures. The Partnership and Wells Fund IV contributed cash fundings to
the Joint Venture for construction in proportion to their ownership interests,
and therefore, this did not affect the Partnership's ownership interest in the
Fund IV - Fund V Joint Venture.
13
<PAGE>
The Hartford Building/Fund V - Fund VI Joint Venture
- ----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------
March 31, 1999 March 31, 1998
---------------------------- ---------------------
<S> <C> <C>
Revenues:
Rental income $179,375 $179,375
-------- --------
Expenses:
Depreciation 73,008 73,005
Management & leasing expenses 7,242 5,656
Other operating expenses 5,319 5,222
-------- --------
85,569 83,883
-------- --------
Net income $ 93,806 $ 95,492
======== ========
Occupied % 100% 100%
Partnership Ownership % 46.5% 46.5%
Cash Distribution to Partnership $ 78,313 $ 78,443
Net Income Allocated to the
Partnership $ 43,601 $ 44,432
</TABLE>
Rental income, net income and cash distributions to the Partnership remained
relatively stable for the three months ended March 31, 1999 and 1998, due to the
stable occupancy rate.
14
<PAGE>
Stockbridge Village II/Fund V - Fund VI Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
March 31, 1999 March 31, 1998
----------------------------- ----------------------
<S> <C> <C>
Revenues:
Rental income $59,408 $58,944
------- -------
Expenses:
Depreciation 25,743 25,703
Management & leasing expenses 6,889 8,602
Other operating expenses 13,275 4,524
------- -------
45,907 38,829
------- -------
Net income $13,501 $20,115
======= =======
Occupied % 72% 72%
Partnership Ownership % 46.5% 46.5%
Cash Distribution to Partnership $13,423 $20,506
Net Income Allocated to the
Partnership $ 6,275 $ 9,359
</TABLE>
Net income and cash distribution to the Partnership decreased in 1999, as
compared to 1998, due primarily to a timing difference in billing tenants for
property taxes. A lease has been signed for the remaining space with occupancy
expected in April, 1999.
15
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 6 (b). No reports on Form 8-K were filed during the first quarter of 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND V, L.P.
Dated: May 11, 1999 By: /s/ Leo F. Wells, III
----------------------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 42,524
<SECURITIES> 12,550,621
<RECEIVABLES> 310,410
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,903,555
<CURRENT-LIABILITIES> 283,810
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,619,745
<TOTAL-LIABILITY-AND-EQUITY> 12,903,555
<SALES> 0
<TOTAL-REVENUES> 170,473
<CGS> 0
<TOTAL-COSTS> 27,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 143,243
<INCOME-TAX> 143,243
<INCOME-CONTINUING> 143,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,243
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
