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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, 1996 or
----------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-23656
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Wells Real Estate Fund VI, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2022628
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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(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
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1
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Form 10-Q
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Wells Real Estate Fund VI,L.P.
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996
and December 31, 1995.............................. 3
Statements of Income for the Three
Months Ended March 31, 1996
and 1995........................................... 4
Statement of Partners' Capital
for the Year Ended December 31, 1995,
and the Three Months Ended March 31, 1996.......... 5
Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995...................... 6
Condensed Notes to Financial Statements............ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 15
PART II. OTHER INFORMATION.......................................... 23
2
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WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1996 December 31, 1995
------ -------------- -----------------
<S> <C> <C>
Investment in joint venture (Note 2) $20,084,909 $20,184,572
Cash and cash equivalents 920,794 967,347
Due from affiliates 246,795 263,587
Deferred project costs 35,462 35,462
Organization costs, less accumulated
amortization of $18,750 in 1996 and
$17,187 in 1995 12,500 14,063
Prepaid expenses and other assets 3,701 11,095
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Total assets $21,304,161 $21,476,126
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 0 $ 4,000
Partnership distribution payable 311,126 327,865
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Total liabilities 311,126 331,865
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Partners' capital:
General partners 0 0
Class A - 2,069,177 units outstanding
at March 31, 1996 and 2,048,357 units
at December 31, 1995 17,764,852 17,637,686
Class B - 430,823 units outstanding
at March 31, 1996 and 451,643 units
at December 31, 1995 3,228,183 3,506,575
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Total partners' capital 20,993,035 21,144,261
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Total liabilities and partners' capital $21,304,161 $21,476,126
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
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WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1996 March 31, 1995
--------------- ---------------
<S> <C> <C>
Revenues:
Interest income $ 32,116 $153,743
Equity in earnings of joint ventures (Note 2) 147,676 137,663
--------- --------
179,792 291,406
--------- --------
Expenses:
Legal and accounting 2,901 5,274
Computer costs 906 2,780
Printing 3,482 2,777
Administrative Salaries 4,756 5,903
Office Expense 1,789 7,787
Postage 3,619 4,684
Taxes and licenses 15 44
Amortization of organization costs 1,563 1,562
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19,031 30,811
--------- --------
Net income $ 160,761 $260,595
========= ========
Net loss allocated to General Partners $ 0 $ (483)
Net income allocated to Class A Limited
Partners $ 277,507 $308,938
Net loss allocated to Class B Limited Partners $(116,746) (47,860)
Net income per Class A Limited Partner Unit $ .13 $ .15
Net loss per Class B Limited Partner Unit $ (.27) $ (.10)
Cash distribution per Class A Limited Partner
Unit $ .15 $ .16
Supplemental schedule of noncash investing
activities-deferred project costs applied to investing
activities $ 0 $ 15,858
</TABLE>
See accompanying condensed notes to financial statements.
4
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WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE THREE MONTHS ENDED
MARCH 31, 1996
<TABLE>
<CAPTION>
LIMITED PARTNERS
----------------------------------------------
CLASS A CLASS B TOTAL
----------------------- --------------------- GENERAL PARTNERS'
UNITS AMOUNT UNITS AMOUNT PARTNERS CAPITAL
--------- ------------ -------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 2,003,010 $17,371,901 496,990 $4,143,449 1,828 $21,517,178
Net income (loss) 0 1,172,944 0 (269,288) (1,828) 901,828
Partnership distributions 0 (1,274,745) 0 0 0 (1,274,745)
Class B conversion elections 45,346 367,586 (45,346) (367,586) 0 0
--------- ----------- ------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1995 2,048,356 17,637,686 451,644 3,506,575 0 21,144,261
--------- ----------- ------- ---------- ------- -----------
Net income (loss) 0 277,507 0 (116,746) 0 160,761
Partnership distributions 0 (311,987) 0 0 0 (311,987)
Class B conversion elections 20,820 161,646 (20,820) (161,646) 0 0
--------- ----------- ------- ---------- ------- -----------
BALANCE, MARCH 31, 1996 2,069,176 $17,764,852 430,824 $3,228,183 $ 0 $20,993,035
========= =========== ======= ========== ======= ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
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WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
--------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 160,761 $ 260,595
Adjustments to reconcile net earnings to net
cash used in operating activities:
Equity in earnings of joint venture (147,676) (137,663)
Distributions received from joint
ventures 269,970 140,038
Partnership distributions paid (328,726) (314,702)
Amortization of organization costs 1,563 1,562
Changes in assets and liabilities:
Decrease in due from affiliates (839) 0
Decrease (increase) in prepaids and
other assets 2,394 (11,583)
Decrease in accounts payable (4,000) (2,000)
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Net cash provided by (used in)
operating activities (46,553) (63,753)
--------- -----------
Cash flow from investing activities:
Investment in joint ventures 0 (535,218)
---------
Net decrease in cash and cash
equivalents (46,553) (598,971)
Cash and cash equivalents, beginning of year 967,347 11,904,815
--------- -----------
Cash and cash equivalents, end of period $ 920,794 $11,305,844
========= ===========
</TABLE>
See accompanying condensed notes to financial statements.
6
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WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statement
(1) Basis of Presentation
---------------------
The financial statements of Wells Real Estate Fund VI, L.P. ( 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, 1995.
(a) General
-----------
Wells Real Estate Fund VI, 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 December 1, 1992, for the
purpose of acquiring, developing, owning, operating, improving, leasing, and
otherwise managing for investment purposes income producing commercial or
industrial properties.
On April 5, 1993, the Partnership commenced a public offering of its limited
partnership units pursuant to a Registration Statement on Form S-11 filed
under the Securities Act of 1933. The Partnership terminated its offering on
April 4, 1994, and received gross proceeds of $25,000,000 representing
subscriptions from 2,500,000 Limited Partners units, composed of two classes
of limited partnership interests, Class A and Class B limited partnership
units.
As of March 31, 1996, the Partnership owned interests in the following
properties: (i) a four-story office building located in Hartford,
Connecticut; (ii) a three-story office building located in Appleton,
Wisconsin; (iii) four retail buildings located in Stockbridge, Georgia; (iv)
a retail building under construction in Stockbridge, Georgia; (v) an
office/retail center under construction in Roswell, Georgia; (vi) a four-
story office building under construction in Jacksonville, Florida; (vii) a
retail center under construction in Winston-Salem, North Carolina; and
(viii) a retail center located in Cherokee County, Georgia. All of the
foregoing properties were acquired on an all cash basis and are described in
more detail in Footnote 2 below.
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(b) Employees
-------------
The Partnership has no direct employees. The employees of Wells Capital,
Inc., a sole general partner of Wells Partners, L.P., a General Partner of
the Partnership, perform a full range of real estate services including
leasing and property management, accounting, asset management and investor
relations for the Partnership.
(c) Insurance
-------------
Wells Management Company, Inc., an affiliate of the General Partners,
carries comprehensive liability and extended coverage with respect to all
the properties owned directly or indirectly by the Partnership. In the
opinion of management of the registrant, the properties are adequately
insured.
(c) Competition
---------------
The Partnership will experience competition for tenants from owners and
managers of competing projects which may include the General Partners and
their affiliates. As a result, the Partnership may be required to provide
free rent, reduced charges for tenant improvements and other inducements,
all of which may have an adverse impact on results of operations. At the
time the Partnership elects to dispose of its properties, the Partnership
will also be in competition with sellers of similar properties to locate
suitable purchasers for its properties.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interest in nine properties through its investment in
joint ventures of which three are office buildings and six are retail
buildings. 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.
The following describes the properties in which the Partnership owns an
interest as of March 31, 1996:
FUND V - FUND VI JOINT VENTURE
------------------------------
On December 27, 1993, the Partnership and Wells Real Estate Fund V, L.P.
("Wells Fund V"), a Georgia public limited partnership affiliated with the
Partnership through common general partners, entered into a Joint Venture
Agreement known as Fund V and Fund VI Associates (the "Fund V - Fund VI
Joint Venture"). The investment objectives of Wells Fund V are substantially
identical to those of the Partnership. The Partnership holds an
approximately 52% equity interest, and Wells Fund V holds an approximately
48% equity interest in the Fund V - Fund VI Joint Venture. The Partnership
owns interests in the following two properties through the Fund V - Fund VI
Joint Venture:
8
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The Hartford Building
- ---------------------
On December 29, 1993, the Fund V - Fund VI Joint Venture purchased the Hartford
Building, a four-story office building containing approximately 71,000 rentable
square foot from Hartford Accident and Indemnity Company for a purchase price of
$6,900,000. The Hartford Building is located on 5.56 acres of land in
Southington, Connecticut. The funds used by the Fund V - Fund VI Joint Venture
to acquire the Hartford Building were derived from capital contributions made by
the Partnership and Wells Fund V totaling $3,432,707 and $3,508,797,
respectively, for total capital contributions to the Fund V - Fund VI Joint
Venture of $6,941,504.
The entire building is leased to Hartford Fire Insurance Company ("Hartford")
for a period of nine years and eleven months commencing December 29, 1993. The
annual base rent during the initial term is $458,400 payable in equal month
installments of $38,200 for the first three months, and $724,200 payable in
equal monthly installments of $60,350 commencing April 1, 1994 and continuing
through the expiration of the initial term of the lease. Hartford also has the
option to extend the initial term of the lease for two consecutive five year
periods. Under the terms of its lease, Hartford is responsible for property
taxes, operating expenses, general repair and maintenance work and a pro rata
share of capital expenditures based upon the number of years remaining in the
lease.
The occupancy rate at the Hartford Building was 100% for 1996, 1995 and 1994.
The average effective annual rental per square foot at the Hartford Building was
$10.11 for 1996, 1995 and 1994, the first year of ownership.
Stockbridge Village II - Stockbridge South Property
- ---------------------------------------------------
On November 12, 1993, Wells Fund V purchased 2,46 acres of real property located
in Clayton County, Georgia for $1,022,634. On July 1, 1994, Wells Fund V
contributed the property as a capital contribution to the Fund V - Fund VI
Joint Venture.
Construction of a 5,400 square foot retail building was completed in November
1994. Construction of a second retail building containing approximately 10,550
square feet was completed in June, 1995. The entire first building was leased
by Apple Restaurants, Inc. for nine years and eleven months beginning in
December, 1994. The annual base rent under the lease is $125,982 until December
15, 1999, at which time the annual base rent increases to $137,700.
Glenn's Open Pit Bar-B-Que leased 4,303 square feet of the second retail
building for a six year term beginning July 1, 1995. The annual base rent under
the lease is $64,548 to June 30, 1997, $68,844 from July 1, 1997 to June 30,
1999, and $77,460 from July 1, 1999 until June 30, 2001.
The total cost to complete Stockbridge Village II is currently anticipated to be
approximately $3,030,000. As of March 31, 1996, the Partnership contributed
$1,678,380 and Wells Fund V had contributed $1,035,804 to the Fund V - Fund VI
Joint Venture for the acquisition and development of Stockbridge Village II. As
of March 31, 1996, the Partnership's equity interest in
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the Fund V - Fund VI Joint Venture was approximately 52% and Wells Fund V's
equity interest was approximately 48%.
Although the ultimate percentage of ownership has not yet been finalized, it is
currently anticipated that the remaining cost of approximately $316,000 to
complete the property will be contributed by the Partnership, in which event,
upon completion of the building funding, the Partnership will own an
approximately 66% equity interest in the Fund V - Fund VI Joint Venture. The
Partnership has reserved sufficient funds for this purpose.
The occupancy rate at the Stockbridge Village II Property was 61% for 1996 and
1995. The average effective annual rental per square foot at the Stockbridge
Village II is $11.65 for 1996 and $10.41 for 1995, the first year of occupancy.
FUND V - VI - VII JOINT VENTURE
- -------------------------------
On September 8, 1994, the Partnership, Wells Fund V and Wells Real Estate Fund
VII, L.P. ("Wells Fund VII"), Georgia public limited partnerships affiliated
with the Partnership through common general partners, entered into a joint
venture agreement known as Fund V, Fund VI, and Fund VII Associates (the "Fund
V-VI-VII Joint Venture"). The Partnership owns an interest in the following
property through the Fund V-VI-VII Joint Venture:
The Marathon Building
- ---------------------
On September 16, 1994, Fund V-VI-VII Joint Venture purchased a three-story
office building contains approximately 75,000 square feet, located on
approximately 6.2 acres of land in Appleton, Wisconsin (the "Marathon Building")
for a purchase price of $8,250,000, excluding acquisition costs.
The funds used by the Fund V-VI-VII Joint Venture to acquire the Marathon
Building were derived from capital contributions made by the Partnership, Wells
Fund V and Wells Fund VII total $3,470,958, $1,337,505, and $3,470,958,
respectively, for total contributions to the Fund V-VI-VII Joint Venture of
$8,279,421 including acquisition costs. The Partnership owns an approximately
42% equity interest in the Fund V-VI-VII Joint Venture.
The entire Marathon Building is leased to Jaakko Poyry Fluor Daniel for a period
of approximately twelve years three and one-half months, with options to extend
the lease for two additional five-year periods. The annual base rent under the
lease is $910,000. The current lease expires December 31, 2006. The lease
agreement is a net lease in that the tenants primarily responsible for the
operating expenses, including real estate taxes.
The occupancy rate at the Marathon Building was 100% for 1996, 1995, and the
last three and a half months of 1994. The average annual rental per square foot
in the Marathon Building was $12.13 for 1996, 1995, and 1994, the first year of
ownership.
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FUND VI - FUND VII JOINT VENTURE
- --------------------------------
On December 9, 1994, the Partnership and Wells Fund VII entered into a Joint
Venture Agreement known as Fund VI and Fund VII Associates (the "Fund VI-Fund
VII Joint Venture"). As of March 31, 1996, the Partnership's equity interest in
the Fund VI - Fund VII Joint Venture was approximately 43%, and Wells Fund VII's
equity interest in the Fund VI - Fund VII Joint Venture was approximately 57%.
The Partnership owns interests in the following two properties through the Fund
VI-Fund VII Joint Venture:
Stockbridge Village III
- -----------------------
In April 1994, the Partnership purchased 3.27 acres of real property located on
the north side of Georgia State Route 138 at Mt. Zion Road, Clayton County,
Georgia for a cost of $1,015,673. This tract of land is located directly across
from Route 138 from the Stockbridge Village Shopping Center, which was developed
and is owned by an affiliate of the Partnership. On December 9, 1994, the
Partnership contributed the property as a capital contribution to the Fund VI-
Fund VII Joint Venture.
Kenny Rogers Roasters is a 3,200 square foot restaurant which was completed in
March 1995, at a cost of approximately $400,000, excluding land. The term of
the lease is for nine years and eleven months commencing March 1, 1995. The
initial base rent payable is $82,320. In the fifth year, the annual base rent
payable increases to $87,600.
Construction began in January, 1995, on a second outparcel building containing
approximately 15,000 square feet for approximately $1,500,000 excluding land.
Construction was substantially completed in October, 1995. In October 1995,
Damon's Clubhouse Restaurant occupied 6,732 square feet. The term of the lease
is for nine years and eleven months commencing October, 1995. The initial
annual base rent is $102,375 through March, 2001 and $115,375 thereafter.
As of March 31, 1996, the Partnership had contributed $1,017,907 and Wells Fund
VII contributed $1,821,834 to the Fund VI - Fund VII Joint Venture for the
acquisition and development of the Stockbridge Village III Property.
The occupancy rate at the Stockbridge Village III Project was 77% in 1996 and
71% in 1995. The average effective annual rental per square foot at the
Stockbridge Village III Project was $12.51 in 1996 and $4.85 for the partial
year of occupancy in 1995.
Stockbridge Village I Expansion
- -------------------------------
On June 7, 1995, the Fund VI - Fund VII Joint Venture purchased 3.38 acres of
real property located in Clayton County, Georgia for a total price of
approximately $718,000. The Stockbridge Village I Expansion consists of a
multi-tenant shopping center containing approximately 29,000 square feet. The
majority of construction has been completed as of April, 1996. A lease has been
signed with Cici's Pizza for a 4,000 square feet restaurant. The term of the
lease is for nine years and eleven months commencing April, 1996. The initial
base rent is $48,000. In the third year,
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the annual base rent increases to $50,000, in the sixth year to $52,000, and in
the ninth year to $56,000. Negotiations are being conducted to lease the
remaining space.
As of March 31, 1996, the Partnership contributed a total of $1,450,000 and
Wells Fund VII contributed a total of $1,450,000 for a total cost of
approximately $2,900,000 toward the development and construction of the
Stockbridge Village I Expansion.
As of March 31, 1996, the Partnership contributed $2,467,907, and Wells Fund VII
contributed $3,271,834, including its cost to acquire land, to the Fund VI -
Fund VII Joint Venture for the acquisition and development of the Stockbridge
Village III Project and the Stockbridge Village I Expansion. As of March 31,
1996, the Partnership's equity interest in Fund VI - VII Joint Venture was
approximately 43%, and Wells Fund VII's equity interest in the Fund VI - VII
Joint Venture was approximately 57%. It is anticipated that Wells Fund VII will
contribute the remaining approximately $60,000 needed to complete Stockbridge
Village III, in which event it is estimated that the Partnership's equity
interest in the Fund VI - VII Joint Venture will be approximately 43% and Wells
Fund VII's equity interest will be approximately 57% upon completion of the
project.
Fund II, III, VI and VII Associates/Holcomb Bridge Road Project
- ---------------------------------------------------------------
On January 10, 1995, the Partnership, the Fund II - Fund III Joint Venture and
Wells Fund VII entered into a joint venture agreement known as Fund II, III, VI
and VII Associates (the "Fund II, III, VI and VII Joint Venture"). The Fund II
- - Fund III Joint Venture is a joint venture between Wells Real Estate Fund III,
L.P. ("Wells Fund III"), a Georgia public limited partnership having Leo F.
Wells, III and Wells Capital, Inc., as general partners, and a joint venture
(the "Fund II-II-OW Joint Venture"), between Wells Real Estate Fund II ("Wells
Fund II"), a Georgia public limited partnership having Leo F. Wells, III and
Wells Capital, Inc., as general partners, and Wells Real Estate Fund II-OW
("Wells Fund II-OW"), a Georgia public limited partnership also having Leo F.
Wells., III and Wells Capital, Inc., as general partners. The investment
objectives of Wells Fund II, Wells Fund II-OW, Wells Fund III and Wells Fund VII
are substantially identical to those of the Partnership.
In January 1995, the Fund II - Fund III Joint Venture contributed approximately
4.3 acres of land at the intersection of Warsaw Road and Holcomb Bridge Road in
Roswell, Fulton County, Georgia (the "Holcomb Bridge Road Project"), including
land improvements with a value of $1,729,116 to the Fund II, III, VI and VII
Joint Venture. Development is underway on two buildings containing a total of
approximately 49,500 square feet. As of March 31, 1996, leases have been signed
with Bertucci's Restaurant Corporation for 5,935 square feet, Air Touch Cellular
for 3,046 square feet and Townsend Tax for 1,389 square feet. These three
tenants occupied the property during the first quarter of 1996 for an occupancy
rate of 21%. The average effective annual rental was $0.81 per square foot for
the first quarter of 1996.
As of March 31, 1996, Fund II - Fund III Joint Venture had contributed
$1,729,116 in land and improvements for an approximate 33% equity interest, the
Partnership had contributed $982,691 toward the construction for an approximate
19% equity interest, and Wells Fund VII had
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contributed $2,500,000 for an approximate 48% equity interest. The total cost
to develop the Holcomb Bridge Road Project is currently estimated to be
approximately $4,000,000, excluding land, and it is anticipated that the
remaining approximate $517,000 will be contributed $260,000 by the Partnership
and $257,000 by Wells Fund VII. The Partnership has reserved sufficient funds
for this purpose.
FUND VI - VII - VIII JOINT VENTURE
- ----------------------------------
On April 17, 1995, the Partnership, Wells Fund VII and Wells Real Estate Fund
VIII, L.P. (Wells Fund VIII"), a Georgia public limited partnership affiliated
with the Partnership through common general partners, entered into a joint
venture agreement known as the Fund VI, Fund VII, and Fund VIII Associates (the
"Fund VI-VII-VIII Joint Venture"). The investment objectives of Wells Fund VIII
are substantially identical to those of the Partnership. As of March 31, 1996,
the Partnership contributed approximately $6,567,688 for an approximately 44%
equity interest in the Fund VI-VII-VIII Joint Venture, which is developing an
office building in Jacksonville, Florida and a multi-tenant retail center in
Clemmons, North Carolina. As of March 31, 1996, Wells Fund VIII contributed
$2,000,000 for an equity interest in the Fund VI-VII-VIII Joint Venture of
approximately 13% and Wells Fund VII contributed approximately $6,432,312 for an
equity interest in the Fund VI-VII-VIII Joint Venture of approximately 43%. The
total cost to complete both properties is anticipated to be approximately
$17,700,000. Although the ultimate percentages of equity interest in the Fund
VI-VII-VIII Joint Venture have not yet been finally determined, it is
anticipated that Wells Fund VIII will contribute the remaining cost of
approximately $2,700,000 needed to complete construction of both projects, in
which event the ultimate equity interests in the Fund VI- VII-VIII Joint Venture
of the Partnership, Wells Fund VII and Wells Fund VIII would be approximately
37%, 36%, and 27%, respectively.
Bell South Property
- -------------------
On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased a 5.55 acre
parcel of land in Jacksonville, Florida for a total of $1,245,059 including
closing costs. The land purchase and future construction costs were funded by
capital contributions of $3,500,000 by the Partnership, $3,500,000 by Wells Fund
VII and $2,000,000 by the Wells Fund VIII.
An agreement was signed with ADEVCO Corporation to supervise, manage, and
coordinate the planning, design, construction and completion of a 92,964 square
foot office building. McDevitt Street Bovis, Inc. is acting as the general
contractor, and Mayes, Udderth & Etheridge, Inc. as the architects.
Construction is anticipated to be completed in May, 1996 for a total cost of
approximately $9,000,000. Bell South is expected to move in on June 1, 1996.
Bell South has executed a lease for 66,333 square feet with a term of nine years
and eleven months with an option to extend for an additional five year period.
The annual base rent during the initial term is $1,016,789 payable in equal
monthly installments of $84,732 during the first five years and $1,116,853
payable in equal monthly installment of $93,071 for the balance of the initial
lease term. The annual rent for the extended term will be at the market rate.
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Tanglewood Commons Shopping Center
- ----------------------------------
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina. The
land purchase costs were funded by a capital contribution made by the
Partnership. As of March 31, 1996, the Partnership contributed $3,067,688 and
Fund VII contributed $2,932,312 to the development of this project. Wells Fund
VIII had not made contributions.
The Fund VI-VII-VIII Joint Venture will develop and construct one large strip
shopping center building containing approximately 81,000 gross square feet on a
12.48 acre tract. The remaining 2.2 acre portion of the property well remain in
a vegetative or natural state.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shipping center
are anticipated to be approximately $8,700,000. An agreement was signed with
Norcom Development, Inc. to supervise, manage and coordinate the planning,
design and construction of the property. Shaak Design Group, Inc. has been
signed as the general contractor, and John S. Clark and Company as the
architect. Ground breaking began in March, 1996.
Harris Teeter, Inc., a regional supermarket chain, executed a lease for a
minimum of 45,000 square feet with an initial term of 20 years. The annul base
rent during the initial term is $488,250. In addition, Harris Teeter has agreed
to pay percentage rents equal to one percent of the amount by which Harris
Teeter's gross sales exceed $35,000,000 for any lease year.
FUND I,II,II-OW,VI,VII ASSOCIATES
- ---------------------------------
On August 1, 1995, the Partnership, Wells Real Estate Fund I ("Wells Fund I"), a
Georgia public limited partnership, the Fund II-Fund II-OW Joint Venture and
Wells Fund VII, entered into a joint venture agreement known as Fund I,II,II-
OW,VI,VII Associates (the "Fund I, II, II-OW,VI,VII Joint Venture"), which was
formed to own and operate the Cherokee Project described below. Wells Fund I is
a Georgia limited partnership having Leo F. Wells, III and Wells Capital, Inc.,
as general partners. The investment objective of Wells Fund I, the Fund II -
Fund II-OW Joint Venture and Wells Fund VII are substantially identical to those
of the Partnership.
The Cherokee Property
- ---------------------
The Cherokee Property consists of a retail shopping center known as the
"Cherokee Commons Shopping Center" located in metropolitan Atlanta, Cherokee
County, Georgia (The "Cherokee Project"). The Cherokee Project has been
expanded to consist of approximately 103,755 net leasable square feet. The
Cherokee Project was initially developed through a joint venture between Wells
Fund I and the Fund II - Fund II-OW Joint Venture which contributed the Cherokee
Project to the Fund I,II,II-OW,VI,VII Joint Venture on August 1, 1995 to
complete the required funding for the expansion.
14
<PAGE>
As of March 31, 1996, Wells Fund I contributed property with a book value of
$2,139,900, the Fund II-Fund II-OW Joint Venture contributed property with a
book value of $4,860,100, the Partnership contributed cash in the amount of
$953,798, and Wells Fund VII contributed cash in the amount of $953,798 to the
Fund I,II,II-OW,VI,VII Joint Venture. As of March 31, 1996, the equity interest
in the Cherokee Project were as follows: Wells Fund I-24%, Fund II-Fund II-OW
Joint Venture-55%, Wells Fund VII-11% and the Partnership-11%.
The Cherokee Project is anchored by a 67,115 square foot lease with Kroger
Food/Drug ("Kroger") which expires in 2011. Kroger's original lease was for
45,528 square feet. In 1994, Kroger expanded to the current 67,115 square feet
which is approximately 65% of the total rentable square feet in the property.
As of March 31, 1996, the Cherokee Project was approximately 95% occupied by 19
tenants, including Kroger. Kroger is the only tenant occupying 10% or more of
the rentable square footage. Kroger is a retail grocery chain. The other
tenants in the shopping center provide typical retail shopping services.
The Kroger lease provides for an annual rent of $392,915 which increased to
$589,102 on August 16, 1995 due to the expansion from 45,528 square feet to
67,115 square feet. The lease expires March 31, 2011 with Kroger intitled to
five successive renewals each for a term of five years.
The occupancy rate at the Cherokee Property was 95% in 1996, 94% in 1995, 91% in
1994, 89% in 1993, and 88% in 1992. The average effective annual rental per
square foot at the Cherokee Property was $8.58 for 1996, $7.50 for 1995, $5.33
for 1994, $6.47 for 1993 and $6.46 for 1992.
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
selected financial data and 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
- ---------------------------------------------------------
(a) General
- -----------
During its offering, which terminated on April 4, 1994, the Partnership raised a
total of $25,000,000 in capital through the sale of 2,500,000 units. No
additional units will be sold by the Partnership. From the original funds
raised, as of March 31, 1996, the Partnership has incurred
15
<PAGE>
$4,619,157 in sales commissions, acquisition fees, organizational and offering
costs; has invested $19,554,132 in properties; has reserved $250,000 as working
capital reserves; and is currently holding net offering proceeds of
approximately $576,000 available for investment in properties. As set forth
above, it is currently anticipated that approximately $316,000 will be
contributed to the Fund V - Fund VI Joint Venture for the completion of the
Stockbridge Village II project, and that approximately $260,000 will be
contributed to the Fund II, III, VI, and VII Joint Venture for the completion of
the Holcomb Bridge Road Project.
Gross revenues of the Partnerships were $179,792 for the quarter ended March 31,
1996, as compared to $291,406 for the quarter ended March 31, 1995. The
decrease in revenues is attributed to funds invested in joint ventures, which
increased the income generated from the joint ventures but decreased the funds
available to earn interest. Depreciation expense increased for the joint
ventures from 1995 to 1996 due to a change in the estimated useful lives of
buildings and improvements from 40 years to 25 years which became effective in
the fourth quarter of 1995.
Expenses of the Partnership were $19,031 for 1996, as compared to $30,811 for
1995 . The decrease in expenses for 1996 as compared to 1995 was primarily due
to decreased legal fees and partnership administration.
Net income of the Partnership was $160,761 for the three months ended March 31,
1996, as compared to $260,595 for the same period in 1995. The decrease in net
income for 1996 over 1995 is due primarily to decreased revenues, partially
offset by decreased expenses as noted in the prior paragraphs.
Net cash used in operating activities decreased from $(63,753) in 1995 to
$(46,553) in 1996. This decreased was due primarily to increased distributions
received from joint ventures offset by decreased interest income and increased
distributions to the limited partners. Net cash used in investing activities
decreased for the three months ended March 31, 1996 as compared to the same
period in 1995 due to a decrease in investments in joint ventures. These
changes produced decreased cash and cash equivalents of $(598,971) and $(46,553)
at March 31, 1995 and 1996, respectively.
The Partnership made cash distributions to the limited partners holding Class A
Units of $.15 for the three months ended March 31, 1996 as compared to $.16 per
Class A unit for 1995. No cash distributions of investment income were made to
the Limited Partners holding Class B Units.
16
<PAGE>
PROPERTY OPERATIONS
- -------------------
As of March 31, 1996, the Partnership owned interests in the following
operational properties:
The Hartford Building/Fund V - Fund VI Joint Ventures
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental Income $179,375 $179,375
Expenses:
Depreciation 73,008 42,516
Management & leasing expenses 7,175 7,175
Other operating expenses 3,175 5,947
-------- --------
83,358 55,638
-------- --------
Net income $ 96,017 $123,737
======== ========
Occupied % 100% 100%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 52.4% 50.3%
Cash Distribution to Partnership $ 89,482 $ 83,424
Net Income Allocated to the
Partnership $ 50,353 $ 61,495
</TABLE>
Net income decreased and expenses increased in 1996 as compared to 1995 due
primarily to an increase in depreciation expense, resulting from the change in
estimated useful lives of buildings and improvements previously discussed under
the "General" section of "Results of Operations and changes in Financial
Condition".
The Partnership's ownership in the Fund V - Fund VI Joint Venture increased from
50.3% in 1995, to 52.4% in 1996 due to additional fundings by the Parterships in
1995, which increased the Partnership's ownership interest in the Joint Venture.
Cash distributions increased in 1996 over 1995 due primarily to the
Partnership's increased percentage ownership interest in the Joint Venture. Net
income allocated to the Partnership decreased in 1996 as compared to 1995 due
primarily to increased depreciation expense.
17
<PAGE>
Stockbridge Village II/Fund V - Fund VI Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental Income $46,461 $32,960
Expenses:
Depreciation 19,761 5,619
Management & leasing expenses 4,597 3,927
Other operating expenses 19,175 12,956
------- -------
43,533 22,502
------- -------
Net income $ 2,928 $10,458
======= =======
Occupied % 61% 100%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 52.4% 50.3%
Cash Distribution to Partnership $11,451 $ 301
Net Income Allocated to the
Partnership $ 1,536 $ 5,166
</TABLE>
The Stockbridge Village II Property, consists of two retail buildings which
contain a total of approximately 15,950 square feet. The first building
containing 5,400 square feet was completed in November, 1994, and occupied by
Apple Restaurants, Inc. in December 1994, resulting in 100% occupancy as of
December 31, 1994. The second building containing 10,550 square feet opened in
June, 1995. Glenn's Open Pit Bar-B-Que leased 4,303 square feet beginning in
July, 1995. 6,247 square feet are available to lease in the second building
which equates to a 61% occupancy for both buildings as of March 31, 1996.
In 1996, there was an increase in depreciation expense due to the change in
estimated useful lives of buildings and improvements as previously discussed
under the "General" section of "Results of Operations and Changes in Financial
Condition".
The Partnership's ownership percentage in the Fund V - Fund VI Joint Venture
increased to 52.4% for 1996 as compared to 50.3% in 1995 due to an additional
investment by the Partnership which increased the Partnership's and decreased
Wells Fund V's ownership interest in the Fund V - Fund VI Joint Venture.
18
<PAGE>
The Marathon Building/Fund V-VI-VII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental Income $242,754 $242,754
Expenses:
Depreciation 87,646 52,299
Management & leasing expenses 9,710 9,710
Other operating expenses 3,698 11,007
--------- --------
101,054 73,016
--------- --------
Net income $141, 700 $169,738
========= ========
Occupied % 100% 100%
Partnership's Ownership % in the
Fund V - VI - VII Joint Venture 41.8% 41.8%
Cash Distribution to Partnership $ 89,810 $ 86,752
Net Income Allocated to the
Partnership $ 59,273 $ 71,001
</TABLE>
Net income decreased and expenses increased in 1996 as compared to 1995 due
primarily to lower expenditure for legal and accounting and an increased in
depreciation expense due to the change in estimated useful lives of buildings
and improvements as previously discussed under "General" section of "Results of
Operations and Changes in Financial Condition".
19
<PAGE>
Stockbridge Village III - Fund VI - Fund VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
-------------------
<S> <C>
Revenues:
Rental Income $56,924
Expenses:
Depreciation 20,377
Management & leasing expenses 3,977
Other operating expenses 17,990
-------
42,344
-------
Net income $14,580
-------
Occupied % 77%
Partnership's Ownership % in the Fund VI -
Fund VII Joint Venture 43.1%
Cash Distribution to Partnership $12,414
Net Income Allocated to the
Partnership $ 6,275
</TABLE>
In April 1994, the Partnership purchased 3.27 acres of land located in Clayton
County, Georgia. On December 9, 1994, the Partnership contributed the
Stockbridge Village III property ("Stockbridge Village III") as a capital
contribution to the Fund VI - Fund VII Joint Venture.
Construction was completed on a 3,200 square foot restaurant in March, 1995.
This retail building is leased to Kenny Rogers Roasters, a restaurant, for a
term of nine years and eleven months. The initial base rent is $82,320 with an
increase in the fifth year to $87,600 annually.
The second multi-tenant retail building containing approximately 15,000 square
feet was completed in October, 1995. Damon's Clubhouse, a restaurant, occupied
approximately 6,732 square feet in October. The Damon's lease is for a term of
nine years and eleven months with initial base rent of $102,375 for five years
and increasing to $115,375 for the remainder of the lease. Three additional
tenants occupied approximately 4,125 square feet as of March 31, 1996.
20
<PAGE>
Cherokee Commons Shopping Center
- --------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental Income $222,621 $145,838
Interest Income 19 25
-------- --------
222,640 145,863
Expenses:
Depreciation 107,183 45,527
Management & leasing expenses 12,634 7,068
Other operating expenses 48,872 45,223
-------- --------
168,689 97,818
-------- --------
Net income $ 53,951 $ 48,045
======== ========
Occupied % 95% 91%
Partnership's Ownership % 11% 0%
Cash Distribution to Partnership $ 16,488 $ 0
Net Income Allocated to the
Partnership $ 5,777 $ 0
</TABLE>
Rental income increased in 1996 over 1995 due to the Kroger expansion which was
completed in November, 1994, however, the additional rent was billed
retroactively and paid in September, 1995. The increase in depreciation expense
for 1996 as compared to 1995 is a result of the change in the estimated useful
lives of buildings and improvements as previously discussed under the "General"
section of "Results of Operations and Changes in Financial Condition".
Management and leasing expenses increased in 1996 as compared to 1995 due to the
increased revenue. Net income of the property increased to $53,951 in 1996 from
$48,045 in 1995 due to the increase in revenue. In 1994, a lease amendment was
entered into with Kroger providing for an expansion of its existing store at the
Cherokee Commons Shopping Center from 45,528 square feet to 66,918 square feet.
In November, 1994, construction was completed on the Kroger expansion and
remodeling of the Center was $2,807,367. The costs of this expansion were
funded in the following amounts: Wells Fund I $94,679 and the Fund II-Fund II-
OW Joint Venture $805,092 as of December 31, 1994 and Wells Fund VII $953,798,
and the Partnership $953,798. The Partnership and Wells Fund VII did not make
their respective contributions until August, 1995.
Since the Partnership contributed to the Fund I, II, II-OW, VI and VII Joint
Venture in August, 1995, there were no cash distributions or income allocated to
the Partnership for the first quarter of 1995.
21
<PAGE>
880 Holcomb Bridge/Fund II, III, VI,VII
- ---------------------------------------
Three Months Ended
March 31, 1996
-------------------
Revenues:
Rental Income $ 9,421
Expenses:
Depreciation 6,120
Management & leasing expenses 1,051
Other operating expenses 18,839
--------
26,010
--------
Net loss $(16,589)
========
Occupied % 21%
Partnership's Ownership % in the Fund IV - Fund
V Joint Venture 19.5%
Cash Distribution to Partnership $ 0
Net (Loss) Allocated to the
Partnership $ (3,232)
In January 1995, the Fund II - Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road to the Fund II,III,VI and
VII Joint Venture. Development is being completed on two buildings with a total
of 49,500 square feet. As of March 31, 1996, three tenants are occupying
approximately 10,370 square feet of space in the retail building under leases of
varying lengths. Since the property was not developed as of March 31, 1995, no
comparative figures are available for the quarter.
As of March 31, 1996, Fund II - Fund III Joint Venture contributed $1,729,116 in
land and land improvements for an approximate 32.7% equity interest, the
Partnership contributed $982,691 toward the construction for an approximate
19.5% equity interest, and Well Fund VII contributed $2,500,000 for an
approximate 47.8% equity interest. The total cost to develop the Holcomb Bridge
Road Project is currently estimated to be approximately $4,000,000, excluding
land. It is anticipated that of the remaining cost of approximately $517,000,
$260,000 will be contributed by the Partnership and $257,000 Wells Fund VII for
an anticipated equity interest of 48.1% by the Partnership, 30.2% by the Fund II
- - Fund III Joint Venture and 21.7% by Wells Fund VI.
22
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6 (b). No reports on Form 8-K were filed during the first quarter of
1996.
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 VI, L.P.
Dated: May 13, 1996 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.
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 920,794
<SECURITIES> 20,084,909
<RECEIVABLES> 246,795
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,701
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,304,161
<CURRENT-LIABILITIES> 311,126
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,993,035
<TOTAL-LIABILITY-AND-EQUITY> 21,304,161
<SALES> 0
<TOTAL-REVENUES> 179,792
<CGS> 0
<TOTAL-COSTS> 19,031
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 160,761
<INCOME-TAX> 160,761
<INCOME-CONTINUING> 160,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160,761
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
