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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ______________to________________
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 or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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None None
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Securities registered pursuant to Section 12(g) of the Act:
Class A Unit
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(Title of Class)
Class B Unit
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(Title of Class)
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 ___
---
Aggregate market value of the voting stock held by non-affiliates:
Not Applicable
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PART I
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ITEM 1. BUSINESS.
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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, constructing, 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 filed on Form S-11 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 December 31,
1996, the Partnership had incurred $4,619,157 in commissions, acquisition fees,
organization and offering costs, had invested $19,789,055 in properties;
reserved $250,000 as working capital reserves; and approximately $342,000 is
available for investment in additional projects.
As of December 31, 1996, the Partnership owned interests in the following
properties through ownership in joint ventures: (i) a four-story office building
located in metropolitan Hartford, Connecticut; (ii) a three-story office
building located in Appleton, Wisconsin; (iii) four retail buildings located in
Stockbridge, Georgia; (iv) a retail shopping center expansion in Stockbridge,
Georgia; (v) an office/retail center under construction in Roswell, Georgia;
(vi) a four-story office building in Jacksonville, Florida; and (vii) a retail
center under construction Clemmons, Forsyth County, 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 Item 2 below.
EMPLOYEES
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the 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. See item 11 - "Compensation of General Partners and Affiliates" for
a summary of the compensation and fees paid to the General Partners and their
affiliates during the fiscal year ended December 31, 1996.
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
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the Partnership. In the opinion of management of the registrant, the properties
are adequately insured.
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.
ITEM 2. PROPERTIES.
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The Partnership owns interests 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. As of December 31, 1996, these
properties were 93% occupied, down from 94% at December 31, 1995 and 100% at
December 31, 1994 and 1993.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1996, assuming no exercise of renewal options
or termination rights:
<TABLE>
<CAPTION>
Number of Annualized Partnership's Percentage of Percentage of
Year of Lease Leases Square Gross Base Share of Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent (1) Gross Base Rent(1) Feet Expiring Base Rent
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 8 13,330 133,817 14,318 4.3% 4.0%
1998 2 3,000 31,597 3,381 1.0% 1.0%
1999 10 17,495 262,276 73,822 5.7% 7.9%
2000 2 4,300 39,684 12,976 1.4% 1.2%
2001 9 22,592 358,266 120,184 7.3% 10.8%
2002 2 2,488 22,704 11,321 0.8% 0.7%
2003 (2) 1 71,000 651,171 341,214 22.9% 19.7%
2004 1 5,400 130,733 68,504 1.7% 4.0%
2005 2 9,982 188,040 80,425 3.2% 5.7%
2006 (3) 5 160,328 1,485,930 923,580 51.7% 45.0%
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42 309,915 $3,304,218 $1,649,725 100.0% 100.0%
</TABLE>
(1) Average monthly gross rent over the life of the lease,
annualized.
(2) Expiration of Hartford Fire Insurance Company lease.
(3) Expiration of Marathon lease of 76,000 square feet and
BellSouth lease of 69,424 square feet.
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The following describes the properties in which the Partnership owns an interest
as of December 31, 1996:
FUND V - FUND VI JOINT VENTURE
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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. As of December 31, 1996, the Partnership had contributed
approximately $5,128,857 and Wells Fund V had contributed approximately
$4,544,601 to the Fund V - Fund VI Joint Venture. It is anticipated that the
Partnerhship will fund an additional $242,000 toward the completion of the
Stockbridge Village II Project, at which time, the Partnership will hold an
approximate 54% 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:
The Hartford Building
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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 feet 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, Hartford County, 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 totalling $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 Partnership holds an approximately 53%
equity interest, and Wells Fund V holds an approximately 47% equity interest in
the Fund V - Fund VI Joint Venture.
The entire building is leased to Hartford Fire Insurance Company for a period of
nine years and eleven months commencing on 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 under the terms of its 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 the years ended
December 31, 1996, 1995 and 1994. The average effective annual rental per square
foot at the Hartford Building is $10.11 for 1996, 1995 and 1994, the first year
of ownership.
Stockbridge Village II - Stockbridge South Project
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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 capital contribution to the Fund V - Fund VI Joint
Venture.
Construction of a 5,400 square foot retail building was completed in November,
1994. 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 9,
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 the second building in Stockbridge Village II is
currently anticipated to be approximately $2,974,000. As of December 31, 1996,
the Partnership contributed $1,696,150 and Wells Fund V contributed $1,035,804
to the Fund V - Fund VI Joint Venture for the acquisition and development of the
Stockbridge Village II Project. It is currently anticipated that the remaining
cost of approximately $242,000 will be contributed by the Partnership
The occupancy rate at the Stockbridge Village II Project was 61% for the years
ended December 31, 1996 and 1995. The average effective annual rental per
square foot at the Stockbridge Village II Project is $12.43 for 1996 and $10.41
for 1995, the first year of occupancy.
FUND V-VI-VII JOINT VENTURE
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On September 8, 1994, the Partnership, Wells Fund V and Wells Real Estate Fund
VII, L.P. ("Wells Fund VII"), a 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 investment objectives of Wells Fund VII are
substantially identical to those of the Partnership. The Partnership owns a 42%
interest in the following property through the Fund V-VI-VII Joint Venture:
The Marathon Building
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On September 16, 1994, the Fund V-VI-VII Joint Venture purchased a three-story
office building containing approximately 76,000 rentable 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 totalling $3,470,958, $1,337,505, and $3,470,958,
respectively, for total contributions to the
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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 twelve years, three and one-half months, with options to extend the lease for
two additional five-year periods. The annual base rent is $910,000. The
current lease expires December 31, 2006. The lease agreement is a net lease in
that the tenant is 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 is $12.13 for 1996, 1995 and 1994, the first year of
ownership.
FUND VI - FUND VII JOINT VENTURE
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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 December 31, 1996, the Partnership contributed
$2,467,907, and Wells Fund VII contributed $3,316,278, 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 December 31, 1996, the Partnership's equity interest in the
Fund VI - VII Joint Venture was approximately 43%, and Wells Fund VII's equity
interest in the Fund VI - VII Joint Venture was approximately 58%. It is
anticipated that Fund VII will contribute approximately $40,000 needed to
complete Stockbridge Village III. It is estimated that the Partnership's equity
interest in the Fund VI - VII Joint Venture will be approximately 42% and Wells
Fund VII's equity interest will be approximately 57% once the project is
completed. The Partnership owns interests in the following two properties
through the Fund VI-Fund VII Joint Venture:
Stockbridge Village III
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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
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
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completed in October, 1995. In October 1995, Damon's Clubhouse occupied 6,500
square feet restaurant. 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 December 31, 1996, the Partnership had contributed $1,017,907 and Wells
Fund VII contributed $1,866,278 to the Fund VI-Fund VII Joint Venture for the
acquisition and development of the Stockbridge Village III Property. As of
December 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 occupancy rate at the Stockbridge Village III Project was 87% in 1996 and
71% in 1995. The average effective annual rental per square foot at the
Stockbridge Village III Project was $14.15 for 1996 and $4.85 for the partial
year of occupancy in 1995.
Stockbridge Village I Expansion
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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. Construction
was substaintially complete in April, 1996 with Cici's Pizza occupying a 4,000
square foot restaurant. The term of the CiCi's lease is for nine years and
eleven months commencing in April, 1996. The initial base rent is $48,000. In
the third year, the annual base rent increases to $50,000, in the sixth year to
$52,000, and in the ninth year to $56,000. Four additional tenants have occupied
6,400 square feet at the property in 1996. Negotiations are being conducted to
lease the remaining space.
As of December 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.
The occupancy rate at the Stockbridge Village I Expansion was 36% for 1996, the
first year of occupancy. The average effective annual rental per square foot
was $2.69 for 1996.
FUND II - III - VI - VII JOINT VENTURE/HOLCOMB BRIDGE ROAD PROJECT
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On January 10, 1995, the Partnership, 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 ("Fund II-III-VI-VII Joint Venture"). The Fund II-Fund III Joint
Venture is a joint venture between Wells Real Estate Fund III, L.P., a Georgia
public limited partnership having Leo F. Wells, III and Wells Capital, Inc. as
general partners, and an existing joint venture (the "Fund II-Fund II-OW Joint
Venture") formed by 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 having Leo F. Wells, III and Wells Capital,
Inc. as general partners. The investment objectives of Wells Fund II, Wells
Fund II-OW and Wells Fund III are substantially identical to those of the
Partnership.
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In January 1995, the Fund II-Fund III Joint Venture contributed to the Fund II-
III-VI-VII Joint Benture 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 Property") including land improvements. Development is
substanitially complete on two buildings containing a total of approximately
49,500 square feet. Nine tenants occupied the 880 Holcomb Bridge property as of
December 31, 1996 for an occupancy rate of 63%. The average effective annual
rental was $9.87 per square foot for 1996.
As of December 31, 1996, Fund II-Fund III Joint Venture contributed $1,729,116
in land and improvements for an equity interest of approximately 25.2%, the
Partnership contributed $1,699,846 for an equity interest of approximately
26.0%, and Wells Fund VII contributed $3,217,154 for an equity interest of
approximately 48.8%. The total cost to develp the Holcomb Bridge Road Property
is currently estimated to be approximately $5,100,000,excluding land. It is
anticipated that of the remaining cost of approximately $183,000, $83,000 will
be contributed by Wells Fund VII and $100,000 by the Partnership after which the
equity interests in the Fund II - III - VI - VII Joint Venture will be 26.4% for
the Partnership, 48.3% for Wells Fund VII, and 25.3% for the Fund II-Fund III
Joint Venture. The Partnership and Wells Fund VII have reserved sufficent funds
for this purpose.
FUND VI-VII-VIII JOINT VENTURE
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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, formed a joint venture
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 December 31, 1996, the Partnership
contributed approximately $6,067,688 for an approximately 36% equity interest in
the Fund VI-VII-VIII Joint Venture, which owns an office building in
Jacksonville, Florida and a multi-tenant retail center under development in
Forsyth County, North Carolina. As of December 31, 1996, Wells Fund VIII
contributed $4,700,000 for an equity interest in the Fund VI-VII-VIII Joint
Venture of approximately 28%, and Wells Fund VII contributed approximately
$5,932,312 for an equity interest in the Fund VI-VII-VIII Joint Venture of
approximately 36%. The total cost to complete both properties is anticipated to
be approximately $17,700,000. Although the ultimate percentages of equity
interests 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 $1,000,000 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 34%, 34%, and 32%, respectively.
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BellSouth Property
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On April 25, 1995, the Fund VI-VII-VIII Joint Venture purschased a 5.55 acre
parcel of land in Jacksonville, Florida for a total of $1,245,059 including
closing costs. In May 1996, the 92,964 square foot office building was
completed with BellSouth Advertising and Publishing Corporation, a subsidiary of
BellSouth Company, occupying approximatley 66,333 square feet and American
Express Travel Realted Services Company, Inc. occupying approximately 22,607
square feet. BellSouth occupied an additional 2,900 square feet in December
1996. The land purchase and contruction costs, totalling approximately
$9,000,000, 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.
The BellSouth lease is for a term of nine years and eleven months with an option
to extend for an additional five year at market rate. The annual base rent
during the inital term is $1,094,426 during the first five years and $1,202,034
for the balance of the inital lease term. The American Express lease is for a
term of five years at an annual base rent of $369,851. BellSouth and American
Express are required to pay additional rent equal to their shares of operating
expenses during their respective lease terms.
The average effective annual rental per square foot at the BellSouth Property
was $14.15 for 1996, the first year of occupany. The occupancy rate was 100%
for 1996.
Tanglewood Commons Shopping Center
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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
Fund VI-VII-VIII Joint Venture is constructing 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 consists of four
outparcels which have been graded and will be held for future development. As
of December 31, 1996, the Partnership contributed $2,567,688, Wells Fund VII
contributed $2,432,312 and Wells Fund VIII had contributed $2,700,000 for the
development of this project.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shopping center
are anticipated to be approximately $8,700,000. Norcom Development, Inc. is
supervising, managing and coordinating the design and construction of the
property. Shook Design Group, Inc. is the architect and John S. Clark and
Company is the General Contractor. Construction of the project began in March,
1996, and is scheduled to be substantially completed in the first quarter of
1997.
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 annual base
rent during the initial term is $488,250, payable in equal monthly installments
of $40,688. 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.
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FUND I - II - II-OW - VI - VII JOINT VENTURE
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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 and 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 objectives 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
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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.
As of December 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
Cherokee Project. As of December 31, 1996, the equity interest in the Fund I -
II - II-OW - VI - VII Joint Venture were as follows: Wells Fund I 24%, Fund II-
Fund II-OW Joint Venture 54%, 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 December 31, 1996, the Cherokee Project was approximately 93% occupied by
19 tenants, including Kroger. Kroger, a retail grocery chain, is the only
tenant occupying 10% or more of the rentable square footage. The other tenants
in the shopping center provide typical retail shopping services.
The Kroger lease calls 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 entitled to
five successive renewals each for a term of five years.
The occupancy rate at the Cherokee Property was 93% 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 $8.59 for 1996, $7.50 for 1995, $5.33
for 1994, $6.47 for 1993 and $6.46 for 1992.
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ITEM 3. LEGAL PROCEEDINGS.
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1996.
[Remainder of this page left intentionally blank]
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PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
- ---------------------------------------------------------------------------
As of February 28, 1997, the Partnership had 2,113,257 outstanding Class A Units
held by a total of 1,587 Limited Partners and 386,742 outstanding Class B Units
held by a total of 210 Limited Partners. The capital contribution per unit is
$10.00. There is no established public trading market for the Partnership's
limited partnership units, and it is not anticipated that a public trading
market for the units will develop. Under the Partnership Agreement, the General
Partners have the right to prohibit transfers of units.
Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners elect to have their cash distributions
paid monthly. Under the Partnership Agreement, distributions from net cash from
operations are allocated first to the Limited Partners holding Class A Units
(and limited partners holding Class B units that have elected a conversion right
that allows them to share in the distribution rights of limited partners holding
Class A units) until they have received 10% of their adjusted capital
contributions. "Net Cash From Operations" means Cash Flow, less adequate cash
reserves for other obligations of the Partnership for which there is no
provision. Cash available for distribution is then distributed to the General
Partners until they have received an amount equal to 10% of cash distributions
previously distributed to the limited partners. Any remaining cash available
for distribution is split between the Limited Partners holding Class A units and
the General Partners on a basis of 90% and 10% respectively. No distributions
will be made to the Limited Partners holding Class B units. No distribution has
been made to the General Partner as of December 31, 1996.
Cash distributions made to Limited Partners holding Class A Units (and limited
partners holding Class B Units that have elected a conversion right) during the
two most recent fiscal years were as follows:
<TABLE>
<CAPTION>
Per Class A Unit
----------------
Distributions For Total Cash Investment Return of
Quarter Ended Distribution Income Capital
------------- ------------ ------ -------
<S> <C> <C> <C>
March 31, 1995 $313,371 $0.16 $0.00
June 30, 1995 $318,000 $0.16 $0.00
Sept. 30, 1995 $320,676 $0.16 $0.00
Dec. 31, 1995 $322,698 $0.16 $0.00
March 31, 1996 $311,988 $0.15 $0.00
June 30, 1996 $282,512 $0.14 $0.00
Sept. 30, 1996 $262,551 $0.12 $0.00
Dec. 31, 1996 $358,606 $0.15 $0.00
</TABLE>
12
<PAGE>
The fourth quarter distribution was accrued for accounting purposes in 1996, and
was not actually paid to the limited partners holding Class A units until
February 1997. Even though there is no guarantee, the General Partners
anticipate that cash distributions to Limited Partners holding Class A units
will continue in 1997 at a level at least comparable with 1996 cash
distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------
The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 1996, 1995 and 1994 and the nine months ended December
31, 1993.
The Partnership which began on April 5, 1993 did not commence active operations
until it received and accepted subscriptions for a minimum of 125,000 units in
May, 1993, and accordingly, there is no comparative financial data available
prior to 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total assets $20,880,163 $21,476,126 $21,837,180 $11,191,023
Total revenues 675,782 1,002,567 819,535 82,723
Net income 589,053 901,828 700,896 31,428
Net income/(loss) allocated
to General Partners 0 (1,828) 1,409 (81)
Net income allocated to
Class A Limited Partners 1,234,717 1,172,944 762,218 39,551
Net loss allocated to
Class B Limited Partners (645,664) (269,288) (62,731) (8,042)
Net income per weighted
average (1) Class A
Limited Partner Unit .59 .57 .43 .01
Net loss per weighted
average (1) Class B
Limited Partner Unit (1.60) (.60) (.12) (.01)
Cash Distributions per
weighted average (1)
Class A Limited Partner Unit:
Investment Income .57 .62 .32 .00
Return of Capital .00 .00 .00 .00
</TABLE>
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased by Limited
Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- --------------------
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
13
<PAGE>
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 from any forward-looking construction
delays, lease-up risks, inability to obtain new tenants upon the 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
Gross revenues of the Partnership were $675,782 for the fiscal year ended
December 31, 1996, as compared to $1,002,567 for the fiscal year ended December
31, 1995, and $819,535 for the fiscal year ended December 31, 1994. The
decrease for 1996 as compared to 1995 was due primarly to decreased interest
income and decreased income from joint ventures due to the changes in
depreciation discussed below. The increase for 1995 over 1994 was due primarily
to increased income from joint ventures partially offset by a decrease in
interest income. This net increase 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 1994 to 1995 and 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. For
further discussion of depreciation expense, please refer to the notes to the
accompanying financial statements.
Expenses of the Partnership were $86,729 for 1996, as compared to $100,739 for
1995 and $118,639 for 1994. The decrease in expenses for 1996 as compared to
1995 and 1994 was primarily due to decreased partnership administration
expenses.
Net income of the Partnership was $589,053 for the fiscal year ended December
31, 1996, as compared to $901,828 for the fiscal year ended December 31, 1995,
and $700,896 for the nine months ended December 31, 1994. The decrease in net
income for 1996 over 1995 is due primarily to decreased income from joint
ventures and decreased interest earned offset partially by decreased expenses.
The Partnership made cash distributions to the limited partners holding Class A
Units of $.57 for fiscal year 1996 as compared to $.62 per Class A Unit for
fiscal year 1995 and $.32 for fiscal year 1994. The General Partners anticipate
distributions per Unit will continue to increase for limited partners holding
Class A Units in 1997. Distributions accrued for the fourth quarter of 1996 to
the limited partners holding Class A Units were paid in February, 1997. No cash
distributions were made to limited partners holding Class B Units.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 121
establishes standards for determining when impairment
14
<PAGE>
losses on long-lived assets have occurred and how impairment losses should be
measured. The joint ventures adopted SFAS No. 121, effective January 1, 1995.
The impact of adoping SFAS No. 121 was not material to the financial statements
of the joint ventures.
PROPERTY OPERATIONS
- -------------------
As of December 31, 1996, the Partnership's ownership interest in Fund I,II,II-
OW, VI and VII Joint Venture was 10.7%, in Fund II,III, VI and VII Joint Venture
26.0%, in Fund V and VI Joint Venture 52.5%, in Fund V,VI, and VII Joint Venture
41.8%, in Fund VI and VII Joint Venture 42.8% and in Fund VI,VII and VIII Joint
Venture 36.4%.
As of December 31, 1996, the Partnership owned interests through interests in
joint ventures in the following operational properties:
The Hartford Building / Fund V - Fund VI Joint Venture
- ------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
---------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Revenues:
Rental income $717,499 $717,499 $717,499
-------- -------- --------
Expenses
Depreciation 292,031 199,551 170,058
Management & leasing expenses 28,700 28,700 27,554
Other operating expenses 13,948 21,182 60,536
-------- -------- --------
334,679 249,433 258,148
-------- -------- --------
Net income $382,820 $468,066 $459,351
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the Fund
V-Fund VI Joint Venture 52.5% 52.4% 48.4%
Cash Distribution to the Partnership $357,530 $346,456 $247,223
Net Income (loss) Allocated to the
Partnership $200,900 $240,278 $215,698
</TABLE>
Net income decreased and expenses increased in 1996 over 1995 due primarily to
increased depreciation expenses. Net income increased and expenses decreased in
1995 as compared to 1994 due primarily to decreased expenditures for property
insurance and legal fees which was partially offset by an increase in
depreciation expense in the fourth quarter of 1995 resulting from 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
Conditions".
15
<PAGE>
The Partnership's ownership in the Fund V-Fund VI Joint Venture increased from
48.4% in 1994, to 52.4% in 1995 and to 52.5% in 1996 due to additional fundings
by the Partnership which increased the Partnership's ownership interest in the
Fund V- Fund VI Joint Venture.
Cash distributions remained stable from 1996 as compared to 1995 but cash
distributions increased in 1995 over 1994 due to the decrease in expenses and
the Partnership's increased percentage ownership interest in the Joint Venture.
Net income allcoated to the Partnership varied from 1996 to 1995 to 1994 due to
increased depreciation expenses and increased ownership in the Fund V-Fund VI
Joint Venture as discussed above.
Real estate taxes and all operational expenses for the building are the
responsibility of the tenant.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
Stockbridge Village II / Fund V-Fund VI Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
One Month
For the Year Ended December 31 Ended Dec. 31
------------------------------- -------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $196,629 $166,033 $ 4,403
-------- -------- --------
Expenses
Depreciation 79,239 43,588 4,813
Management & leasing expenses 19,786 16,136 0
Other operating expenses 90,216 43,099 18,852
-------- -------- --------
189,241 102,823 23,665
-------- -------- --------
Net income $ 7,388 $ 63,210 $(19,262)
======== ======== ========
Occupied % 61% 61% 100%
Partnership's Ownership % in the
Fund V-Fund VI Joint Venture 52.5% 52.4% 48.4%
Cash Distribution to the Partnership $ 41,056 $ 38,697 $ 0
Net Income Allocated to the
Partnership $ 3,870 $ 32,655 $ (8,976)
</TABLE>
The Stockbridge Village II Project, 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
16
<PAGE>
opened in June, 1995. Glenn's Open Pit Bar-B-Que leased 4,303 square feet
beginning in July, 1995. 4,969 additional square feet have been leased in the
second building with occupancy in the first quarter of 1997.
Since the first building of the Stockbridge Village II Project opened in
December 1994, comparative income and expense figures for the year ended
December 31, 1994 are not available. In 1996 and 1995 there were increases in
depreciation expense due to the change in estimated useful lives of buildings
and improvements which became effective in the fourth quarter of 1995, as
previously discussed under the "General" section of "Results of Operations and
Changes in Financial Conditions".
The Partnership's ownership percentage in the Fund V - Fund VI Joint Venture
increased to 52.5% for 1996 from 52.4% for 1995 as compared to 48.4% in 1994 due
to an additional investment by the Partnership which increased the Partnership's
ownership interest and decreased the Wells Fund V's ownership interest in the
Fund V - Fund VI Joint Venture.
The Stockbridge Village II Project incurred property taxes of $22,835 for 1996,
$19,924 for 1995 and $14,200 for 1994.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc., refer to Item 2, Properties, Page 3.
The Marathon Building/Fund V-VI-VII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Four Months Ended
For the Year Ended December 31 December 31,
------------------------------ ------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $971,017 $971,017 $283,213
Expenses
Depreciation 350,585 243,428 61,016
Management & leasing expenses 38,841 38,841 11,329
Other operating expenses 14,636 25,557 22,085
-------- -------- --------
404,062 307,826 94,430
-------- -------- --------
Net income $566,955 $663,191 $188,783
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund V-VI-VII Joint Venture 41.8% 41.8% 41.8%
Cash Distribution to the Partnership $359,305 $354,736 $ 96,360
Net Income Allocated to the
Partnership $237,157 $277,413 $ 78,990
</TABLE>
17
<PAGE>
Rental income for 1996 and 1995 was the same. Since the Marathon Building was
purchased in September 1994, comparative income and expense figures for the year
ended December 31, 1994, are not available. Depreciation expense increased for
1996 compared to 1995 due to the recording of a full year's expense reflecting
the change in estimated useful lives which was made beginning in fourth quarter
of 1995. In 1995, there was an increase in depreciation expense, as compared to
1994, 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 Conditions". Other operating expenses decreased from
$25,557 in 1995 to $14,636 in 1996 due primarily to payment of legal and
administrative expenses associated with the first year of operating the
property.
Real estate taxes and all operational expenses for the building are the
responsibility of the tenant.
The Partnership has an equity interest of 41.8% in the Marathon Property through
its ownership in the Fund V-VI-VII Joint Venture.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, Page 3.
Stockbridge Village III/Fund VI - Fund VII Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended 8 Months Ended
December 31, 1996 December 31, 1995
--------------------- ------------------
<S> <C> <C>
Revenues:
Rental income $257,571 $88,239
Expenses:
Depreciation 84,642 28,273
Management and leasing expenses 51,107 8,999
Other operating expenses 59,168 43,082
-------- -------
194,917 80,354
-------- -------
Net income $ 62,654 $7,885
======== =======
Occupied % 87% 71%
Partnership's Ownership % in the
Fund VI - Fund VII Joint Venture 42.8% 43.9%
Cash Distribution to the Partnership $ 65,756 0
Net Income Allocation to the $ 26,845 $4,107
Partnership
</TABLE>
18
<PAGE>
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. Four additional
tenants have occupied approximately 5,850 square feet as of December 31, 1996.
The Stockbridge Village III Project incurred $23,026 for 1996 and $13,368 for
1995 in property taxes.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
Stockbridge Village I Expansion/Fund VI - Fund VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1996
------------------
<S> <C>
Revenues:
Rental income $ 59,006
Expenses:
Depreciation 52,780
Management & leasing expenses 3,238
Other operating expenses 28,810
--------
84,828
--------
Net Loss $(25,822)
========
Occupied % 36%
Partnership's Ownership % in the Fund
VI - Fund VII Joint Venture 42.8%
Cash Distribution to Partnership $ 0
Net Loss Allocated to the Partnership $(11,070)
</TABLE>
On June 7, 1995, the Fund VI - Fund VII Joint Venture purchased 3.38 acres of
real property located in Clayton County, Georgia. The Stockbridge Village I
Expansion consists of a multi-tenant shopping center containing approximately
29,000 square feet. The majority of
19
<PAGE>
construction was completed in April, 1996 with Cici's Pizza leasing a 4,000
square foot restaurant. The term of the lease is for nine years and eleven
months commencing April, 1997. The initial base rent is $48,000. In the third
year, annual base rent will increase to $50,000, in the sixth year to $52,000,
and in the ninth year to $56,000. Four additional tenants have occupied 6,400
square feet at the property as of December 31, 1996. Negotiations are being
conducted to lease the remaining space.
Since this property opened in 1996, there is no comparable financial information
for prior years. The Stockbridge Village I Expansion incurred $9,182 for 1996
property taxes. It is projected that no additional funding will be required to
complete tenant buildout by the Partnership or Wells Fund VII.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
refer to Item 2, Properties, page 3.
Holcomb Bridge Road Property / Fund II - III - VI - VII Joint Venture
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
December 31, 1996
-----------------
<S> <C>
Revenues:
Rental Income $255,062
Expenses:
Depreciation 181,798
Management & leasing expenses 28,832
Other operating expenses 101,600
--------
312,230
--------
Net loss $(57,168)
========
Occupied % 63%
Partnership's Ownership % in the Fund
II - III - VI - VII Joint Venture 26.0%
Cash Distribution to Partnership $ 19,329
Net Loss Allocated to the
Partnership $(10,193)
</TABLE>
Since the Holcomb Bridge Property was under construction and not occupied until
first quarter, 1996, comparative income and expense figures for prior years, are
not available. Real estate taxes at the Holcomb Bridge Property were $37,191
for 1996, the first year of occupancy.
In January 1995, the Fund II - Fund III Joint Venture contributed 4.3 acres of
land and land improvements at Holcomb Bridge Road to the Fund II - III - VI -
VII Joint Venture. The
20
<PAGE>
project opened in April, 1996. Development is being completed on two buildings
with a total of 49,500 square feet. As of December 31, 1996, nine tenants
occupied approximately 31,144 square feet of space in the retail building under
leases of varying lengths.
As of December 31, 1996, the Fund II - Fund III Joint Venture contributed
$1,729,116 in land and land improvements for an equity interest of approximately
25.2%, Wells Fund VII contributed $3,217,154 for an equity interest of
approximately 48.8%, and the Partnership contributed $1,699,846 for an equity
interest of approximately 26.0%. The total cost to develop the Holcomb Bridge
Road Project is currently estimated to be approximately $5,100,000, excluding
land. It is anticipated that of the remaining cost of approximately $183,000,
$83,000 will be contributed by Wells Fund VII and $100,000 by the Partnership,
after which the equity interests in the property will be 26.4% for the
Partnership, 48.3% for Wells Fund VII and 25.3% for the Fund II - Fund III Joint
Venture. The Partnership and Wells Fund VII have reserved sufficient funds for
this purpose.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
BellSouth Property / Fund VI - VII - VIII Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Eight Months
Ended December 31, 1996
-----------------------
<S> <C>
Revenues:
Rental income $876,711
Interest income 60,092
--------
936,803
--------
Expenses:
Depreciation 290,407
Management & leasing expenses 99,330
Other operating expenses 288,665
--------
678,402
--------
Net income $258,401
========
Occupied % 100%
Partnership's Ownership % in the
Fund VI - VII - VIII Joint Venture 36.4%
Cash Distribution to Partnership $175,281
Net Income Allocated to Partnership $100,600
</TABLE>
On April 25, 1995, the Fund VI - VII - VIII Joint Venture purchased 5.55 acres
of land located in Jacksonville, Florida. In May 1996, the 92,964 square foot
office building was completed, with
21
<PAGE>
BellSouth Advertising and Publishing Corporation occupying approximately 66,333
square feet and American Express occupying approximately 22,607 square feet. An
additional approximate 2,900 square feet was occupied by BellSouth commencing in
December 1996 bringing occupancy to 100%
The initial term of the BellSouth lease is nine years and eleven months. The
annual base rent during the initial term is $1,048,061 during the first five
years and $1,150,878 for the balance of the initial lease term. The American
Express lease is for a term of five years at an annual base rent of $369,851.
BellSouth and American Express are required to pay additional rent equal to
their share of operating expenses during their respective lease terms.
Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts.
Since the building opened in May, 1996, comparative income and expense figures
for prior years are not available. The BellSouth Property incurred property
taxes of $23,234 for 1996, the first year of occupancy.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
Cherokee Commons Shopping Center / Fund I - II - II-OW - VI - VII Associates.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Rental Income $890,951 $778,204 $ 552,823
Interest Income 73 180 50
-------- -------- ---------
891,024 778,384 552,873
Expenses:
Depreciation 429,419 277,099 172,583
Management & leasing expenses 48,882 36,303 22,410
Other operating expenses 180,841 115,885 569,830
-------- -------- ---------
659,142 429,287 764,823
-------- -------- ---------
Net income $231,882 $349,097 $(211,950)
======== ======== =========
Occupied % 93% 94% 91%
Partnership's Ownership % 10.7% 10.7% 0%
Cash Distribution to Partnership $ 72,510 $ 36,069 $ -0-
Net Income Allocated to the
Partnership $ 24,830 $ 18,381 $ -0-
</TABLE>
Rental income increased in 1996 over 1995 due to the Kroger expansion which was
completed in November, 1994. Rental income for the year ended December 31, 1995
increased approximately $225,000 from the rental income for the year ended
December 31, 1994. This increase is due to
22
<PAGE>
excessive rents relating to the Kroger expansion which, although completed in
November of 1994, was billed retroactively and paid in September 1995. The
decrease in occupancy in 1996, was due to the current vacancy of 2,380 square
feet; however, a lease is being negotiated for 1,200 square feet with
anticipated occupancy in February 1997. Operating expenses of the property
increased to $659,142 in 1996 from $429,287 in 1995, and $764,823 in 1994. The
increase is due primarily to increased management and leasing fees as well as
increased depreciation expense. The increase in depreciation expense for 1996 as
compared to 1995 and 1994 is a result of the change in the estimated useful
lives of buildings and improvements which became effective in the fourth quarter
of 1995, as previously discussed under the "General" section of "Results of
Operations and Changes in Financial Conditions". Net income of the property
decreased to $231,882 in 1996 from $349,097 in 1995 and increased from (211,950)
in 1994, due to the increase in operating expenses as discussed above.
A lease amendment was executed with Kroger expanding 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. The total cost for both 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, Fund II-II-OW $805,092,
Wells Fund VII $953,798 and the Partnership $953.798 as of December 31, 1995.
The statements are for a twelve month period; however, the Partnership and Wells
Fund VII did not contribute their portion until August, 1995.
The Cherokee Property incurred property taxes of $63,696 for 1996, $63,694 for
1995 and $56,080 for 1994.
Since the Partnership did not contribute to the Fund I - II - II-OW - VI - VII
Joint Venture until August, 1995, there are no cash distributions or income
allocated to the Partnership for 1994. Allocation of cash distributions and
income to the Partnership began in August, 1995.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
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, the Partnership incurred $4,619,157 in commissions, acquisition fees,
organization and offering costs; invested $19,789,055 in properties; reserved
$250,000 as working capital reserves; and the remainder of approximately
$342,000 is reserved for investment in joint ventures. It is currently
anticipated that approximately $242,000 will be contributed to the Fund V - Fund
VI Joint Venture to complete the Stockbridge Village II Project and
approximately $100,000 will be contributed to the Fund II, III, VI and VII Joint
Venture. No additional funding to the joint ventures are anticipated by the
Partnership.
23
<PAGE>
As of December 31, 1996, the Partnership had working capital cash reserves of
$250,000. The Partnership is required to maintain working capital reserves in
an amount equal to the operating expenses estimated to be required to operate
the Partnership for a six month period, not to exceed 3% or be reduced below 1%
of offering proceeds available for investment in properties. The General
Partners believe such working capital reserves will be adequate.
The Partnership's net cash provided by operating activities decreased from
$234,119 for the year ended December 31, 1994 to $(216,092) for the year ended
December 31, 1995 but increased to $(143,341) for the year ended December 31,
1996 primarily due to increases in distributions from joint ventures partially
offset by decreased interest income in 1996. Net cash used in investing
activities increased from $5,912,454 in 1994 to $10,721,376 in 1995 but
decreased to $234,924 in 1996 due primarily to fluctuation in investments in
joint ventures, a return of capital in 1996 due to a transfer of funds from the
Tanglewood Project to the Holcomb Bridge Road Project and elimination in 1995
and 1996 of deferred project cost paid in 1994. Cash flow from financing
activities decreased from $10,386,552 in 1994 to $0 in 1995 and 1996. The
decrease from 1994 is due to the termination of the sale of Partnership units in
1995. No Partnership unit sales by the Partnership are allowed after the
termination date of April 4, 1994 as stated in the Prospectus.
The Partnership's distributions paid and payable through the fourth quarter of
1996 have been paid from net cash from operations and from distributions
received from its equity investment in joint ventures. The Partnership
anticipates that distributions will continue to be paid on a quarterly basis
from such sources. No cash distributions were paid to Class B Unit holders for
1996. The Partnership expects to meet liquidity requirements and budget demands
through cash flow from operations.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required for the normal operations of the
properties in which it owns a joint venture interest that will result in the
Partnership's liquidity increasing or decreasing in any material way.
INFLATION
- ---------
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are provisions
in the majority of tenant leases to protect the partnership from the impact of
inflation. Most leases contain common area maintenance charges, real estate tax
and insurance reimbursements on a per square foot basis, or in some cases,
annual reimbursement of operating expenses above a certain per square foot
allowance. These provisions reduce the Partnership exposure to increases in
costs and operating expenses resulting from inflation. In addition, a number of
the Partnership's leases are for terms of less than five years which may permit
the Partnership to replace existing leases with new leases at higher base rental
rates if the existing leases are below market rate. There is no assurance,
however, that the Partnership would be able to replace existing leases with new
leases at higher base rentals.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
The financial statements of the Registrant and supplementary data are detailed
under Item 14 (a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
The Partnership's change in accountants during 1995 was previously reported in
the Partnership's Form 8-K dated September 11, 1995. There were no
disagreements with the Partnership's accountants or other reportable events
during 1996.
25
<PAGE>
PART III
--------
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP.
- ---------------------------------------------
WELLS PARTNERS, L.P. Wells Partners, L.P. is a private Georgia limited
- -------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., a Georgia Corporation. The executive
offices of Wells Capital, Inc. are located at 3885 Holcomb Bridge Road,
Norcross, Georgia 30092.
LEO F. WELLS, III. Mr. Wells is a resident of Atlanta, Georgia, is 53 years of
- -----------------
age and holds a Bachelor of Business Administration Degree in Economics from the
University of Georgia. Mr. Wells is the President and sole Director of Capital.
Mr. Wells is the President of Wells & Associates, Inc., a real estate brokerage
and investment company formed in 1976 and incorporated in 1978, for which he
serves as principal broker. Mr. Wells is also currently the sole Director and
President of Wells Management Company, Inc., a property management company he
founded in 1983. In addition, Mr. Wells is the President and Chairman of the
Board of Wells Investment Securities, Inc., Wells & Associates, Inc., and Wells
Management Company, Inc. which are affiliates of the General Partners. From
1980 to February 1985, Mr. Wells served as Vice-President of Hill-Johnson, Inc.,
a Georgia corporation engaged in the construction business. From 1973 to 1976,
he was associated with Sax Gaskin Real Estate Company and from 1970 to 1973, he
was a real estate salesman and property manager for Roy D. Warren & Company, an
Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
- ---------------------------------------------------------
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 1996.
CASH COMPENSATION TABLE
<TABLE>
<CAPTION>
(A) (B) (C)
Name of individual or Capacities in which served
number in group - Form of Compensation Cash Compensation
- ----------------- -------------------------- -----------------
<S> <C> <C>
Wells Management Property Manager - $93,349
Company, Inc. Management and Leasing
Fees
</TABLE>
(1) The majority of these fees are not paid directly by the Partnership but are
paid by the joint venture entities which own properties for which the
property management and leasing services relate and include management and
leasing fees which were accrued for accounting purposes in 1996 but not
actually paid until January, 1997.
26
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 28, 1997.
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature Percent of Class
Beneficial Owner of Beneficial
Ownership
________________________________________________________________________________
Class A Units Leo F. Wells, III 811.91 units IRA less than 1%
(401(k))
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sale Proceeds. The General
-------------------------------------------------------
Partners will receive a subordinated participation in net cash flow from
operations equal to 10% of net cash flow after the Limited Partners holding
Class A Units have received preferential distributions equal to 10% of
their adjusted capital contribution. The General Partners will also receive
a subordinated participation in net sale proceeds and net financing
proceeds equal to 20% of residual proceeds available for distribution after
Limited Partners holding Class A Units have received a return of their
adjusted capital contributions plus a 10% cumulative return on their
adjusted capital contributions and Limited Partners holding Class B Units
have received a return of their adjusted capital contribution plus a 15%
cumulative return on their adjusted capital contribution; however, that in
no event shall the General Partners receive in the aggregate in excess of
15% of net sale proceeds and net financing proceeds remaining after
payments to Limited Partners from such proceeds of amounts equal to the sum
of their adjusted capital contributions plus a 6% cumulative return on
their adjusted capital contributions. The General Partners received no
distribution from cash flow or from net sales proceeds in 1996.
27
<PAGE>
Property Management and Leasing Fees. Wells Management Company, Inc., an
------------------------------------
affiliate of the General Partners, will receive compensation for
supervising the management of the Partnership properties equal to the
lesser of: (A)(i) 3% of the gross revenues for leasing (aggregate maximum
of 6%) plus a separate one-time fee for initial rent-up or leasing-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by other rendering similar services in
the same geographic area for similar properties; and (ii) in the cash of
industrial and commercial properties which are leased on a long-term basis
(ten or more years), 1% of the gross revenues except for initial leasing
fees equal to 3% of the gross revenues over the first five years of the
lease term; or (B) the amounts charged by unaffiliated persons rendering
comparable services in the same geographic area. Wells Management Company,
Inc. received $93,349 in property management and leasing fees relating to
the Partnership in 1996.
Real Estate Commissions. In connection with the sale of Partnership
-----------------------
properties, the General Partners or their affiliates may receive
commissions not exceeding the lesser of (A) 50% of the commissions
customarily charged by other brokers in arm's-length transactions involving
comparable properties in the same geographic area or (B) 3% of the gross
sales price of the property, and provided that payments of such commissions
will be made only after Limited Partners have received prior distributions
totalling 100% of their capital contributions plus a 6% cumulative return
on their adjusted capital contributions. The General Partners or their
affiliates received no real estate commissions in 1996.
28
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
Information with respect to this item is contained on Pages F-2 to F-42
of this Annual Report of Form 10-K. See Index to Financial Statements
on Page F-1.
(a) 2. Financial Statement Schedule III
Information with respect to this item begins on Page S-1 of this Annual
Report on Form 10-K
(a)3. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1996.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(d) See (a) 2 above.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 17th day of March,
1997.
WELLS REAL ESTATE FUND VI, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
---------------------------------
Individual General Partner and
as President of Wells Capital,
Inc., the General Partner of
Wells Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity as and on the date indicated.
Signature Title
- --------- -----
/s/ Leo F. Wells, III Individual General Partner, March 17, 1997
- --------------------------
Leo F. Wells, III President and Sole Director
of Wells Capital, Inc.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT
TO SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting
of security holders has been sent to security holders.
30
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund VI, L.P.)
The following documents are filed as exhibits to this report. Those
exhibits previously filed and incorporated herein by reference are identified
below by an asterisk. For each such asterisked exhibit, there is shown below
the description of the previous filing. Exhibits which are not required for
this report are omitted.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*3(a) Certificate of Limited Partnership of N/A
Wells Real Estate Fund VI, L.P.
(Exhibit 3(c) to Registration
Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund
VII, L.P., File No. 33-55908)
*4(a) Agreement of Limited Partnership of N/A
Wells Real Estate Fund VI, L.P.
(Exhibit to Form 10-K of Wells Real
Estate Fund VI, L.P. for the fiscal
year ended December 31, 1993, File
No. 0-23656)
*10(a) Management Agreement between Wells N/A
Real Estate Fund VI, L.P. and Wells
Management Company, Inc. (Exhibit to
Form 10-K of Wells Real Estate Fund
VI, L.P. for the fiscal year ended
December 31, 1993, File No. 0-23656)
*10(b) Leasing and Tenant Coordinating N/A
Agreement between Wells Real Estate
Fund VI, L.P. and Wells Management
Company, Inc. (Exhibit to Form 10-K
of Wells Real Estate Fund VI, L.P.
for the fiscal year ended December
31, 1993, File No. 0-23656)
*10(c) Custodial Agency Agreement dated N/A
March 25, 1993, between Wells Real
Estate Fund VI, L.P. and NationsBank
of Georgia, N.A. (Exhibit to Form
10-K of Wells Real Estate Fund VI,
L.P. for the fiscal year ended
December 31, 1993, File No. 0-23656)
*10(d) Fund V and Fund VI Associates Joint N/A
Venture Agreement dated December 27,
1993 (Exhibit 10(g) to Post-Effective
Amendment No. 1 to Registration
Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund
VII, L.P., File No. 33-55908)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(e) Sale and Purchase Agreement dated N/A
November 17, 1993, with Hartford
Accident and Indemnity Company
(Exhibit 10(h) to Post-Effective
Amendment No. 1 to Registration
Statement of Wells Real Estate
Fund VI, L.P. and Wells Real Estate
Fund VII, L.P., File No. 33-55908)
*10(f) Lease with Hartford Fire Insurance N/A
Company December 29, 1993 (Exhibit
10(i) to Post-Effective Amendment No.
1 to Registration Statement of Wells
Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No.
33-55908)
*10(g) Amended and Restated Custodial Agency N/A
Agreement dated April 1, 1994, between Wells
Real Estate Fund VI, L.P. and NationsBank
of Georgia, N.A. Wells Real
Estate Fund VI, L.P. for the fiscal
year ended December 31, 1994, File No. 0-23656)
*10(h) First Amendment to Joint Venture N/A
Agreement of Fund V and Fund VI
Associates dated July 1, 1994
(Exhibit 10(x) to Form 10-K of Wells
Real Estate Fund V, L.P. for the
fiscal year ended December 31, 1994,
File No. 0-21580)
*10(i) Land and Building Lease Agreement N/A
dated March 29, 1994, between Apple
Restaurants, Inc. and NationsBank of
Georgia, N.A., as Agent for Wells
Real Estate Fund V, L.P. (Exhibit
10(y) to Form 10-K of Wells Real
Estate Fund V, L.P. for the fiscal
year ended December 31, 1994, File
No. 0-21580)
*10(j) Building Lease Agreement dated N/A
September 9, 1994, between Glenn's
Open-Pit Bar-B-Que, Inc. and
NationsBank of Georgia, N.A., as
Agent for Fund V and Fund VI
Associates (Exhibit 10(z) to Form
10-K of Wells Real Estate Fund V,
L.P. for the fiscal year ended
December 31, 1994, File No. 0-21580)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(k) Joint Venture Agreement of Fund V, N/A
Fund VI and Fund VII Associates dated
September 8, 1994, among Wells Real
Estate Fund V, L.P., Wells Real
Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P. (Exhibit 10(j)
to Post-Effective Amendment No. 6 to
Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P., File No.
33-55908)
*10(l) Agreement for the Purchase and Sale N/A
of Property dated August 24, 1994,
between Interglobia Inc. - Appleton
and NationsBank of Georgia, N.A., as
Agent for Fund V and Fund VI
Associates (Exhibit 10(k) to
Post-Effective Amendment No. 6 to
Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P., File No.
33-55908)
*10(m) Assignment and Assumption of N/A
Agreement for the Purchase and Sale
of Real Property dated September 9,
1994, between NationsBank of Georgia,
N.A., as Agent for Fund V and Fund VI
Associates, and NationsBank of
Georgia, N.A., as Agent for Fund V,
Fund VI and Fund VII Associates
(Exhibit 10(l) to Post-Effective
Amendment No. 6 to Registration
Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund
VII, L.P., File No. 33-55908)
*10(n) Building Lease dated February 14, N/A
1991, between Interglobia Inc. -
Appleton and Marathon
Engineers/Architects/Planners, Inc.
(included as part of Exhibit D to
Exhibit 10(k) to Post-Effective
Amendment No. 6 to Registration
Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund
VII, L.P., File No. 33-55908)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(o) Limited Guaranty of Lease dated N/A
January 1, 1993, by J. P. Finance OY
and Fluor Daniel, Inc. for the
benefit of Interglobia Inc. -
Appleton (included as Exhibit B to
Assignment, Assumption and Amendment
of Lease referred to as Exhibit 10(p)
below, which is included as part of
Exhibit D to Exhibit 10(k) to
Post-Effective Amendment No. 6 to
Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P., File No.
33-55908)
*10(p) Assignment, Assumption and Amendment N/A
of Lease dated January 1, 1993, among
Interglobia Inc. - Appleton, Marathon
Engineers/Architects/Planners, Inc.
and Jaakko Poyry Fluor Daniel
(included as part of Exhibit D to
Exhibit 10(k) to Post-Effective
Amendment No. 6 to Registration
Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund
VII, L.P., File No. 33-55908)
*10(q) Second Amendment to Building lease N/A
dated August 15, 1994, between
Interglobia Inc. - Appleton and
Jaakko Poyry Fluor Daniel
(successor-in-interest to Marathon
Engineers/Architects/Planners, Inc.)
(included as Exhibit D-1 to Exhibit
10(k) to Post-Effective Amendment No.
6 to Registration Statement of Wells
Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No.
33-55908)
*10(r) Assignment and Assumption of Lease N/A
dated September 6, 1994, between
Interglobia Inc. - Appleton and
NationsBank of Georgia, N.A., as
Agent for Fund V, Fund VI and Fund
VII Associates (Exhibit 10(q) to
Post-Effective Amendment No. 6 to
Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P., File No.
33-55908)
*10(s) Agreement for the Purchase and Sale N/A
of Real Property dated April 7, 1994,
between 138 Industrial Ltd. and
NationsBank of Georgia, N.A., as
Agent for Wells Real Estate Fund VI,
L.P. (Exhibit to Form 10-K of Wells
Real Estate Fund VI, L.P. for the
fiscal year ended December 31, 1994,
File No. 0-23656)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(t) Land and Building Lease Agreement N/A
dated August 22, 1994, between KRR
Stockbridge, Inc. d/b/a Kenny Rogers
Roasters and NationsBank of Georgia,
N.A., as Agent for Wells Real Estate
Fund VI, L.P. (Exhibit to Form 10-K
of Wells Real Estate Fund VI, L.P.
for the fiscal year ended December
31, 1994, File No. 0-23656)
*10(u) Joint Venture Agreement of Fund VI N/A
and Fund VII Associates dated
December 9, 1994 (Exhibit to Form
10-K of Wells Real Estate Fund VI,
L.P. for the fiscal year ended
December 31, 1994, File No. 0-23656)
*10(v) Building Lease Agreement dated N/A
December 19, 1994, between Damon's of
Stockbridge, LLC d/b/a Damon's
Clubhouse and NationsBank of Georgia,
N.A., as Agent for Fund VI and Fund
VII Associates (Exhibit to Form 10-K
of Wells Real Estate Fund VI, L.P.
for the fiscal year ended December
31, 1994, File No. 0-23656)
*10(w) Joint Venture Agreement of Fund II, N/A
III, VI and VII Associates dated
January 10, 1995 (Exhibit to Form
10-K of Wells Real Estate Fund VI,
L.P. for the fiscal year ended
December 31, 1995, File No. 0-23656)
*10(x) Joint Venture Agreement of Fund VI, N/A
Fund VII and Fund VIII Associates
dated April 17, 1995 (Exhibit 10(q)
to Post-Effective Amendment No. 3 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(y) Agreement for the Purchase and Sale N/A
of Real Property dated February 13,
1995, between G.L. National, Inc. and
Wells Capital, Inc. (Exhibit 10(r) to
Post-Effective Amendment No. 3 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(z) Agreement to Lease dated February 15, N/A
1995, between NationsBank of Georgia,
N.A., as Agent for Wells Real Estate
Fund VII, L.P. and BellSouth
Advertising & Publishing Corporation
(Exhibit 10(s) to Post-Effective
Amendment No. 3 to Form S-11
Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No.
33-83852)
*10(aa) Development Agreement dated April 25, N/A
1995, between Fund VI, Fund VII and
Fund VIII Associates and ADEVCO
Corporation (Exhibit 10(t) to
Post-Effective Amendment No. 3 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(bb) Owner-Contractor Agreement dated N/A
April 24, 1995, between Fund VI, Fund
VII and Fund VIII Associates, as
Owner, and McDevitt Street Bovis,
Inc., as Contractor (Exhibit 10(u) to
Post-Effective Amendment No. 3 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(cc) Architect's Agreement dated February N/A
15, 1995, between Wells Real Estate
Fund VII, L.P., as Owner, and Mayes,
Suddereth & Etheredge, Inc., as
Architect (Exhibit 10(v) to
Post-Effective Amendment No. 3 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(dd) First Amendment to Joint Venture N/A
Agreement of Fund VI and Fund VII
Associates dated May 25, 1995
(Exhibit to Form 10-K of Wells Real
Estate Fund VI, L.P. for the fiscal
year ended December 31, 1995, File
No. 0-23656)
*10(ee) First Amendment to Joint Venture N/A
Agreement of Fund VI, Fund VII and
Fund VIII Associates dated May 30,
1995 (Exhibit 10(w) to Post Effective
Amendment No. 4 to Form S-11
Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No.
33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(ff) Real Estate Purchase Agreement dated N/A
April 13, 1995 (Exhibit 10(x) to Post
Effective Amendment No. 4 to Form
S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No.
33-83852)
*10(gg) Lease Agreement dated February 27, N/A
1995, between NationsBank of Georgia,
N.A., as agent for Wells Real Estate
Fund VII, L.P., and Harris Teeter,
Inc. (Exhibit 10(y) to Post Effective
Amendment No. 4 to Form S-11
Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No.
33-83852)
*10(hh) Development Agreement dated May 31, N/A
1995, between Fund VI, Fund VII and
Fund VIII Associates and Norcom
Development, Inc. (Exhibit 10(z) to
Post Effective Amendment No. 4 to
Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(ii) Joint Venture Agreement of Fund I, N/A
II, II-OW, VI and VII Associates
dated August 1, 1995 (Exhibit to Form
10-K of Wells Real Estate Fund VI,
L.P. for the fiscal year ended
December 31, 1995, File No. 0-23656)
*10(jj) Lease Modification Agreement No. 3 N/A
with The Kroger Co. dated December
31, 1993 (Exhibit 10(k) to Form 10-K
of Wells Real Estate Fund I for the
fiscal year ended December 31, 1993,
File No. 0-14463)
</TABLE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Financial Statements Page
- -------------------- ----
<S> <C>
Independent Auditors' Reports F2-F3
Balance Sheets as of December 31, 1996 and 1995 F4
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F5
Statements of Partners' Capital for the Years Ended
December 31, 1996, 1995 and 1994 F6
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F7
Notes to Financial Statements for December 31, 1996,
1995, and 1994 F8
</TABLE>
F-1
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Wells Real Estate Fund VI, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VI,
L.P. (a Georgia public limited partnership) as of December 31, 1996 and 1995 and
the related statements of income, partners' capital, and cash flows for the
years then ended. These financial statements and the schedule referred to below
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund VI, L.P.
as of December 31, 1996 and 1995 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Atlanta, Georgia
January 10, 1997
F-2
<PAGE>
[LETTERHEAD OF PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
The Partners
Wells Real Estate Fund VI, L.P.:
We have audited the balance sheet (which is not presented separately herein) of
Wells Real Estate Fund VI, L.P. (a limited partnership) as of December 31, 1994,
and the related statements of income, partners' capital, and cash flows for the
year then ended. In connection with our audit of the financial statements, we
have also audited the information for the year ended December 31, 1994 included
in the December 31, 1996 financial statement Schedule III - Real Estate and
Accumulated Depreciation. These financial statements and information included
in the financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and information included in the financial statement schedule based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund VI, L.P.
as of December 31, 1994, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles. Also in our opinion, the related information for 1994 included in
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
January 13, 1995
Atlanta, Georgia
F-3
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- ------------
<S> <C> <C>
INVESTMENT IN JOINT VENTURES $19,930,833 $20,184,572
CASH AND CASH EQUIVALENTS 589,082 967,347
DUE FROM AFFILIATES 335,878 263,587
DEFERRED PROJECT COSTS 14,157 35,462
ORGANIZATIONAL COSTS, LESS ACCUMULATED AMORTIZATION OF
$23,437 IN 1996 AND $17,187 IN 1995 7,813 14,063
PREPAID EXPENSES AND OTHER ASSETS 2,400 11,095
----------- -----------
Total assets $20,880,163 $21,476,126
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 4,500 $ 4,000
Partnership distributions payable 330,572 327,865
----------- -----------
Total liabilities 335,072 331,865
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
PARTNERS' CAPITAL:
Limited partners:
Class A 18,162,497 17,637,686
Class B 2,382,594 3,506,575
----------- -----------
Total partners' capital 20,545,091 21,144,261
----------- -----------
Total liabilities and partners' capital $20,880,163 $21,476,126
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Equity in income of joint ventures $ 607,214 $ 681,033 $285,711
Interest income 68,568 321,534 533,824
----------- ----------- -----------
675,782 1,002,567 819,535
----------- ----------- -----------
EXPENSES:
Partnership administration 49,424 73,123 84,122
Legal and accounting 26,556 15,762 23,741
Amortization of organization costs 6,250 6,250 6,250
Computer costs 4,499 5,604 4,526
----------- ----------- -----------
86,729 100,739 118,639
----------- ----------- -----------
NET INCOME $ 589,053 $ 901,828 $700,896
=========== =========== ===========
NET (LOSS) INCOME ALLOCATED TO GENERAL
PARTNERS $ 0 $ (1,828) $ 1,409
=========== =========== ===========
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $1,234,717 $1,172,944 $762,218
=========== =========== ===========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ (645,664) $ (269,288) $(62,731)
=========== =========== ===========
NET INCOME PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT $ 0.59 $ 0.57 $ 0.43
=========== =========== ===========
NET LOSS PER WEIGHTED AVERAGE CLASS B
LIMITED PARTNER UNIT $ (1.60) $ (0.60) $ (0.12)
=========== =========== ===========
CASH DISTRIBUTION PER WEIGHTED AVERAGE
CLASS A LIMITED PARTNER UNIT $ 0.57 $ 0.62 $ 0.32
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<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, 1993 929,639 $ 7,964,112 354,015 $3,009,705 $ 419 $10,974,236
Net income (loss) 0 762,218 0 (62,731) 1,409 700,896
Limited partner contributions 1,003,578 10,035,784 212,768 2,127,677 0 12,163,461
Sales commissions 0 (997,735) 0 (212,768) 0 (1,210,503)
Other offering expenses 0 (451,844) 0 (99,116) 0 (550,960)
Partnership distributions 0 (559,952) 0 0 0 (559,952)
Class A conversion elections (2,277) (24,320) 2,277 24,320 0 0
Class B conversion elections 72,070 643,638 (72,070) (643,638) 0 0
----------- ------------ --------- ---------- --------- ------------
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 1,234,717 0 (645,664) 0 589,053
Partnership distributions 0 (1,188,223) 0 0 0 (1,188,223)
Class B conversion elections 64,901 478,317 (64,901) (478,317) 0 0
----------- ------------ --------- ---------- --------- ------------
BALANCE, DECEMBER 31, 1996 2,113,257 $18,162,497 386,743 $2,382,594 $ 0 $20,545,091
=========== ============ ========= ========== ========= ============
</TABLE>
The accompanying notes are an integral part of these statements.WELLS REAL
F-6
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 589,053 $ 901,828 $ 700,896
------------- ------------- -------------
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Equity in income of joint ventures (607,214) (681,033) (285,711)
Distributions received from joint ventures 1,044,891 766,212 203,543
Distributions to partners from
accumulated earnings (1,185,516) (1,261,032) (245,800)
Amortization of organization costs 6,250 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets 8,695 53,533 (46,628)
Due to affiliates 0 0 (97,178)
Deferred income 0 (3,850) 3,850
Accounts payable and accrued expenses 500 2,000 (5,103)
------------ ------------- ------------
Total adjustments (732,394) (1,117,920) (466,777)
------------ ------------- ------------
Net cash (used in) provided by
operating activities (143,341) (216,092) 234,119
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures (734,924) (10,721,376) (5,429,517)
Return of contributions in joint venture 500,000 0 0
Deferred project costs paid 0 0 (482,937)
------------ ------------- ------------
Net cash used in investing
activities (234,924) (10,721,376) (5,912,454)
------------ -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 0 0 12,163,461
Sales commission paid 0 0 (1,323,009)
Offering costs paid 0 0 (453,900)
------------ ------------- -------------
Net cash provided by financing activities 0 0 10,386,552
------------ ------------- -------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (378,265) (10,937,468) 4,708,217
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 967,347 11,904,815 7,196,598
------------ ------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 589,082 $ 967,347 $11,904,815
============ ============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Deferred project costs applied to
joint venture property, net of
deferred project costs transferred $ 21,305 $ 495,866 $ 252,761
============ ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Wells Real Estate Fund VI, L.P. (the "Partnership") is a public limited
partnership organized on April 5, 1993 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P., a Georgia nonpublic limited partnership. The Partnership has two
classes of limited partnership interests, Class A and Class B units.
Limited partners may vote to, among other things, (a) amend the partnership
agreement, subject to certain limitations, (b) change the business purpose
or investment objectives of the Partnership, and (c) remove a general
partner. A majority vote on any of the described matters will bind the
Partnership, without the concurrence of the general partners. Each limited
partnership unit has equal voting rights, regardless of class.
The Partnership was formed to acquire and operate commercial real
properties, including properties which are to be developed, are currently
under development or construction, are newly constructed, or have operating
histories. The Partnership owns an interest in several properties through
joint ventures between the Partnership and other Wells Real Estate funds,
as follows: (i) a shopping center located in Cherokee County, Georgia, the
Cherokee Commons Shopping Center ("Cherokee Commons"), (ii) an
office/retail center in Roswell, Georgia, (iii) the Hartford Building, a
four-story office building located in Southington, Connecticut, (iv) the
Stockbridge Village II property, two retail buildings located in Clayton
County, Georgia, (v) the Marathon Building, a three-story office building
located in Appleton, Wisconsin, (vi) the Stockbridge Village III Retail
Center, two retail buildings located in Stockbridge, Georgia, (vii) a
retail center expansion in Stockbridge, Georgia, (viii) the BellSouth
property, a four-story office building in Jacksonville, Florida, and (ix) a
retail center under construction in Clemmons, Forsyth County, North
Carolina (Note 4).
USE OF ESTIMATES AND FACTORS AFFECTING THE PARTNERSHIP
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-8
<PAGE>
The carrying values of the real estate assets are based on management's
current intent to hold the real estate assets as long-term investments. The
success of the Partnership's future operations and the ability to realize
the investment in its assets will be dependent upon the Partnership's
ability to maintain rental rates, occupancy, and an appropriate level of
operating expenses in future years. Management believes that the steps it
is taking will enable the Partnership to realize its investment in its
assets.
INCOME TAXES
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares
of profits and losses in their individual income tax returns.
DISTRIBUTION OF NET CASH FROM OPERATIONS
Cash available for distribution, as defined by the partnership agreement,
is distributed to limited partners on a quarterly basis. In accordance
with the partnership agreement, distributions are paid first to limited
partners holding Class A units until they have received a 10% return on
their adjusted capital contributions, as defined. Cash available for
distribution is then paid to the general partners until they have received
an amount equal to 10% of distributions. Any remaining cash available for
distribution is split between the limited partners holding Class A units
and the general partners on a basis of 90% and 10%, respectively. No
distributions will be made to the limited partners holding Class B units.
DISTRIBUTION OF SALES PROCEEDS
Upon sales of properties, the net sales proceeds are distributed in the
following order:
. To limited partners, on a per unit basis, until each limited
partner has received 100% of its adjusted capital contribution,
as defined
. To limited partners holding Class B units, on a per unit basis,
until they receive an amount equal to the net cash available for
distribution received by the limited partners holding Class A
units
. To all limited partners, on a per unit basis, until they receive
a cumulative 10% per annum return on their adjusted capital
contributions, as defined
. To all limited partners, on a per unit basis, until they receive
an amount equal to their respective cumulative distributions
. To all general partners until they have received 100% of their
capital contribution
. Thereafter, 80% to the limited partners and 20% to the general
partners
F-9
<PAGE>
ALLOCATION OF NET INCOME, NET LOSS, AND GAIN ON SALE
Net income is defined as net income recognized by the Partnership,
excluding deductions for depreciation, amortization, and cost recovery.
Net income, as defined, of the Partnership will be allocated each year in
the same proportions that net cash from operations is distributed to the
partners. To the extent the Partnership's net income in any year exceeds
net cash from operations, it will be allocated 99% to the limited partners
holding Class A units and 1% to the general partners.
Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners
holding Class B units and 1% to the general partners until their capital
accounts are reduced to zero, (b) then to any partner having a positive
balance in his capital account in an amount not to exceed such positive
balance, and (c) thereafter to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to a qualified income offset
provision in the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, (c) allocations to Class B limited partners in amounts
equal to deductions for depreciation, amortization, and cost recovery
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized
by the Partnership with respect to the sale of such property, and (d)
allocations to Class A limited partners and general partner in amounts
equal to deductions for depreciation, amortization, and cost recovery
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized
by the Partnership with respect to the sale of such property.
INVESTMENT IN JOINT VENTURES
BASIS OF PRESENTATION. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investments in joint ventures are recorded using
the equity method of accounting.
REAL ESTATE ASSETS. Real estate assets held through investments in
affiliated joint ventures are stated at cost less accumulated depreciation.
Major improvements and betterments are capitalized when they extend the
useful lives of the related assets. All repairs and maintenance are
expensed as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which is effective for fiscal years beginning after December 15, 1995.
SFAS No. 121 establishes standards for determining when impairment losses
on long-lived assets have occurred and how impairment losses should be
measured. The joint ventures adopted SFAS No. 121, effective January 1,
1995. The impact of adopting SFAS No. 121 was not material to the financial
statements of the joint ventures.
F-10
<PAGE>
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amount of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets
under SFAS No. 121 by determining whether the carrying value of such real
estate assets will be recovered through the future cash flows expected from
the use of the asset and its eventual disposition. Management has
determined that there has been no impairment in the carrying value of real
estate assets held by the joint ventures as of December 31, 1996.
Depreciation for buildings, building improvements, and land improvements
are calculated using the straight-line method over their useful lives.
Effective October 1, 1995 the joint ventures revised their estimate of the
useful lives of those assets from 40 years to 25 years. This change was
made to better reflect the estimated periods during which such assets will
remain in service. The change had the effect on the Partnership, through
its ownership interest in the joint ventures, of increasing depreciation
expense approximately $39,928 in the fourth quarter of 1995 and $260,958 in
the year ended December 31, 1996. Tenant improvements are amortized over
the life of the related lease or the life of the asset, whichever is
shorter.
REVENUE RECOGNITION. All leases on real estate held by the joint ventures
are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
PARTNERS' DISTRIBUTIONS AND ALLOCATIONS OF PROFIT AND LOSS. Cash available
for distribution and allocations of profit and loss to the Partnership by
the joint ventures are made in accordance with the terms of the individual
joint venture agreements. Generally, these items are allocated in
proportion to the partners' respective ownership interests. Cash is paid by
the joint ventures to the Partnership quarterly.
DEFERRED LEASE ACQUISITION COSTS. Costs incurred to procure operating
leases are capitalized and amortized on a straight-line basis over the
terms of the related leases.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
PER UNIT DATA
Net income (loss) per unit, with respect to the Partnership for the years
ended December 31, 1996, 1995, and 1994, is computed based on the weighted
average number of units outstanding during the respective period.
F-11
<PAGE>
RECLASSIFICATIONS
Certain 1995 and 1994 items have between reclassified to conform with the
1996 financial statement presentation.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company") for acquisition and advisory services. These
payments, as stipulated by the partnership agreement, can be up to 6% of
the limited partner contributions, subject to certain overall limitations
contained in the partnership agreement. Fees paid through December 31,
1996 were $932,216 and amounted to 3.7% of the limited partner
contributions received. These fees are allocated to specific properties as
they are purchased or developed and are included in real estate assets at
the joint ventures. Deferred project costs at December 31, 1996 and 1995
represent fees not yet applied to properties.
3. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1996 and 1995 represents the
Partnership's share of cash to be distributed for the fourth quarters of
1996 and 1995, as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Fund V and VI Associates $ 98,995 $106,627
Fund V, VI, and VII Associates 89,577 87,478
Fund VI and VII Associates 17,737 (6,383)
Fund VI, VII, and VIII Associates 97,741 47,183
Fund I, II, II-OW, VI, and VII
Associates--Cherokee 18,925 28,682
Fund II, III, VI, and VII Associates 12,903 0
-------- --------
$335,878 $263,587
======== ========
</TABLE>
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells
Management management and leasing fees equal to (a) 3% of the gross
revenues for management and 3% of the gross revenues for leasing (aggregate
maximum of 6%) plus a separate fee for the one-time lease-up of newly
constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services
in the same geographic area for similar properties or (b) in the case of
commercial properties which are leased on a long-term net basis (ten or
more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term.
F-12
<PAGE>
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $93,349, $45,301, and $17,984 for the
years ended December 31, 1996, 1995, and 1994, respectively, which were
paid to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners of other Wells Real Estate
funds. As such, there may exist conflicts of interest where the general
partners, while serving in the capacity as general partners of other Wells
Real Estate funds, may be in competition with the Partnership for tenants
in similar geographic markets.
4. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
AMOUNT PERCENT Amount Percent
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Fund I, II, II-OW, VI, and VII
Associates--Cherokee $ 932,597 11% $ 980,277 11%
Fund II, III, VI, and VII Associates 1,759,947 26 1,028,210 19
Fund V and VI Associates 5,006,236 53 5,181,922 52
Fund V, VI, and VII Associates 3,414,896 42 3,537,044 42
Fund VI and VII Associates 2,548,699 43 2,590,820 44
Fund VI, VII, and VIII Associates 6,268,458 36 6,866,299 44
----------- -----------
$19,930,833 $20,184,572
=========== ===========
</TABLE>
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 1996 and 1995 :
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Investment in joint ventures, beginning of period $20,184,572 $ 9,176,058
Equity in income of joint ventures 607,214 681,033
Distributions from joint ventures (1,117,182) (889,761)
Contributions to joint ventures 779,389 11,213,517
Return of contributions (523,160) 0
Other 0 3,725
----------- -----------
Investment in joint ventures, end of period $19,930,833 $20,184,572
=========== ===========
</TABLE>
F-13
<PAGE>
FUND I, II, II-OW, VI, AND VII ASSOCIATES--CHEROKEE
On August 1, 1995, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund I, Fund II and II-OW (a joint venture between
Wells Real Estate Fund II and Wells Real Estate Fund II-OW), and Wells Real
Estate Fund VII, L.P. ("Fund VII"). The joint venture, Fund I, II, II-OW,
VI, and VII Associates, was formed for the purpose of owning and operating
Cherokee Commons, a retail shopping center containing approximately 103,755
square feet, located in Cherokee County, Georgia. Percentage ownership
interests in Fund I, II, II-OW, VI, and VII Associates--Cherokee were
determined at the time of formation based on contributions. Until the
formation of this joint venture, Cherokee Commons was part of the Fund I
and II Tucker--Cherokee joint venture. Concurrent with the formation of
the Fund I, II, II-OW, VI, and VII Associates--Cherokee joint venture,
Cherokee Commons was transferred from the Fund I and II Tucker--Cherokee
joint venture.
F-14
<PAGE>
Following are the financial statements for Fund I, II, II-OW, VI, AND VII
Associates--Cherokee:
FUND I, II, II-OW, VI, AND VII ASSOCIATES--CHEROKEE
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
1996 1995
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,219,704 $1,219,704
Building and improvements, less
accumulated depreciation of
$1,847,476 in 1996 and $1,418,057 in
1995 7,329,974 7,731,162
---------- ----------
Total real estate assets 8,549,678 8,950,866
Cash and cash equivalents 71,346 210,356
Accounts receivable 93,902 136,964
Prepaid expenses and other assets 78,527 92,633
---------- ----------
Total assets $8,793,453 $9,390,819
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 23,130 $ 27,754
Partnership distributions payable 112,817 203,987
Due to affiliates 78,375 68,762
---------- ----------
Total liabilities 214,322 300,503
---------- ----------
Partners' capital:
Wells Real Estate Fund I 1,970,363 2,103,666
Fund II and II-OW 4,746,274 5,028,796
Wells Real Estate Fund VI 932,597 980,277
Wells Real Estate Fund VII 929,897 977,577
---------- ----------
Total partners' capital 8,579,131 9,090,316
---------- ----------
Total liabilities and partners'
capital $8,793,453 $9,390,819
========== ==========
</TABLE>
F-15
<PAGE>
FUND I, II, II-OW, VI AND VII ASSOCIATES--CHEROKEE
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Rental income $890,951 $778,204 $ 552,823
Interest income 73 180 50
-------- -------- ---------
891,024 778,384 552,873
-------- -------- ---------
Expenses:
Depreciation 429,419 277,099 172,583
Operating costs, net of reimbursements 126,367 51,663 502,434
Property administration 42,868 39,316 44,624
Management and leasing fees 35,598 29,015 19,462
Lease acquisition costs 13,284 7,288 2,948
Legal and accounting 8,362 20,273 19,756
Computer costs 3,244 4,633 3,016
-------- -------- ---------
659,142 429,287 764,823
-------- -------- ---------
Net income (loss) $231,882 $349,097 $(211,950)
======== ======== =========
Net income (loss) allocated to Wells
Real Estate Fund I $ 55,705 $ 95,490 $ (63,124)
======== ======== =========
Net income (loss) allocated to Fund II
and II-OW $126,517 $216,845 $(148,827)
======== ======== =========
Net income allocated to Wells Real
Estate Fund VI $ 24,830 $ 18,381 $ 0
======== ======== =========
Net income allocated to Wells Real
Estate Fund VII $ 24,830 $ 18,381 $ 0
======== ======== =========
</TABLE>
F-16
<PAGE>
FUND I, II, II-OW, VI AND VII ASSOCIATES--CHEROKEE
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
WELLS REAL FUND II WELLS REAL WELLS REAL TOTAL
ESTATE AND ESTATE ESTATE PARTNERS'
FUND I II-OW FUND VI FUND VII CAPITAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $2,207,551 $4,639,064 $ 0 $ 0 $6,846,615
Net loss (63,123) (148,827) 0 0 (211,950)
Partnership contributions 100,000 805,092 0 0 905,092
Partnership distributions (104,234) (213,478) 0 0 (317,712)
---------- ---------- -------- -------- ----------
Balance, December 31, 1994 2,140,194 5,081,851 0 0 7,222,045
Net income 95,490 216,845 18,381 18,381 349,097
Partnership contributions 0 0 997,965 995,266 1,993,231
Partnership distributions (126,697) (269,900) (36,069) (36,070) (468,736)
Other (5,321) 0 0 0 (5,321)
---------- ---------- -------- -------- ----------
Balance, December 31, 1995 2,103,666 5,028,796 980,277 977,577 9,090,316
Net income 55,705 126,517 24,830 24,830 231,882
Partnership distributions (189,008) (409,039) (72,510) (72,510) (743,067)
---------- ---------- -------- -------- ----------
Balance, December 31, 1996 $1,970,363 $4,746,274 $932,597 $929,897 $8,579,131
========== ========== ======== ======== ==========
</TABLE>
F-17
<PAGE>
FUND I, II, II-OW, VI, AND VII ASSOCIATES--CHEROKEE
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- ----------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 231,882 $ 349,097 $(211,950)
--------- ----------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 429,419 277,099 172,583
Changes in assets and liabilities:
Accounts receivable 43,062 7,111 (42,225)
Prepaid expenses and other assets 14,106 (42,937) (17,654)
Accounts payable and accrued
expenses (4,624) (279,529) 278,837
Due to affiliates 9,613 9,909 (4,904)
--------- ----------- ---------
Total adjustments 491,576 (28,347) 386,637
--------- ----------- ---------
Net cash provided by operating
activities 723,458 320,750 174,687
--------- ----------- ---------
Cash flows from investing activities:
Investment in real estate (28,231) (1,869,138) (609,489)
--------- ----------- ---------
Cash flows from financing activities:
Contributions from joint venture
partners 0 2,100,403 706,962
Distributions to joint venture partners (834,237) (376,011) (237,808)
--------- ----------- ---------
Net cash (used in) provided by
financing activities (834,237) 1,724,392 469,154
--------- ----------- ---------
Net (decrease) increase in cash and
cash equivalents (139,010) 176,004 34,352
Cash and cash equivalents, beginning of
year 210,356 34,352 0
--------- ----------- ---------
Cash and cash equivalents, end of year $ 71,346 $ 210,356 $ 34,352
========= =========== =========
Supplemental disclosure of noncash
investing activities:
Deferred project costs applied by
partners $ 0 $ 85,637 $ 0
========= =========== =========
</TABLE>
FUND II, III, VI, AND VII ASSOCIATES
On January 1, 1995, the Partnership entered into a joint venture agreement
with Fund II and III Associates, Fund II and II-OW, and Fund VII. The joint
venture, Fund II, III, VI, and VII Associates, was formed for the purpose
of acquiring, developing, operating, and selling real properties. During
1995, Fund II and III Associates contributed at cost a 4.3-acre tract of
land from its 880 Property--Brookwood Grill to the Fund II, III, VI, and
VII Associates joint venture. During 1996, the Partnership and Fund VII
made contributions to the joint venture. Ownership percentage interests
were recomputed accordingly. Development is substantially complete on two
buildings containing a total of
F-18
<PAGE>
approximately 49,500 square feet. During 1996, leases commenced on
approximately half of the available space.
The following are the financial statements for Fund II, III, VI, and VII
Associates:
FUND II, III, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
1996 1995
---------- ----------
<S> <C> <C>
Nonoperating real estate assets, at
cost:
Land $ 0 $1,325,242
Land improvements 0 403,874
Construction in progress 0 2,662,448
Total nonoperating real estate
---------- ----------
assets 0 4,391,564
---------- ----------
Operating real estate assets, at cost:
Land 1,325,242 0
Building and improvements, less
accumulated depreciation of $181,798 4,568,805 0
Construction in progress 214,398 0
---------- ----------
Total operating real estate
assets 6,108,445 0
---------- ----------
Total real estate assets 6,108,445 4,391,564
Cash and cash equivalents 675,703 1,321,378
Accounts receivable 67,334 0
Prepaid expenses and other assets 145,820 41,028
---------- ----------
Total assets $6,997,302 $5,753,970
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 204,970 $ 474,905
Partnership distributions payable 49,590 0
---------- ----------
254,560 474,905
---------- ----------
Partners' capital:
Fund II and III Associates 1,690,244 1,729,116
Wells Real Estate Fund VI 1,759,947 1,028,210
Wells Real Estate Fund VII 3,292,551 2,521,739
---------- ----------
Total partners' capital 6,742,742 5,279,065
---------- ----------
Total liabilities and partners'
capital $6,997,302 $5,753,970
========== ==========
</TABLE>
F-19
<PAGE>
FUND II, III, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Rental income $255,062
--------
Expenses:
Depreciation 181,798
Operating costs, net of reimbursements 75,018
Management and leasing fees 16,376
Legal and accounting 14,928
Lease acquisition costs 12,456
Partnership administration 10,286
Computer costs 1,368
--------
312,230
--------
Net loss $(57,168)
========
Net loss allocated to Fund II and III
Associates $(19,378)
========
Net loss allocated to Wells Real Estate
Fund VI $(10,193)
========
Net loss allocated to Wells Real Estate
Fund VII $(27,597)
========
</TABLE>
FUND II, III, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
WELLS WELLS REAL TOTAL
FUND II AND REAL ESTATE ESTATE PARTNERS'
III ASSOCIATES FUND VI FUND VII CAPITAL
-------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 0 $ 0 $ 0 $ 0
Partnership contributions 1,729,116 1,028,210 2,521,739 5,279,065
-------------- ---------- ---------- ----------
Balance, December 31, 1995 1,729,116 1,028,210 2,521,739 5,279,065
Partnership contributions 0 761,259 835,646 1,596,905
Partnership distributions (19,494) (19,329) (37,237) (76,060)
Net loss (19,378) (10,193) (27,597) (57,168)
-------------- ---------- ---------- ----------
Balance, December 31, 1996 $1,690,244 $1,759,947 $3,292,551 $6,742,742
============== ========== ========== ==========
</TABLE>
F-20
<PAGE>
FUND II, III, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (57,168) $ 0
------------- -------------
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation 181,798 0
Changes in assets and liabilities:
Accounts receivable (67,334) 0
Prepaid expenses and other assets (104,792) (41,028)
Accounts payable and accrued
expenses 88,532 22,256
------------- -------------
Total adjustments 98,204 (18,772)
------------- -------------
Net cash provided by (used in)
operating activities 41,036 (18,772)
------------- -------------
Cash flows from investing activities:
(Decrease) increase in construction
payables (358,467) 452,649
Investment in real estate (1,736,082) (2,595,190)
------------- -------------
Net cash used in investing
activities (2,094,549) (2,142,541)
------------- -------------
Cash flows from financing activities:
Contributions from joint venture
partners 1,434,308 3,482,691
Distributions to joint venture partners (26,470) 0
------------- -------------
Net cash provided by financing
activities 1,407,838 3,482,691
Net (decrease) increase in cash and
cash equivalents (645,675) 1,321,378
Cash and cash equivalents, beginning of
year 1,321,378 0
------------- -------------
Cash and cash equivalents, end of year $ 675,703 $ 1,321,378
============= =============
Supplemental disclosure of noncash
activities:
Contribution of real estate assets $ 0 $ 1,729,116
============= =============
Deferred project costs applied by
partners $ 162,597 $ 67,257
============= =============
</TABLE>
FUND V AND VI ASSOCIATES
On December 27, 1993, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund V, L.P. ("Fund V"). The joint venture, Fund V
and VI Associates, was formed for the purpose of investing in commercial real
properties. In December 1993, the joint venture purchased a 71,000-square-
foot, four-story office building known as the Hartford Building in
Southington, Connecticut. On June 26, 1994, Fund V contributed its interest
in a parcel of land, the Stockbridge Village II property, to the joint
venture. The Stockbridge Village II property consists of two separate
restaurants and began operations during 1995. A portion of this property is
still under development as of December 31, 1996.
F-21
<PAGE>
During 1996, the Partnership made contributions to Fund V and VI
Associates, thereby, increasing its ownership percentage interest from 52%
at December 31, 1995 to 53% at December 31, 1996.
Following are the financial statements for Fund V and VI Associates:
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
---------- -----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,622,733 $ 1,622,733
Building and improvements, less
accumulated depreciation of $796,338
in 1996 and $425,068 in 1995 7,791,513 8,155,193
Construction in progress 3,217 0
---------- -----------
Total real estate assets 9,417,463 9,777,926
Cash and cash equivalents 157,443 183,695
Accounts receivable 120,022 96,649
Prepaid expenses and other assets 54,969 41,142
---------- -----------
Total assets $9,749,897 $10,099,412
========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 25,752 $ 10,000
Partnership distributions payable 188,453 203,325
Due to affiliates 5,537 4,738
---------- -----------
Total liabilities 219,742 218,063
---------- -----------
Partners' capital:
Wells Real Estate Fund V 4,523,919 4,699,427
Wells Real Estate Fund VI 5,006,236 5,181,922
---------- -----------
Total partners' capital 9,530,155 9,881,349
---------- -----------
Total liabilities and partners'
capital $9,749,897 $10,099,412
========== ===========
</TABLE>
F-22
<PAGE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Rental income $914,128 $883,532 $721,902
--------- --------- ---------
Expenses:
Depreciation 371,270 243,139 174,871
Operating costs, net of reimbursements 79,873 32,005 45,108
Management and leasing fees 38,727 38,540 27,554
Legal and accounting 10,816 11,905 17,340
Partnership administration 10,655 12,752 14,264
Lease acquisition costs 9,759 10,417 0
Computer costs 2,820 3,498 2,676
--------- --------- ---------
523,920 352,256 281,813
--------- --------- ---------
Net income $390,208 $531,276 $440,089
========= ========= =========
Net income allocated to Wells Real
Estate Fund V $185,438 $258,343 $233,367
========= ========= =========
Net income allocated to Wells Real
Estate Fund VI $204,770 $272,933 $206,722
========= ========= =========
</TABLE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND V FUND VI CAPITAL
----------- ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1993 $3,744,906 $3,551,652 $7,296,558
Net income 233,367 206,722 440,089
Partnership contributions 1,106,573 996,891 2,103,464
Partnership distributions (280,678) (247,222) (527,900)
----------- ------------ ------------
Balance, December 31, 1994 4,804,168 4,508,043 9,312,211
Net income 258,343 272,933 531,276
Partnership contributions 0 786,099 786,099
Partnership distributions (363,084) (385,153) (748,237)
----------- ------------ ------------
Balance, December 31, 1995 4,699,427 5,181,922 9,881,349
Net income 185,438 204,770 390,208
Partnership contributions 0 18,130 18,130
Partnership distributions (360,946) (398,586) (759,532)
----------- ------------ ------------
Balance, December 31, 1996 $4,523,919 $5,006,236 $9,530,155
=========== ============ ============
</TABLE>
F-23
<PAGE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 390,208 $ 531,276 $ 440,089
---------- ---------- ------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 371,270 243,139 174,871
Changes in assets and liabilities:
Accounts receivable (23,373) (32,496) (64,153)
Prepaid expenses and other assets (13,827) (11,442) (29,700)
Accounts payable 15,752 (46,745) 56,745
Due to affiliates 799 2,348 2,390
---------- ---------- ------------
Total adjustments 350,621 154,804 140,153
---------- ---------- ------------
Net cash provided by operating
activities 740,829 686,080 580,242
---------- ---------- ------------
Cash flows from investing activities:
Investment in real estate (10,807) (751,481) (2,147,897)
---------- ---------- ------------
Cash flows from financing activities:
Contributions from joint venture
partners 18,130 786,099 2,103,465
Distributions to joint venture partners (774,404) (668,748) (404,065)
---------- ---------- ------------
Net cash (used in) provided by
financing activities (756,274) 117,351 1,699,400
---------- ---------- ------------
Net (decrease) increase in cash and
cash equivalents (26,252) 51,950 131,745
Cash and cash equivalents, beginning of
year 183,695 131,745 0
---------- ---------- ------------
Cash and cash equivalents, end of year $ 157,443 $ 183,695 $ 131,745
========== ========== ============
</TABLE>
FUND V, VI, AND VII ASSOCIATES
On September 8, 1994, the Partnership entered into a joint venture agreement
with Fund V and Fund VII. The joint venture, Fund V, VI, and VII Associates,
was formed for the purpose of investing in commercial real properties. In
September 1994, Fund V, VI, and VII Associates purchased a 75,000-square-
foot, three-story office building known as the Marathon Building in Appleton,
Wisconsin.
F-24
<PAGE>
Following are the financial statements for Fund V, VI, and VII Associates:
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
1996 1995
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 314,591 $ 314,591
Building and improvements, less
accumulated depreciation of $655,029
in 1996 and $304,444 in 1995 7,712,875 8,063,460
---------- ----------
Total real estate assets 8,027,466 8,378,051
Cash and cash equivalents 214,145 209,127
Accounts receivable 142,358 81,341
---------- ----------
Total assets $8,383,969 $8,668,519
========== ==========
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 214,145 $ 209,127
Due to affiliates 5,695 3,254
---------- ----------
Total liabilities 219,840 212,381
---------- ----------
Partners' capital:
Wells Real Estate Fund V 1,343,590 1,391,654
Wells Real Estate Fund VI 3,414,896 3,537,044
Wells Real Estate Fund VII 3,405,643 3,527,440
---------- ----------
Total partners' capital 8,164,129 8,456,138
---------- ----------
Total liabilities and partners'
capital $8,383,969 $8,668,519
========== ==========
</TABLE>
F-25
<PAGE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 8, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental income $971,017 $971,017 $283,213
-------- -------- --------
Expenses:
Depreciation 350,585 243,428 61,016
Management and leasing fees 38,841 38,841 11,329
Legal and accounting 7,331 13,715 6,779
Partnership administration 4,641 8,150 14,666
Computer costs 1,410 1,749 640
Operating costs 1,254 1,943 0
-------- -------- --------
404,062 307,826 94,430
-------- -------- --------
Net income $566,955 $663,191 $188,783
======== ======== ========
Net income allocated to Wells Real
Estate Fund V $ 93,321 $109,161 $ 30,994
======== ======== ========
Net income allocated to Wells Real
Estate Fund VI $237,157 $277,413 $ 78,990
======== ======== ========
Net income allocated to Wells Real
Estate Fund VII $236,477 $276,617 $ 78,799
======== ======== ========
</TABLE>
F-26
<PAGE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 8, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE ESTATE PARTNERS'
FUND V FUND VI FUND VII CAPITAL
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, September 8, 1994 $ 0 $ 0 $ 0 $ 0
Net income 30,994 78,991 78,798 188,783
Partnership contributions 1,428,887 3,631,736 3,621,872 8,682,495
Partnership distributions (37,800) (96,360) (96,128) (230,288)
----------- ----------- ----------- -----------
Balance, December 31, 1994 1,422,081 3,614,367 3,604,542 8,640,990
Net income 109,161 277,413 276,617 663,191
Partnership distributions (139,588) (354,736) (353,719) (848,043)
----------- ----------- ----------- -----------
Balance, December 31, 1995 1,391,654 3,537,044 3,527,440 8,456,138
Net income 93,321 237,157 236,477 566,955
Partnership distributions (141,385) (359,305) (358,274) (858,964)
----------- ----------- ----------- -----------
Balance, December 31, 1996 $1,343,590 $3,414,896 $3,405,643 $8,164,129
=========== =========== =========== ===========
</TABLE>
F-27
<PAGE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 8, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 566,955 $ 663,191 $188,783
--------- --------- ---------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 350,585 243,428 61,016
Changes in assets and liabilities:
Accounts receivable (61,017) (61,017) (20,324)
Accounts payable 0 (3,000) 3,000
Due to affiliates 2,441 2,441 813
--------- --------- ---------
Total adjustments 292,009 181,852 44,505
--------- --------- ---------
Net cash provided by operating
activities 858,964 845,043 233,288
Cash flows from financing activities:
Distributions to joint venture partners (853,946) (835,231) (33,973)
--------- --------- --------
Net increase in cash and cash
equivalents 5,018 9,812 199,315
Cash and cash equivalents, beginning of
period 209,127 199,315 0
--------- --------- --------
Cash and cash equivalents, end of period $ 214,145 $ 209,127 $199,315
========= ========= ========
</TABLE>
FUND VI AND VII ASSOCIATES
On December 9, 1994, the Partnership entered into a joint venture agreement
with Fund VII. The joint venture, Fund VI and VII Associates, was formed for
the purpose of investing in commercial real properties. In December 1994,
the Partnership contributed its interest in a parcel of land, the Stockbridge
Village III Retail Center property, located in Stockbridge, Georgia, to the
joint venture. The Stockbridge Village III Retail Center property is
comprised of two separate outparcel buildings totaling approximately 18,500
square feet. One of the outparcel buildings began operations during 1995.
The other outparcel began operations during 1996. On June 7, 1995, Fund VI
and VII Associates purchased 3.38 acres of real property located in
Stockbridge, Georgia. The retail center expansion consists of a multi-tenant
shopping center containing approximately 29,000 square feet.
During 1995, both the Partnership and Fund VII made contributions to Fund VI
and VII Associates and during 1996, Fund VII made contributions to the joint
venture. Ownership percentage interests were recomputed accordingly.
F-28
<PAGE>
Following are the financial statements for Fund VI And VII Associates:
FUND VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
1996 1995
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,812,447 $1,812,447
Building and improvements, less
accumulated depreciation of $165,695
in 1996 and $28,273 in 1995 3,497,180 1,712,290
Construction in progress 115,438 970,980
---------- ----------
Total real estate assets 5,425,065 4,495,717
Cash and cash equivalents 505,724 1,396,815
Accounts receivable 93,166 33,925
Prepaid expenses and other assets 82,706 68,949
---------- ----------
Total assets $6,106,661 $5,995,406
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 103,535 $ 96,602
Partnership distributions payable 41,473 (14,308)
Due to affiliates 2,412 6,897
---------- ----------
Total liabilities 147,420 89,191
---------- ----------
Partners' capital:
Wells Real Estate Fund VI 2,548,699 2,590,820
Wells Real Estate Fund VII 3,410,542 3,315,395
---------- ----------
Total partners' capital 5,959,241 5,906,215
---------- ----------
Total liabilities and partners'
capital $6,106,661 $5,995,406
========== ==========
</TABLE>
F-29
<PAGE>
FUND VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Revenues:
Rental income $316,487 $88,239
Expenses:
Depreciation 137,422 28,273
Operating costs, net of reimbursements 50,299 31,835
Lease acquisition costs 34,153 2,546
Management and leasing fees 20,192 6,453
Partnership administration 19,123 6,871
Legal and accounting 14,277 3,240
Computer costs 4,188 1,136
-------- -------
279,654 80,354
-------- -------
Net income $ 36,833 $ 7,885
======== =======
Net income allocated to Wells Real
Estate Fund VI $ 15,775 $ 4,107
======== =======
Net income allocated to Wells Real
Estate Fund VII $ 21,058 $ 3,778
======== =======
</TABLE>
FUND VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND FOR THE PERIOD FROM INCEPTION (DECEMBER 9, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND VI FUND VII CAPITAL
---------- ---------- ---------
<S> <C> <C> <C>
Balance, December 9, 1994 $ 0 $ 0 $ 0
Partnership contributions 1,053,648 188,684 1,242,332
---------- ---------- ---------
Balance, December 31, 1994 1,053,648 188,684 1,242,332
Net income 4,107 3,778 7,885
Partnership contributions 1,529,340 3,118,321 4,647,661
Other 3,725 4,612 8,337
---------- ---------- ---------
Balance, December 31, 1995 2,590,820 3,315,395 5,906,215
Net income 15,775 21,058 36,833
Partnership contributions 0 151,306 151,306
Partnership distributions (57,896) (77,217) (135,113)
----------- ----------- ----------
Balance, December 31, 1996 $2,548,699 $3,410,542 $5,959,241
=========== =========== ==========
</TABLE>
F-30
<PAGE>
FUNDS VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND FOR THE PERIOD FROM INCEPTION (DECEMBER 9, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 36,833 $ 7,885 $ 0
----------- --------- ----------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 137,422 28,273 0
Changes in assets and liabilities:
Accounts receivable (59,241) (33,925) 0
Prepaid expenses and other assets (13,757) (68,949) 0
Accounts payable 21,049 17,486 0
Due to affiliates (4,485) 6,897 0
----------- --------- ----------
Total adjustments 80,988 (50,218) 0
----------- --------- ----------
Net cash provided by (used in)
operating activities 117,821 (42,333) 0
----------- --------- ----------
Cash flows from investing activities:
(Decrease) increase in construction (14,116) 49,116 30,000
payables
Investment in real estate (1,060,466) (3,000,848) (1,272,332)
Net cash used in investing ----------- ----------- ----------
activities (1,074,582) (2,951,732) (1,242,332)
----------- ----------- ----------
Cash flows from financing activities:
Contributions from joint venture 145,002 4,396,851 1,242,332
partners
Distributions to joint venture partners (79,332) (5,971) 0
----------- ---------- ----------
Net cash provided by financing
activities 65,670 4,390,880 1,242,332
----------- ---------- ----------
Net (decrease) increase in cash and
cash equivalents (891,091) 1,396,815 0
Cash and cash equivalents, beginning of
year 1,396,815 0 0
----------- ----------- ----------
Cash and cash equivalents, end of year $ 505,724 $ 1,396,815 $ 0
=========== =========== ==========
Supplemental disclosure of noncash
items:
Deferred project costs applied by $ 6,304 $ 250,810 $ 0
partners =========== =========== ==========
</TABLE>
FUND VI, VII, AND VIII ASSOCIATES
On April 17, 1995, the Partnership entered into a joint venture with Fund VII
and Wells Real Estate Fund VIII, L.P. ("Fund VIII"). The joint venture, Fund
VI, VII, and VIII Associates, was formed to acquire, develop, operate, and
sell real properties. On April 25, 1995, the joint venture purchased a 5.55-
acre parcel of land in Jacksonville, Florida. A 92,964-square foot office
building, known as the Bell South property, was completed and commenced
operations in 1996. On May 31, 1995, the joint venture purchased a
F-31
<PAGE>
14.683-acre parcel of land located in Clemmons, Forsyth County, North
Carolina. The land is currently under development.
During 1996, the Partnership and Fund VII each withdrew $500,000 from the
joint venture in order to contribute needed funds to Fund II, III, VI, and
VII Associates. In addition, $23,160 and $21,739, respectively, of deferred
project costs related to these funds were unapplied when the contributions
were withdrawn. Ownership percentage interests were recomputed accordingly.
Following are the financial statements for Fund VI, VII, And VIII Associates:
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets
1996 1995
----------- -----------
<S> <C> <C>
Nonoperating real estate assets, at cost:
Land $ 3,159,929 $ 4,461,818
Construction in progress 4,587,178 4,430,443
Total nonoperating real estate ----------- -----------
assets 7,747,107 8,892,261
----------- -----------
Operating real estate assets, at cost:
Land 1,301,890 0
Building and improvements, less
accumulated depreciation of $290,407
in 1996 7,004,986 0
----------- -----------
Total operating real estate 8,306,876 0
assets
Total real estate assets 16,053,983 8,892,261
Cash and cash equivalents 929,683 7,347,927
Accounts receivable 27,851 33,000
Prepaid expenses and other assets 691,741 264,378
----------- -----------
Total assets $17,703,258 $16,537,566
=========== ===========
</TABLE>
F-32
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------------- ------------
Liabilities and Partners' Capital
<S> <C> <C>
Liabilities:
Accounts payable $ 203,275 $ 772,999
Partnership distributions payable 268,656 107,590
Due to affiliates 1,555 0
----------- -----------
Total liabilities 473,486 880,589
----------- -----------
Partners' capital:
Wells Real Estate Fund VI 6,268,458 6,866,299
Wells Real Estate Fund VII 6,111,934 6,706,493
Wells Real Estate Fund VIII 4,849,380 2,084,185
----------- -----------
Total partners' capital 17,229,772 15,656,977
----------- -----------
Total liabilities and partners' capital $17,703,258 $16,537,566
=========== ===========
</TABLE>
F-33
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1995)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Revenues:
Rental income $ 876,711 $ 0
Interest income 147,581 270,723
Other income 150 0
--------- --------
1,024,442 270,723
--------- --------
Expenses:
Depreciation 290,407 0
Operating costs 262,090 12,792
Lease acquisition costs 50,388 0
Management and leasing fees 48,942 0
Legal and accounting 17,251 0
Property administration 15,975 10,980
Computer costs 642 0
---------- --------
685,695 23,772
---------- --------
Net income $ 338,747 $246,951
========== ========
Net income allocated to Wells Real Estate Fund VI $ 134,875 $108,199
========== ========
Net income allocated to Wells Real Estate Fund VII $ 131,609 $105,848
========== ========
Net income allocated to Wells Real Estate Fund VIII $ 72,263 $ 32,904
========== ========
</TABLE>
F-34
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1995)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE ESTATE PARTNERS'
FUND VI FUND VII FUND VIII CAPITAL
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, April 17, 1995 $ 0 $ 0 $ 0 $ 0
Net income 108,199 105,848 32,904 246,951
Partnership contributions 6,871,903 6,711,976 2,085,890 15,669,769
Partnership distributions (113,803) (111,331) (34,609) (259,743)
---------- --------- --------- ----------
Balance, December 31, 1995 6,866,299 6,706,493 2,084,185 15,656,977
Net income 134,875 131,609 72,263 338,747
Partnership contributions 0 0 2,815,965 2,815,965
Partnership distributions (209,556) (204,429) (123,033) (537,018)
Return of contributions (523,160) (521,739) 0 (1,044,899)
---------- ---------- ---------- -----------
Balance, December 31, 1996 $6,268,458 $6,111,934 $4,849,380 $17,229,772
========== ========== ========== ===========
</TABLE>
F-35
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1995)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 338,747 $ 246,951
Adjustments to reconcile net income to ----------- -----------
net cash provided by (used in) operating activities:
Depreciation 290,407 0
Changes in assets and liabilities:
Accounts receivable 5,149 (33,000)
Prepaid expenses and other assets (427,363) (264,378)
Accounts payable 37,480 0
Due to affiliates 1,555 0
----------- -----------
Total adjustments (92,772) (297,378)
----------- -----------
Net cash provided by (used in) operating
activities 245,975 (50,427)
----------- -----------
Cash flows from investing activities:
(Decrease) increase in construction payables (607,204) 772,999
Investment in real estate (7,381,063) (8,892,261)
----------- -----------
Net cash used in investing activities (7,988,267) (8,119,262)
----------- -----------
Cash flows from financing activities:
Contributions received from joint venture partners 2,700,000 15,669,769
Return of contributions from joint venture partners (1,000,000) 0
Distributions to joint venture partners (375,952) (152,153)
----------- -----------
Net cash provided by financing activities 1,324,048 15,517,616
----------- -----------
Net (decrease) increase in cash and cash equivalents (6,418,244) 7,347,927
Cash and cash equivalents, beginning of period 7,347,927 0
----------- -----------
Cash and cash equivalents, end of period $ 929,683 $ 7,347,927
=========== ===========
Supplemental disclosure of noncash items:
Deferred project costs contributed by partners, net $ 71,066 $ 669,769
=========== ===========
</TABLE>
F-36
<PAGE>
5. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1996, 1995, and 1994 were calculated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Financial statement net income $ 589,053 $ 901,828 $ 700,896
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 260,958 39,928 0
Joint venture change in ownership 0 8,730 0
Expenses deductible when paid for income tax
purposes, accrued for financial reporting purposes 6,032 13,744 1,464
Rental income accrued for financial reporting
purposes in excess of amounts for income tax (46,654) (47,699) (34,678)
purposes
----------- ---------- ----------
Income tax basis net income $ 809,389 $ 916,531 $ 667,682
=========== ========== ==========
</TABLE>
The Partnership's income tax basis partners' capital at December 31, 1996, 1995,
and 1994 was computed as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Financial statement partners' capital $20,545,091 $21,144,261 $21,517,178
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 300,886 39,928 0
Joint venture change in ownership 8,730 8,730 0
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of
capital for financial reporting purposes 3,655,694 3,655,694 3,655,694
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (129,850) (82,377) (34,678)
Accumulated expenses deductible when paid for
income tax purposes, accrued for financial
reporting purposes 22,059 15,208 1,464
Partnership's distributions payable 325,410 322,702 314,152
----------- ----------- -----------
Income tax basis partners' capital $24,728,020 $25,104,146 $25,453,810
=========== =========== ===========
</TABLE>
F-37
<PAGE>
6. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interests in joint ventures under noncancelable operating leases at
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 1,972,153
1998 2,005,130
1999 1,979,936
2000 1,944,828
2001 1,856,972
Thereafter 8,996,972
-----------
$18,755,991
===========
</TABLE>
Three significant tenants contributed approximately 39%, 26%, and 17% of
rental income, which is included in equity of income of joint ventures, for
the year ended December 31, 1996. In addition, four significant tenants will
contribute approximately 24%, 22%, 19%, and 14% of future minimum rental
income.
The future minimum rental income due Fund I, II, II-OW, VI, and VII
Associates--Cherokee under noncancelable operating leases at December 31,
1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 868,954
1998 750,926
1999 684,582
2000 633,827
2001 609,896
Thereafter 5,449,194
-----------
$8,997,379
===========
</TABLE>
One significant tenant contributed approximately 66% of rental income for the
year ended December 31, 1996. In addition, one significant tenant will
contribute approximately 93% of future minimum rental income.
F-38
<PAGE>
The future minimum rental income due Fund II, III, VI, and VII Associates
under noncancelable operating leases at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 456,659
1998 468,816
1999 431,682
2000 341,028
2001 244,106
Thereafter 506,949
----------
$2,449,240
==========
</TABLE>
Four significant contributed approximately 38%, 16%, 14%, and 11% of
rental the year ended December 31, 1996. In addition, two
significant will contribute approximately 46% and 15% of future
minimum rental income.
The future minimum rental income due Fund V and VI Associates under
noncancelable operating leases, including those leases signed at properties
under construction, at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 923,061
1998 929,686
1999 932,453
2000 946,166
2001 948,650
Thereafter 2,254,958
----------
$6,934,974
==========
</TABLE>
Two significant tenants contributed approximately 78% and 14% of rental
income for the year ended December 31, 1996. In addition, three significant
tenants will contribute approximately 72%, 15%, and 13% of future minimum
rental income.
The future minimum rental income due Fund V, VI, and VII Associates under
noncancelable operating leases at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 980,000
1998 980,000
1999 980,000
2000 980,000
2001 980,000
Thereafter 4,950,000
----------
$9,850,000
==========
</TABLE>
One significant tenant contributed 100% of rental income for the year ended
December 31, 1996 and will contribute 100% of future minimum rental income.
F-39
<PAGE>
The future minimum rental income due Fund VI and VII Associates under
noncancelable operating leases at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 401,085
1998 411,332
1999 386,192
2000 353,426
2001 329,901
Thereafter 993,970
-----------
$2,875,906
-----------
</TABLE>
Three significant tenants contributed approximately 34%, 26%, and 11%, of
rental income for the year ended December 31, 1996. In addition, two
significant tenants will contribute approximately 34% and 17%, of future
minimum rental income.
The future minimum rental income due Fund VI, VII, and VIII Associates under
noncancelable operating leases, including those leases signed at properties
under construction, at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1997 $ 1,907,377
1998 2,002,460
1999 2,004,859
2000 2,006,856
2001 1,865,797
Thereafter 12,647,664
-----------
$22,435,013
===========
</TABLE>
Two significant tenants contributed approximately 75% and 25% of rental
income for the year ended December 31, 1996. In addition, two significant
tenants will contribute approximately 55% and 45% of future minimum rental
income.
F-40
<PAGE>
7. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 179,792 $ 130,335 $ 160,514 $ 205,141
Net income 160,761 96,138 144,677 187,477
Net income allocated to Class A limited
partners 277,507 240,165 358,439 358,606
Net loss allocated to Class B limited
partners (116,746) (144,027) (213,762) (171,129)
Net income per weighted average Class A
limited partner unit outstanding
$ 0.13 $ 0.12 $ 0.17 $ 0.17
Net loss per weighted average Class B
limited partner unit outstanding (0.27) (0.35) (0.54) (0.44)
Cash distribution per weighted average
Class A limited partner unit
outstanding 0.15 0.14 0.12 0.15
</TABLE>
<TABLE>
<CAPTION>
1995 Quarters Ended
--------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 291,406 $ 287,338 $ 226,336 $ 197,487
Net income 260,595 257,951 206,268 177,014
Net loss allocated to General Partners (483) (510) (619) (216)
Net income allocated to Class A limited
partners 308,937 308,877 268,160 286,970
Net loss allocated to Class B limited
partners (47,860) (50,416) (61,273) (109,739)
Net income per weighted average Class A
limited partner unit outstanding
$ 0.15 $ 0.15 $ 0.13 $ 0.14
Net loss per weighted average Class B
limited partner unit outstanding (a) (0.10) (0.11) (0.14) (0.26)
Cash distribution per weighted average
Class A limited partner unit
outstanding (a) 0.16 0.16 0.16 0.15
</TABLE>
(a) The totals of the four quarterly amounts for net loss per weighted
average Class B limited partner unit outstanding and for cash
distribution per weighted average Class A limited partner unit
outstanding for the year ended December 31, 1995 do not equal the
totals for the year. This difference results from the use of a
weighted average to compute the number of units outstanding for each
quarter and the year.
F-41
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Company. In the normal course
of business, the Company may become subject to such litigation or claims.
F-42
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROSS COSTS OF AMOUNT AT WHICH
INITIAL COST CARRIED AT DECEMBER 31, 1996
------------------ ---------------------------------
BUILDINGS COST OF BUILDINGS
AND CAPITALIZED AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ------------------------- --------------- ------------- ---------------- -------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
HARTFORD BUILDING (A) None $ 528,042 $ 6,775,574 $ 26,867 $ 528,042 $ 6,802,441
STOCKBRIDGE VILLAGE II (B) None 1,095,219 0 1,788,099 1,094,691 1,785,410
MARATHON BUILDING (C) None 314,591 8,367,904 0 314,591 8,367,904
STOCKBRIDGE VILLAGE III (D) None 1,015,674 0 1,946,898 1,062,720 1,899,852
STOCKBRIDGE VILLAGE I
EXPANSION (E) None 712,234 0 1,915,954 749,727 1,763,023
880 PROPERTY (F) None 1,325,242 0 4,965,001 1,325,242 4,750,603
BELLSOUTH PROPERTY (G) None 1,244,256 0 7,353,027 1,301,890 7,295,393
TANGLEWOOD COMMONS (H) None 3,020,040 0 4,727,066 3,159,928 0
CHEROKEE COMMONS (I) None 1,142,663 6,462,837 2,791,653 1,219,704 9,170,950
------------ ------------ -------------- ------------ --------------
Total $10,397,961 $21,606,315 $ 25,514,565 $10,756,535 $ 41,835,576
============ ============ ============== ============ ==============
<CAPTION>
LIFE ON WHICH
CONSTRUCTION ACCUMULATED DATE OF DATE DEPRECLATION
DESCRIPTION IN PROGRESS TOTAL DEPRECLATION CONSTRUCTION ACQUIRED IS COMPUTED (1)
- ------------------------- -------------- --------- ----------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
HARTFORD BUILDING (A) $ 0 $ 7,330,483 $ 688,698 1981 12/29/83 20 to 40 years
STOCKBRIDGE VILLAGE II (B) 3,217 2,883,318 127,640 1994 11/12/93 20 to 40 years
MARATHON BUILDING (C) 0 8,682,495 655,029 1991 09/16/94 20 to 40 years
STOCKBRIDGE VILLAGE III (D) 0 2,962,572 112,915 1995 04/07/94 20 to 40 years
STOCKBRIDGE VILLAGE I
EXPANSION (E) 115,438 2,628,188 52,780 1996 06/07/95 20 to 25 years
880 PROPERTY (F) 214,398 6,290,243 181,798 1996 01/31/90 20 to 25 years
BELLSOUTH PROPERTY (G) 0 8,597,283 290,407 1996 04/25/95 20 to 25 years
TANGLEWOOD COMMONS (H) 4,587,178 7,747,106 0 05/30/95 20 to 25 years
CHEROKEE COMMONS (I) 6,500 10,397,154 1,847,476 1986 06/09/87 20 to 40 years
------------- ------------- ------------
Total $ 4,926,731 $ 57,518,842 $ 3,936,743
============= ============= ============
</TABLE>
S-1
<PAGE>
(a) The Hartford Building is a four-story, 71,000-square-foot building located
in Southington, Connecticut. It is owned by Fund V and VI Associates. The
Partnership owned a 53% interest in Fund V and VI Associates at December
31, 1996.
(b) Stockbridge Village II consists of two retail buildings located in Clayton
County, Georgia. It is owned by Fund V and VI Associates. The Partnership
owned a 53% interest in Fund V and VI Associates at December 31, 1996.
(c) The Marathon Building is a three-story, 75,000-square-foot building located
in Appleton, Wisconsin. It is owned by Fund V, VI, and VII Associates. The
Partnership owned a 42% interest in Fund V, VI, and VII Associates at
December 31, 1996.
(d) Stockbridge Village III consists of two retail buildings located in
Stockbridge, Georgia. It is owned by Fund VI and VII Associates. The
Partnership owned a 43% interest in Fund VI and VII Associates at December
31, 1996.
(e) Stockbridge Village I Expansion is a 3.38-acre tract of real property under
development located in Stockbridge, Georgia. It is owned by Fund VI and VII
Associates. The Partnership owned a 43% interest in Fund VI and VII
Associates at December 31, 1996.
(f) The 880 Property is a 4.3-acre tract of real property under development in
Roswell, Georgia. It is owned by Fund II, III, VI, and VII Associates. The
Partnership owned a 26% interest in Fund II, III, VI, and VII Associates at
December 31, 1996.
(g) The BellSouth Property is a four-story, 93,000 square-foot building located
in Jacksonville, Florida. It is owned by the Fund VI, VII, and VIII
Associates. The Partnership owned a 36% interest in Fund VI, VII, and VIII
Associates at December 31, 1996.
(h) Tanglewood Commons is a 14.68-acre tract of real property under
construction in Clemmons, Forsyth County, North Carolina. It is owned by
the Fund VI, VII, and VIII Associates. The Partnership owned a 36% interest
in Fund VI, VII, and VIII Associates at December 31, 1996.
(i) Cherokee Commons is a retail shopping center located in Cherokee County,
Georgia. It is owned by Fund I, II, II-OW, VI, and VII Associates--
Cherokee. The Partnership owned an 11% interest in Fund I, II, II-OW, VI,
and VII Associates--Cherokee at December 31, 1996.
(j) Depreciation lives used for buildings are 40 years through September 1995,
changed to 25 years thereafter. Depreciation lives used for land
improvements are 20 years.
S-2
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
----------- ------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 $19,406,340 $ 242,945
1995 additions 27,722,620 1,932,897
1995 deductions (66,734) 0
----------- ----------
BALANCE AT DECEMBER 31, 1995 47,062,226 2,175,842
1996 additions 10,456,616 1,760,901
----------- ----------
BALANCE AT DECEMBER 31, 1996 $57,518,842 $3,936,743
=========== ==========
</TABLE>
S-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 589,082
<SECURITIES> 19,930,833
<RECEIVABLES> 335,878
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,400
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,880,163
<CURRENT-LIABILITIES> 335,072
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,545,091
<TOTAL-LIABILITY-AND-EQUITY> 20,880,163
<SALES> 0
<TOTAL-REVENUES> 675,782
<CGS> 0
<TOTAL-COSTS> 86,729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 589,053
<INCOME-TAX> 589,053
<INCOME-CONTINUING> 589,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 589,053
<EPS-PRIMARY> .59
<EPS-DILUTED> 0
</TABLE>
