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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, 1998 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
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Commission file number 0-23656
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Wells Real Estate Fund VI, L. P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2022628
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(State 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
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Aggregate market value of the voting stock held by non-affiliates:
Not Applicable
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PART I
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., a Georgian non-
public limited partnership, 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.
The Partnership owns interests in properties through its equity ownership in the
following joint ventures: Fund V and Fund VI Associates, a joint venture between
the Partnership and Wells Real Estate Fund V, L.P. (the "Fund V - Fund VI Joint
Venture"); (ii) Fund V, Fund VI, and Fund VII Associates, a joint venture
between the Partnership, Wells Real Estate Fund V, L.P. and Wells Real Estate
Fund VII, L.P. (the "Fund V-VI-VII Joint Venture"); (iii) Fund VI and Fund VII
Associates, a joint venture between the Partnership and Wells Real Estate Fund
VII, L.P. (the "Fund VI-VII Joint Venture"); (iv) Fund II, Fund III, Fund VI and
Fund VII Associates, a joint venture between the Partnership, Fund II and Fund
III Associates, and Wells Real Estate Fund VII, L.P., (the "Fund II,III,VI,VII
Joint Venture"); (v) Fund VI, Fund VII and Fund VIII Associates, a joint venture
between the Partnership, Wells Real Estate Fund VII, L.P. and Wells Real Estate
Fund VIII, L.P. (the "Fund VI,VII,VIII Joint Venture"); and (vi) Fund I, II, II-
OW, VI, VII Associates, a joint venture between the Partnership, Wells Real
Estate Fund I, Wells Real Estate Fund II, Wells Real Estate Fund II-OW, and
Wells Real Estate Fund VII, L.P. (the "Fund I,II,II-OW,VI,VII Joint Venture").
As of December 31, 1998, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a four
story office building located in Hartford, Connecticut (the "Hartford Building")
and (ii) two retail buildings located in Clayton County, Georgia (the
"Stockbridge Village II") which are owned by the Fund V - Fund VI Joint Venture;
(iii) a three-story office building located in Appleton Wisconsin (the "Marathon
Building") which is owned by the Fund V-VI-VII Joint Venture; (iv) two retail
buildings located in Clayton County, Georgia (the "Stockbridge Village III")
which are owned by the Fund VI - Fund VII Joint Venture; (v) a shopping center
expansion located in Clayton County, Georgia (the "Stockbridge Village I
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Expansion") which is owned by the Fund VI - Fund VII Joint Venture; (vi) an
office/retail center located in Roswell, Georgia (the "Holcomb Bridge Road
Project") which is owned by the Fund II-III-VI-VII Joint Venture; (vii) a four
story office building located in Jacksonville, Florida (the "BellSouth
Property") which is owned by the Fund VI, VII, VIII Joint Venture; (viii) a
shopping center located in Clemmons, North Carolina (the "Tanglewood Commons")
which is owned by the Fund VI, VII, VIII Joint Venture; and (ix) a retail
shopping center located in Cherokee County, Georgia (the "Cherokee Commons")
which is owned by the Fund I-II-II-OW-VI-VII Joint Venture. All of the
foregoing properties were acquired on an all cash basis.
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, 1998.
Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management
of the registrant, the properties are adequately insured.
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, 1998, these
properties were 95% occupied, as compared to 94% as of December 31, 1997 and 93%
as of December 31, 1996.
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The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1998, assuming no exercise of renewal options
or termination rights:
<TABLE>
<CAPTION>
Partnerships
Year of Number of Annualized Share of Percentage of Percentage of
Leased Leases Square Gross Base Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent(1) Gross Base Rent(1) Feet Expiring Base Rent
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<S> <C> <C> <C> <C> <C> <C>
1999 9 14,617 191,338 54,999 3.8% 3.5%
2000 6 11,080 125,793 35,386 2.9% 2.3%
2001 16 52,791 826,124 247,480 13.7% 15.1%
2002 20 41,120 645,944 202,452 10.7% 11.8%
2003 (2) 4 75,200 756,319 397,301 19.5% 13.8%
2004 4 16,623 298,839 138,016 4.3% 5.5%
2005 2 9,932 188,676 82,451 2.6% 3.5%
2006 (3) 5 160,328 2,380,107 655,329 41.6% 43.6%
2007 1 3,600 46,793 5,007 0.9% 0.9%
2008 0 0 0 0 0.0% 0.0%
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67 385,291 $5,459,933 $1,818,421 100.0% 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.
The following describes the properties in which the Partnership owns an interest
as of December 31, 1998:
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, 1998, the Partnership had contributed
approximately $5,321,268, and Wells Fund V had contributed approximately
$4,544,601 to the Fund V - Fund VI Joint Venture. The Partnership holds an
approximately 53.5% equity interest, and Wells Fund V currently holds an
approximately 46.5% equity interest in the Fund V - Fund VI Joint Venture. It
is anticipated that the Partnership will fund an additional $17,000 toward the
completion of the tenant improvements at the Stockbridge Village II Project, at
which time it is anticipated that 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:
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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 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 monthly 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% as of years ended December
31 1998, 1997 and 1996. The average effective annual rental per square foot at
the Hartford Building is $10.11 for 1998, 1997 and 1996.
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 and vacated in April 1997
owing substantial rent. The receivable from Glenn's was collected in December
1997. This space has been leased with occupancy expected in early 1999.
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The total cost to complete the second building in Stockbridge Village II is
approximately $2,941.00. As of December 31, 1998, the Partnership contributed
$1,888,561, 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. As set forth above, it is currently anticipated that the remaining
cost to complete tenant improvements of approximately $17,000 will be
contributed by the Partnership.
The occupancy rate at the Stockbridge Village II Project was 72% at year end
1998 and 1997 and 61% as of December 31, 1996. The average effective annual
rental per square foot at the Stockbridge Village II Project is $14.90 for 1998,
$14.88 for 1997 and $12.43 for 1996.
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"), 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 Fund V-VI-VII Joint Venture of
$8,279,421 including acquisition costs.
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 the years ended 1998,
1997, and 1996. The average effective annual rental per square foot in the
Marathon Building is $12.78 for 1998, $12.74 for 1997 and $12.78 for 1996.
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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, 1998, the Partnership contributed
$2,604,916, including its cost to acquire land, and Wells Fund VII contributed
$3,372,774 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, 1998, the Partnership's equity interest in the
Fund VI - VII Joint Venture was approximately 43.7%, and Wells Fund VII's equity
interest in the Fund VI - VII Joint Venture was approximately 56.3%. 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.
The first building is a 3,200 square foot restaurant which was completed in
March 1995, at a cost of approximately $400,000 excluding land. The space is
now being leased by RMS / Fazoli's, which signed a 13 year lease that commenced
on December 10, 1998.
Construction began in January, 1995, on a second outparcel building containing
approximately 15,000 square feet for approximately $1,500,000 excluding land. In
October 1995, Damon's Clubhouse occupied 6,732 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, 1998, the Partnership had contributed $1,033,285, and Wells
Fund VII contributed $1,917,483 to the Fund VI-Fund VII Joint Venture for the
acquisition and development of the Stockbridge Village III Property.
The occupancy rate at the Stockbridge Village III Project was 100% for the year
ended 1998 and 1997, and 87% at year end 1996. The average effective annual
rental per square foot at the Stockbridge Village III Project was $ 13.08 for
1998, $15.67 for 1997 and $14.15 for 1996.
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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 29,200 square feet.
Construction was substantially 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. Eleven additional
tenants have occupied 17,600 square feet at the property in 1996, 1997 and 1998.
Negotiations are being conducted to lease the remaining space.
As of December 31, 1998, the Partnership contributed a total of $1,571,631, and
Wells Fund VII contributed a total of $1,455,291 for a total cost of
approximately $3,026,922 toward the development and construction of the
Stockbridge Village I Expansion.
The occupancy rate at the Stockbridge Village I Expansion was 81% at year end
1998, 74% at year end 1997 and 36% at year end 1996, the first year of
occupancy. The average effective annual rental per square foot was $10.08 for
1998, $6.82 for 1997 and $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.
In January 1995, the Fund II-Fund III Joint Venture contributed to the Fund II-
III-VI-VII Joint Venture 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 has
been completed on two buildings containing a total of approximately 49,500
square feet. Fifteen tenants
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occupied the 880 Holcomb Bridge property as of December 31, 1998 for an
occupancy rate of 94%. The average effective annual rental was $17.41 for 1998,
$13.71 for 1997 and $9.87 per square foot for 1996.
As of December 31, 1998, Fund II-Fund III Joint Venture contributed $1,729,116
in land and improvements for an equity interest of approximately 24.0%, the
Partnership contributed $1,817,179 for an equity interest of approximately
26.9%, and Wells Fund VII contributed $3,496,604 for an equity interest of
approximately 49.1%. The total cost to develop the Holcomb Bridge Road Property
is approximately $5,902,000, excluding land.
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, 1998, the Partnership
contributed approximately $6,067,688 for an approximately 34.3% 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, 1998, Wells Fund VIII
contributed $5,700,000 for an equity interest in the Fund VI-VII-VIII Joint
Venture of approximately 32.3%, and Wells Fund VII contributed approximately
$5,932,312 for an equity interest in the Fund VI-VII-VIII Joint Venture of
approximately 33.4%. The total cost to complete both properties is
approximately $17,700,000.
BellSouth Property
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On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased a 5.55 acre
parcel of land in Jacksonville, Florida for a total of $1,245,059 including
closing costs. In May 1996, the 92,964 square foot office building was
completed with BellSouth Advertising and Publishing Corporation, a subsidiary of
BellSouth Company, occupying approximately 66,333 square feet and American
Express Travel Related Services Company, Inc. occupying approximately 22,607
square feet. BellSouth occupied an additional 3,901 square feet in December
1996. The land purchase and construction 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 years at the then market rate. The annual base
rent during the initial term is $1,094,426 during the first five years and
$1,202,034 for the balance of the initial lease term. The American Express lease
is for a term of five years at an annual
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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 $ 16.36 for 1998, $16.40 for 1997 and $14.15 at year end 1996, the first
year of occupancy. The occupancy rate at year end was 100% for 1998, 1997 and
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 67,320 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 or
resale. As of December 31, 1998, the Partnership contributed $2,567,688, Wells
Fund VII contributed $2,432,312 and Wells Fund VIII had contributed $3,700,000
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. Construction of the project
began in March, 1996, and was substantially completed in the first quarter of
1997. At December 31, 1998, the Joint Venture had $319,000 reserved to fund
remaining tenant improvements costs.
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. 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.
The occupancy rate at Tanglewood Commons was 91% for 1998 and 86% for 1997. The
average effective annual rental per square foot at Tanglewood Commons was $10.96
for 1998 and $8.36 for 1997, the first year of occupancy.
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.
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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, 1998, Wells Fund I contributed property with a book value of
$2,139,900, the Fund II-Fund II-OW Joint Venture contributed property with a
book value of $4,860,100, the Partnership contributed cash in the amount of
$953,798, and Wells Fund VII contributed cash in the amount of $953,798 to the
Fund I-II-IIOW-VI-VII Joint Venture. As of December 31, 1998, 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, 1998, the Cherokee Project was approximately 91% occupied by
20 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 year end for the Cherokee Property was 91% for 1998, 94%
in 1997 and 93% in 1996. The average effective annual rental per square foot at
the Cherokee Property was $ 8.78 for 1998, $8.49 for 1997 and $8.59 for 1996.
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 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1998.
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PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
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As of February 28, 1999, the Partnership had 2,187,757 outstanding Class A Units
held by a total of 1,630 Limited Partners and 312,243 outstanding Class B Units
held by a total of 189 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.
The General Partners have estimated the investment value of properties held by
the Partnership, as of December 31, 1998, to be $10.61 per Class A Unit and
$13.50 per Class B Units based on market conditions existing in early December
1998. The value was confirmed as reasonable by an independent MAI appraiser,
David L. Beal Company, although no actual MAI appraisal was performed due to the
inordinate expense involved with such an undertaking. The valuation does not
include any fractional interest valuation.
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, 1998.
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:
12
<PAGE>
Per Class A Unit
----------------
Distributions For Total Cash Investment Return of
Quarter Ended Distribution Income Capital
------------- ------------ ------ -------
March 31, 1997 $359,617 $0.17 $0.00
June 30, 1997 $362,741 $0.17 $0.00
Sept. 30, 1997 $399,873 $0.19 $0.00
Dec. 31, 1997 $432,841 $0.20 $0.00
March 31, 1998 $435,455 $0.20 $0.00
June 30, 1998 $440,837 $0.20 $0.00
Sept. 30, 1998 $438,327 $0.20 $0.00
Dec. 31, 1998 $426,161 $0.20 $0.00
Fourth quarter distribution was accrued for accounting purposes in 1998, and was
not actually paid to the limited partners holding Class A Units until February
1999. Even though there is no guarantee, the General Partners anticipate that
cash distributions to Limited Partners holding Class A Units will continue in
1999, at a level at least comparable with 1998 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, 1998, 1997, 1996, 1995 and 1994.
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.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets $19,328,676 $20,218,514 $20,880,163 $21,476,126 $21,837.180
Total revenues 939,519 884,802 675,782 1,002,567 819,535
Net income 855,788 795,654 589,053 901,828 700,896
Net income/(loss) allocated
to General Partners 0 0 0 (1,828) 1,409
Net income allocated to
Class A Limited Partners 1,770,058 1,677,826 1,234,717 1,172,944 762,218
Net loss allocated to
Class B Limited Partners (914,270) (882,172) (645,664) (269,288) (62,731)
Net income per weighted
average (1) Class A
Limited Partner Unit .81 .78 .59 .57 .43
Net loss per weighted
average (1) Class B
Limited Partner Unit (2.80) (2.47) (1.60) (.60) (.12)
Cash Distributions per
weighted average (1)
Class A Limited Partner Unit:
Investment Income .80 .73 .57 .62 .32
Return of Capital .00 .00 .00 .00 .00
</TABLE>
13
<PAGE>
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased or
converted 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 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 statements
made in this Report, which include construction costs which may exceed
estimates, 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 $939,519 for the fiscal year ended
December 31, 1998, as compared to $884,802 for the fiscal year ended December
31, 1997, and $675,782 for the fiscal year ended December 31, 1996. The
increase for 1998 over 1997 and 1996 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.
Expenses of the Partnership were $83,731 for 1998, as compared to $89,148 for
1997 and $86,729 for 1996. The slight change in expenses for 1998 as compared
to 1997 and 1996 was primarily due to decreased legal and accounting expenses.
Net income of the Partnership was $855,788 for the fiscal year ended December
31, 1998, as compared to $795,654 for the fiscal year ended December 31, 1997,
and $589,053 for the year ended December 31, 1996. The increase in net income
for 1998 over 1997 and 1996 is due primarily to increased earnings from joint
ventures.
The Partnership made cash distributions to the limited partners holding Class A
Units of $.80 for fiscal year 1998 as compared to $.73 per Class A Unit for
fiscal year 1997 and $.57 for fiscal
14
<PAGE>
year 1996. The General Partners anticipate distributions per Unit will continue
to increase for limited partners holding Class A Units in 1999. Distributions
accrued for the fourth quarter of 1998 to the limited partners holding Class A
Units were paid in February, 1999. 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 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.
Property Operations
- -------------------
As of December 31, 1998, 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
was 26.9%, in Fund V and VI Joint Venture was 53.5%, in Fund V,VI, and VII Joint
Venture was 41.8%, in Fund VI and VII Joint Venture was 43.7% and in Fund VI,VII
and VIII Joint Venture was 34.3%.
As of December 31, 1998, the Partnership owned interests through interests in
joint ventures in the following operational properties:
[The Remainder of this page left intentionally blank]
-----------------------------------------------------
15
<PAGE>
The Hartford Building - Fund V - Fund VI Joint Venture
- ------------------------------------------------------
For the Year Ended December 31
----------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental income $717,499 $717,499 $717,499
-------- -------- --------
Expenses
Depreciation 292,032 292,031 292,031
Management & leasing expenses 27,719 30,189 28,700
Other operating expenses (10,530) (9,983) 13,948
-------- -------- --------
330,281 312,237 334,679
-------- -------- --------
Net income $387,218 $405,262 $382,820
======== ======== ========
Occupied % 100 % 100 % 100 %
Partnership's Ownership % in the
Fund V-Fund VI Joint Venture 53.5 % 53.5 % 52.5 %
Cash Distribution to the Partnership $365,986 $374,219 $357,530
Net Income Allocated to the
Partnership $207,076 $215,449 $200,900
Net income decreased and expenses increased in 1998, as compared to 1997, due
primarily to an insurance reimbursement received in 1997 from the tenant for
prior year's expenses. Net income increased and expenses decreased in 1997 over
1996 due to the insurance reimbursement in 1997.
The Partnership's ownership in the Fund V-Fund VI Joint Venture increased from
52.5% in 1996, to 53.5% in 1997 and 1998 due to additional fundings by the
Partnership, which increased its ownership interest and decreased the Wells Fund
V's ownership interest in the Fund V- Fund VI Joint Venture.
Cash distributions remained relatively stable from 1998 as compared to 1997, and
1996. Net income allocated to the Partnership decreased in 1998 as compared to
1997 due to decreased insurance reimbursement due to the insurance reimbursement
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. For more detailed financial
information regarding the historical operations of The
16
<PAGE>
Hartford Building, refer to the Financial Statements, as of December 31, 1998,
1997 and 1996 regarding The Hartford Building commencing at page F-43 of this
Annual Report on Form 10-K.
Stockbridge Village II - Fund V - Fund VI Joint Venture
- -------------------------------------------------------
For the Year Ended December 31
------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental income $235,776 $235,508 $196,629
-------- -------- --------
Expenses
Depreciation 101,971 96,357 79,239
Management & leasing expenses 29,648 35,423 19,786
Other operating expenses 32,156 62,725 90,216
-------- -------- --------
163,775 194,505 189,241
-------- -------- --------
Net income $ 72,001 $ 41,003 $ 7,388
======== ======== ========
Occupied % 72% 72% 61%
Partnership's Ownership % in the
Fund V-Fund VI Joint Venture 53.5% 53.5% 52.5%
Cash Distribution to the Partnership $ 89,458 $ 69,719 $ 41,056
Net Income Allocated to the
Partnership $ 38,513 $ 22,033 $ 3,869
Net income is greater in 1997, as compared to 1997 and 1996, due to primarily to
increase CAM reimbursements from tenants. Operating expenses for 1997, have
decreased from 1996 levels due primarily to a bad debt recovery in 1997, and
decreased in 1998 from 1997 due to increased CAM billings to tenants.
The Partnership's ownership percentage in the Fund V - Fund VI Joint Venture
increased to 53.5% in 1998 and 1997 from 52.5% in 1996 due to additional
investments by the Partnership which increased the Partnership's ownership
interest in the fund V-Fund VI Joint Venture.
The Stockbridge Village II Project incurred property taxes of $23,508 for 1998,
$25,491 for 1997 and $22,835 for 1996.
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.
17
<PAGE>
The Marathon Building/Fund V-VI-VII Joint Venture
- -------------------------------------------------
For the Year Ended December 31
------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental income $971,447 $968,219 $971,017
-------- -------- --------
Expenses:
Depreciation 350,585 350,585 350,585
Management & leasing expenses 34,632 39,671 38,841
Other operating expenses 12,261 11,905 14,636
-------- -------- --------
397,478 402,161 404,062
-------- -------- --------
Net income $573,969 $566,058 $566,955
======== ======== ========
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 $389,954 $388,557 $359,305
Net Income Allocated to the
Partnership $240,091 $236,782 $237,157
Rental income remained relatively stable in 1998, 1997 and 1996. Operating
expense increased slightly due to accounting fee and administrative fees
increasing, as compared to 1997. Cash distribution to the partnership and net
income allocated to partnership remained stable for 1998.
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.
18
<PAGE>
Stockbridge Village III/Fund VI - Fund VII Joint Venture
- --------------------------------------------------------
For the Year Ended December 31,
------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental income $238,093 $285,256 $257,571
-------- -------- --------
Expenses:
Depreciation 91,053 86,626 84,642
Management and leasing expenses 32,844 30,722 51,107
Other operating expenses 145,402 22,501 59,168
-------- -------- --------
269,299 139,849 194,917
-------- -------- --------
Net (Loss) Income $(31,206) $145,407 $ 62,654
======== ======== ========
Occupied % 100% 100% 87%
Partnership's Ownership % in the
Fund VI - Fund VII Joint Venture 43.7% 42.5% 42.8%
Cash Distribution to the Partnership $ 27,885 $ 99,789 $ 65,756
Net (Loss) Income Allocation to the
Partnership $(13,520) $ 62,151 $ 26,845
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.
A net loss is reflected for December 31, 1998, as compared to the net income of
$145,407 for December 31, 1997. The net loss was due to a decrease in rental
income and an increase in other operating expenses which was due to a bad debt
writeoff for Kenny Rodgers Roasters, which vacated in the first quarter of 1998.
The space is now being leased by RMS / Fazoli's, which signed a 13 year lease
that commenced on December 10, 1998.
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. The remaining 8,268
square feet were fully occupied by December 31, 1997.
The Stockbridge Village III Project incurred property taxes of $25,248 for 1998,
$25,009 for 1997 and $23,026 for 1996.
19
<PAGE>
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>
Year Ended Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $294,318 $199,090 $ 59,006
-------- -------- --------
Expenses:
Depreciation 141,843 111,990 52,780
Management & leasing expenses 44,398 25,268 3,238
Other operating expenses 18,181 38,757 28,810
-------- -------- --------
204,422 176,015 84,828
-------- -------- --------
Net income (loss) $ 89,896 $ 23,075 $(25,822)
======== ======== ========
Occupied % 81% 74% 36%
Partnership's Ownership % in the
Fund VI - Fund VII Joint Venture 43.7% 42.5% 42.8%
Cash Distribution to Partnership $ 96,809 $ 48,829 $ 0
Net Income (Loss) Allocated to the
Partnership $ 38,827 $ 9,832 $(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 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. Eleven
additional tenants have occupied 17,600 square feet at the property as of
December 31, 1998. Negotiations are being conducted to lease the remaining
space.
Rental income, net income and cash distributions have increased due primarily to
increased occupancy. The Stockbridge Village I Expansion incurred property taxes
of $22,565 for 1998, $25,608 for 1997 and $9,182 for 1996.
20
<PAGE>
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>
For the Year Ended For the Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------ ------------------ -----------------
<S> <C> <C> <C>
Revenues:
Rental Income $862,360 $679,268 $255,062
-------- -------- --------
Expenses:
Depreciation 376,290 325,974 181,798
Management & leasing expenses 97,701 48,962 28,832
Other operating expenses 60,799 195,567 101,600
-------- -------- --------
534,790 570,503 312,230
-------- -------- --------
Net income (loss) $327,570 $108,765 $(57,168)
======== ======== ========
Occupied % 94% 94% 63%
Partnership's Ownership % in the
Fund II - III - VI - VII Joint
Venture 26.9% 26.9% 26.0%
Cash Distribution to Partnership $199,946 $115,220 $ 19,329
Net Income (Loss) Allocated to the
Partnership $ 87,915 $ 28,409 $(10,193)
</TABLE>
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 project opened in April, 1996. Development has been
substantially completed on two buildings with a total of 49,530 square feet. As
of December 31, 1998, fifteen tenants occupied space in the retail building
under leases of varying lengths.
Income, depreciation, management and leasing expenses increased compared to
1997, due primarily to increased occupancy in fourth quarter of 1997. Since the
Holcomb Bridge Road Property was under construction and not occupied until first
quarter, 1996, 12-month income and expense figures are not available.
The Holcomb Bridge Road Property incurred property taxes of $52,162 for 1998,
$85,230 for 1997 and $37,191 for 1996.
For comments on the general competitive conditions to which the property may be
subject, see Item, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
21
<PAGE>
BellSouth Property / Fund VI - VII - VIII Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Eight Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Revenues:
Rental income $1,521,109 $1,524,708 $876,711
Interest income 7,806 8,188 60,092
Other income 9,373 360 150
---------- ---------- --------
1,538,288 1,533,256 936,953
---------- ---------- --------
Expenses:
Depreciation 444,448 443,544 290,407
Management & leasing expenses 190,025 191,176 99,330
Other operating expenses 436,403 415,114 288,815
---------- ---------- --------
1,070,876 1,049,834 678,552
---------- --------- -------
Net income $ 467,412 $ 483,422 $258,401
=========== ========== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund VI - VII - VIII Joint Venture 34.3% 34.3% 36.4%
Cash Distribution to Partnership $ 323,745 $ 335,846 $175,281
Net Income Allocated to Partnership $ 160,090 $ 170,391 $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 BellSouth Advertising and Publishing
Corporation occupying approximately 66,333 square feet and American Express
occupying approximately 22,607 square feet. An additional approximate 3,091
square feet was occupied by BellSouth commencing in December 1996 bringing
occupancy to 100%.
Net income has decreased in 1998 as compared to 1997 due primarily to increased
cost for HVAC repairs and various other building expenses. Cash distributions
and net income allocated to the partnership decreased in 1998 from 1997 levels
due primarily to additional funding by Wells Fund VIII in early 1997, which
decreased the partnership ownership in the fund VI-VII-VIII Joint Venture.
Interest income was generated from construction dollars, not as yet funded on
construction,
22
<PAGE>
being invested in interest bearing accounts. Since the building opened in May,
1996, 12-month income and expense figures for 1996 are not available.
The BellSouth Property incurred property taxes of $171,629 for 1998, $164,400
for 1997 and $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.
Tanglewood Commons / Fund VI - VII - VIII Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Eleven Months Ended
December 31, 1998 December 31, 1997
------------------- -------------------
<S> <C> <C>
Revenues:
Rental income $737,862 $562,880
Interest income 17,610 11,276
-------- --------
755,472 574,156
-------- --------
Expenses:
Depreciation 244,311 191,155
Management & leasing expenses 61,562 41,589
Other operating expenses 49,338 88,873
-------- --------
355,211 321,617
-------- --------
Net income $400,261 $252,539
======== ========
Occupied % 91% 86%
Partnership's Ownership % in the Fund VI - Fund
VII - Fund VIII Joint Venture 34.3% 34.3%
Cash Distribution to Partnership $218,408 $132,652
Net Income Allocated to the
Partnership $137,091 $ 87,731
</TABLE>
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina. The
land purchase costs were funded by a capital contribution made by the
Partnership. Total costs and expenses to be incurred by the Fund VI-VII-VIII
Joint Venture for the acquisition, development, construction and completion of
the shopping center were approximately $8,700,000. A strip shopping center
containing approximately 67,320 gross square feet opened on the site on February
26, 1997.
In February 1997, Harris Teeter, Inc., a regional supermarket chain, occupied
its leased space of 46,120 square feet with an initial term of 20 years. The
annual base rent during the initial term is
23
<PAGE>
$488,250. In addition, Harris Teeter has agreed to pay percentage rent equal to
one percent of the amount by which Harris Teeter gross sales exceed $35,000,000
for any lease year.
Tanglewood Commons incurred property taxes of $52,229 for 1998 and $58,466 for
1997, the first year of occupancy. Since this property commenced operations in
February 1997, comparable income and expense figures for the prior year are not
available.
For comments on the general competitive conditions to which the property may be
subject, see Item , 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 Joint Venture.
- -------------------------------------------------------------------------------
For the Year Ended December 31
------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Rental Income $909,831 $880,652 $890,951
Interest Income 84 67 73
-------- -------- --------
909,915 880,719 891,024
-------- -------- --------
Expenses:
Depreciation 444,660 440,882 429,419
Management & leasing expenses 82,517 78,046 48,882
Other operating expenses 84,676 138,294 180,841
-------- -------- --------
611,853 657,222 659,142
-------- -------- --------
Net income $298,062 $223,497 $231,882
======== ======== ========
Occupied % 91% 94% 93%
Partnership's Ownership % 10.7% 10.7% 10.7%
Cash Distribution to Partnership $ 79,238 $ 65,047 $ 72,510
Net Income Allocated to the
Partnership $ 31,916 $ 23,931 $ 24,830
Rental income increased in 1998 over 1997 due primarily to a one time adjustment
made to the straight line rent schedule. Rental income decreased in 1997, as
compared to 1996, due to decreased occupancy at the property for the first three
quarters of 1997. The increase in occupancy in the fourth quarter of 1997, was
due to a new 1,200 square foot lease executed in 1997. Operating expenses of
the property decreased to $84,676 in 1998 from $138,294 in 1997 and $180,841 in
1996. The decrease in operating expense in 1998, as compared to 1997 is due to
decreased expenditures for tenants improvements, common area expenses and legal
fees. The decrease in operating expenses in 1997, as compared to 1996, is due to
a change in estimated billing of common area maintenance charges and property
taxes which was partially offset by increases in plumbing repair and contract
labor expenses. Net income of the property increased to
24
<PAGE>
$298,062 in 1998 and decreased to $223,497 in 1997 from $231,882 in 1996, due to
the reasons discussed above.
Real estate taxes were $77,311 for 1998, $67,259 for 1997 and $63,696 for 1996.
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 $20,239,843 in properties; reserved
$124,000 as working capital reserves; and the remainder of approximately $17,000
is reserved for investment in the Fund V - Fund VI Joint Venture to complete the
Stockbridge Village II Project.
Pursuant to the terms of the Partnership Agreement, the Partnership is required
to maintain working capital reserves in an amount equal to the cash operating
expenses required to operate the Partnership for a six-month period not to be
reduced below 1% of Limited Partners' capital contributions. As set forth
above, in order to fund tenant improvements at the Stockbridge Village II,
Stockbridge Expansion and at the Holcomb Bridge Road Property, the General
Partners have used $126,000 of the Partnership's working capital reserves to
reduce the balance below this minimum amount, rather than funding the tenant
improvements out of operating cash flow, which would have the effect of reducing
cash flow distributions to Limited Partners. It is anticipated that future
rental revenues from these projects will be allocated to restore the
Partnership's minimum working capital reserve levels over time in the future.
The Partnership net cash used in operating activities increased from $2,716 for
the year ended December 31, 1996 to $57,206 for the year ended December 31, 1997
and to $70,649 for the year ended December 31, 1998 primarily due to decreased
interest income in 1997 and 1998. Net cash provided by investing activities
increased from $809,967 in 1996 to $1,189,264 in 1997 and to $1,693,826 in 1998
due primarily to decreased investments in joint ventures, a return of capital in
1996 due to a transfer of funds from Tanglewood Project to the Holcomb Bridge
Road Project and increases in distributions received from joint ventures. Cash
flow from financing activities varied from ($1,185,516) in 1996 to ($1,452,803)
in 1997 and ($1,745,626) in 1998 due to increased in distributions to partners.
The Partnership's distributions paid and payable through the fourth quarter of
1998 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
1998. The Partnership expects to meet liquidity requirements and budget demands
through cash flow from operations.
25
<PAGE>
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 should reduce the Partnership's 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.
Year 2000
- ---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and is expected
to be completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted as the assessment progresses. The
costs incurred by the Partnership and its affiliates thus far for renovations
and replacements have been immaterial. Some testing of systems has begun and
all testing is expected to be complete by June 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant. The Partnership's affiliated entities are purchasing the upgrade for
the accounting and property management package system; however, it is not slated
to be available until the end of the first quarter of 1999. At the present
time, it is believed that all major non-information technology systems are Year
2000 compliant. The cost to upgrade any non-compliant systems is believed to be
immaterial.
The Partnership is in the process of confirming with the Partnership's
vendors, including third-party service providers such as banks, that their
systems will be Year 2000 compliant. Based on the information received thus
far, the primary third-party service providers with which the Partnership has
relationships have confirmed their Year 2000 readiness.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use with
its accounting, property management and investment portfolio tracking. The
Partnership has preliminarily determined that
26
<PAGE>
any costs, problems or uncertainties associated with the potential consequences
of Year 2000 issues are not expected to have a material impact on the future
operations or financial condition of the Partnership. The Partnership will
perform due diligence as to the Year 2000 readiness of each property owned by
the Partnership and each property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e.,
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
The Partnership is currently formulating contingency plans to cover any
areas of concern. Alternate means of operating the business are being developed
in the unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors. A written plan is being developed for testing and dispensation to each
staff member of the Advisor of the Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down, the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed. In the event that the security system shuts down, the Partnership
has devised a plan for each building to hire temporary on-site security guards.
In the event that a third-party vendor has Year 2000 problems relating to
investor information, the Partnership intends to perform a full system back-up
of all investor information as of December 31, 1999 so that the Partnership will
have accurate hard-copy investor information.
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.
- --------------------
There were no disagreements with the Partnership's accountants or other
reportable events during 1998.
27
<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 55 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, 1998.
CASH COMPENSATION TABLE
(A) (B) (C)
Name of individual or Capacities in which served
number in group Form of Compensation Cash Compensation
- --------------------- -------------------------- -----------------
Wells Management Property Manager - $124,660
Company, Inc. Management and Leasing
Fees
(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 1998, but not
actually paid until January, 1999.
28
<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, 1999.
(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 1327.37 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 1998.
29
<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 $124,660 in property management and leasing fees relating to
the Partnership in 1998.
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 1998.
30
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------------------------------------------------------------------------
(a)1. Financial Statements
The Financial Statements are contained on pages F-2 through F-48 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(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 1998.
(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.
31
<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 26th day of March,
1999.
Wells Real Estate Fund VI, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
--------------------------
Leo F. Wells, III
Individual General Partner and as
President and Chief Financial Officer
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 26, 1999
- ---------------------- President and Sole Director
Leo F. Wells, III of Wells Capital, Inc., the
General Partner of Wells
Partners, L.P.
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.
32
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
INDEX TO THE FINANCIAL STATEMENTS
Financial Statements Page
- -------------------- ----
Independent Auditors' Reports F2
Balance Sheets as of December 31, 1998 and 1997 F3
Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996 F4
Statements of Partners' Capital for the Years Ended
December 31, 1998, 1997 and 1996 F5
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 F6
Notes to Financial Statements for December 31, 1998,
1997, and 1996 F7
Audited Financial Statements - The Hartford Building F42
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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, 1998 and 1997 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1998. 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. aA
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, 1998 and 1997 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III--Real Estate Investments
and Accumulated Depreciation as of December 31, 1998 is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INVESTMENT IN JOINT VENTURES $18,753,866 $19,479,915
CASH AND CASH EQUIVALENTS 145,888 268,337
DUE FROM AFFILIATES 427,734 465,733
DEFERRED PROJECT COSTS 888 2,666
ORGANIZATIONAL COSTS, LESS ACCUMULATED AMORTIZATION OF $31,250 IN
1998 AND $29,687 IN 1997 0 1,563
PREPAID EXPENSES AND OTHER ASSETS 300 300
----------- -----------
Total assets $19,328,676 $20,218,514
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Partnership distributions payable $ 427,995 $ 432,841
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A 18,608,322 18,525,190
Class B 292,359 1,260,483
----------- -----------
Total partners' capital 18,900,681 19,785,673
----------- -----------
Total liabilities and partners' capital $19,328,676 $20,218,514
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
REVENUES:
<S> <C> <C> <C>
Equity in income of joint ventures $ 928,000 $ 856,710 $ 607,214
Interest income 11,519 28,092 68,568
---------- ---------- ----------
939,519 884,802 675,782
---------- ---------- ----------
EXPENSES:
Partnership administration 58,706 52,386 49,424
Legal and accounting 15,481 21,541 26,556
Amortization of organization costs 1,563 6,250 6,250
Computer costs 7,981 8,971 4,499
---------- ---------- ----------
83,731 89,148 86,729
---------- ---------- ----------
NET INCOME $ 855,788 $ 795,654 $ 589,053
========== ========== ==========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS
$1,770,058 $1,677,826 $1,234,717
========== ========== ==========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS
$ (914,270) $ (882,172) $ (645,664)
========== ========== ==========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED
PARTNER UNIT $ 0.81 $ 0.78 $ 0.59
========== ========== ==========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER
UNIT $ (2.80) $ (2.47) $ (1.60)
========== ========== ==========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT
$ 0.80 $ 0.73 $ 0.57
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Limited Partners
---------------------------------------------
Class A Class B Total
---------------------- -------------------- Partners'
Units Amount Units Amount Capital
--------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 2,048,356 $17,637,686 451,644 $3,506,575 $21,144,261
Net income (loss) 0 1,234,717 0 (645,664) 589,053
Partnership distributions 0 (1,188,223) 0 0 (1,188,223)
Class B conversion elections 64,901 478,317 (64,901) (478,317) 0
--------- ----------- -------- ---------- -----------
BALANCE, DECEMBER 31, 1996 2,113,257 18,162,497 386,743 2,382,594 20,545,091
Net income (loss) 0 1,677,826 0 (882,172) 795,654
Partnership distributions 0 (1,555,072) 0 0 (1,555,072)
Class B conversion elections 45,638 239,939 (45,638) (239,939) 0
--------- ----------- -------- ---------- -----------
BALANCE, DECEMBER 31, 1997 2,158,895 18,525,190 341,105 1,260,483 19,785,673
Net income (loss) 0 1,770,058 0 (914,270) 855,788
Partnership distributions 0 (1,740,780) 0 0 (1,740,780)
Class B conversion elections 28,862 53,854 (28,862) (53,854) 0
--------- ----------- -------- ---------- -----------
BALANCE, DECEMBER 31, 1998 2,187,757 $18,608,322 312,243 $ 292,359 $18,900,681
========= =========== ======= ========== ===========
</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 CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 855,788 $ 795,654 $ 589,053
----------- ----------- -----------
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in income of joint ventures (928,000) (856,710) (607,214)
Amortization of organization costs 1,563 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets 0 2,100 8,695
Accounts payable and accrued expenses 0 (4,500) 500
----------- ----------- -----------
Total adjustments (926,437) (852,860) (591,769)
----------- ----------- -----------
Net cash used in operating activities (70,649) (57,206) (2,716)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures (135,602) (310,759) (734,924)
Distributions received from joint ventures 1,829,428 1,500,023 1,044,891
Return of contributions in joint venture 0 0 500,000
----------- ----------- -----------
Net cash provided by investing activities
1,693,826 1,189,264 809,967
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated earnings
(1,745,626) (1,452,803) (1,185,516)
----------- ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS
(122,449) (320,745) (378,265)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
268,337 589,082 967,347
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 145,888 $ 268,337 $ 589,082
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs contributed to joint ventures
$ 1,778 $ 11,491 $ 21,305
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
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.
("Wells Partners"), a Georgia nonpublic limited partnership. The Partnership
has two classes of limited partnership interests, Class A and Class B units.
Limited partners shall have the right to change their prior elections to have
some or all of their units treated as Class A units or Class B units once
every five years. 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 above 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 the following properties
through joint ventures between the Partnership and other Wells Real Estate
Funds: (i) a shopping center located in Cherokee County, Georgia ("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 shopping center in Clemmons, Forsyth County, North Carolina.
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-7
<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 on 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 quarterly. In accordance with the
partnership agreement, distributions are paid first to limited partners
holding Class A units until they have received a 10% per annum 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, as defined
. To the general partners until they have received 100% of their
capital contributions, as defined
. Thereafter, 80% to the limited partners and 20% to the general
partners
F-8
<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 and amortization. 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, and amortization 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 and amortization 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 partners in amounts equal to deductions for depreciation
and amortization 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.
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 amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets 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, 1998.
F-9
<PAGE>
Depreciation for buildings and improvements is calculated using the straight-
line method over 25 years.
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, 1998, 1997, and 1996, is computed based on the weighted
average number of units outstanding during the period.
Reclassifications
Certain prior year items have been reclassified to conform with the current
year financial statement presentation.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells Partners, 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. Aggregate fees paid through December 31, 1998 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, 1998 and 1997 represent fees not yet applied to
properties.
F-10
<PAGE>
3. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1998 and 1997 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarters of 1998 and 1997, as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Fund V and VI Associates $ 98,669 $141,979
Fund V, VI, and VII Associates 98,715 96,724
Fund VI and VII Associates 29,672 38,932
Fund VI, VII, and VIII Associates 128,335 132,340
Fund I, II, II-OW, VI, and VII Associates--Cherokee 16,013 20,409
Fund II, III, VI, and VII Associates 56,330 35,349
-------- --------
$427,734 $465,733
======== ========
</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.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $124,660, $170,646, and $93,349 for the
years ended December 31, 1998, 1997, and 1996, 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 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.
F-11
<PAGE>
4. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Amount Percent Amount Percent
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Fund I, II, II-OW, VI, and VII
Associates--Cherokee $ 844,160 11% $ 891,482 11%
Fund II, III, VI, and VII Associates 1,682,380 26 1,789,811 27
Fund V and VI Associates 4,789,883 53 4,989,976 53
Fund V, VI, and VII Associates 3,113,259 42 3,263,121 42
Fund VI and VII Associates 2,511,074 44 2,487,443 43
Fund VI, VII, and VIII Associates 5,813,110 34 6,058,082 34
----------- -----------
$18,753,866 $19,479,915
=========== ===========
</TABLE>
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Investment in joint ventures, beginning of year $19,479,915 $19,930,833
Equity in income of joint ventures 928,000 856,710
Distributions from joint ventures (1,791,429) (1,629,878)
Contributions to joint ventures 137,380 322,250
----------- -----------
Investment in joint ventures, end of year $18,753,866 $19,479,915
=========== ===========
</TABLE>
Fund I, II, II-OW, VI, and VII Associates--Cherokee
In August 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--Cherokee, 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. 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.
Percentage ownership interests in Fund I, II, II-OW, VI, and VII Associates--
Cherokee were determined at the time of formation based on contributions.
Under the terms of the joint venture agreement, Fund VI and Fund VII each
contributed approximately $1 million to the new joint venture in return for a
10.7% ownership interest. Fund I's ownership interest in the Cherokee joint
venture changed from 30.6% to 24%, and Fund II and II-OW joint venture's
ownership
F-12
<PAGE>
interest changed from 69.4% to 54.6%. The $2 million in cash contributed to
Cherokee was used to fund an expansion of the property for an existing
tenant.
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, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,219,704 $1,219,704
Building and improvements, less accumulated depreciation of
$2,717,809 in 1998 and $2,273,149 in 1997 6,500,995 6,939,884
---------- ----------
Total real estate assets 7,720,699 8,159,588
Cash and cash equivalents 222,814 153,159
Accounts receivable 35,517 92,516
Prepaid expenses and other assets 90,979 99,869
---------- ----------
Total assets $8,070,009 $8,505,132
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 107,129 $ 36,851
Partnership distributions payable 130,838 194,123
Due to affiliates 109,267 93,940
---------- ----------
Total liabilities 347,234 324,914
---------- ----------
Partners' capital:
Wells Real Estate Fund I 1,741,492 1,863,173
Fund II and II-OW 4,295,663 4,536,781
Wells Real Estate Fund VI 844,160 891,482
Wells Real Estate Fund VII 841,460 888,782
---------- ----------
Total partners' capital 7,722,775 8,180,218
---------- ----------
Total liabilities and partners' capital $8,070,009 $8,505,132
========== ==========
</TABLE>
F-13
<PAGE>
Fund I, II, II-OW, VI and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
Revenues:
<S> <C> <C> <C>
Rental income $909,831 $880,652 $890,951
Interest income 84 67 73
-------- -------- --------
909,915 880,719 891,024
-------- -------- --------
Expenses:
Depreciation 444,660 440,882 429,419
Operating costs, net of reimbursements 35,715 70,017 126,367
Property administration 22,934 26,260 42,868
Management and leasing fees 82,517 78,046 48,882
Legal and accounting 7,363 9,385 8,362
Computer costs 0 0 3,244
Bad debt expense 18,664 0 0
Loss on real estate assets 0 32,632 0
-------- -------- --------
611,853 657,222 659,142
-------- -------- --------
Net income $298,062 $223,497 $231,882
======== ======== ========
Net income allocated to Wells Real Estate Fund I $ 71,604 $ 53,691 $ 55,705
======== ======== ========
Net income allocated to Fund II and II-OW $162,626 $121,942 $126,517
======== ======== ========
Net income allocated to Wells Real Estate Fund VI $ 31,916 $ 23,932 $ 24,830
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $ 31,916 $ 23,932 $ 24,830
======== ======== ========
</TABLE>
F-14
<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, 1998, 1997, and 1996
<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, 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
Net income 53,691 121,942 23,932 23,932 223,497
Partnership distributions (160,881) (331,435) (65,047) (65,047) (622,410)
---------- ---------- -------- -------- ----------
Balance, December 31, 1997 1,863,173 4,536,781 891,482 888,782 8,180,218
Net income 71,604 162,626 31,916 31,916 298,062
Partnership distributions (193,285) (403,744) (79,238) (79,238) (755,505)
---------- ---------- -------- -------- ----------
Balance, December 31, 1998 $1,741,492 $4,295,663 $844,160 $841,460 $7,722,775
---------- ---------- -------- -------- ----------
</TABLE>
Fund I, II, II-OW, VI, and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 298,062 $ 223,497 $ 231,882
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 444,660 440,882 429,419
Loss on real estate assets 0 32,632 0
Changes in assets and liabilities:
Accounts receivable 56,999 1,386 43,062
Prepaid expenses and other assets 8,890 (21,342) 14,106
Accounts payable and accrued expenses 70,278 13,721 (4,624)
Due to affiliates 15,327 15,565 9,613
--------- --------- ---------
Total adjustments 596,154 482,844 491,576
--------- --------- ---------
Net cash provided by operating activities
894,216 706,341 723,458
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate (5,771) (83,424) (28,231)
--------- --------- ---------
Cash flows from financing activities:
Distributions to joint venture partners (818,790) (541,104) (834,237)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 69,655 81,813 (139,010)
Cash and cash equivalents, beginning of year 153,159 71,346 210,356
--------- --------- ---------
Cash and cash equivalents, end of year $ 222,814 $ 153,159 $ 71,346
========= ========= =========
</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, and Fund VII. The joint venture, Fund II,
III, VI, and VII Associates,
F-15
<PAGE>
was formed for the purpose of acquiring, developing, operating, and selling
real properties. During 1995, Fund II and III Associates contributed 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, 1997, and 1998, the
Partnership and Fund VII made contributions to the joint venture. Ownership
percentage interests were recomputed accordingly. Development was
substantially completed in 1996 on two buildings containing a total of
approximately 49,500 square feet.
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, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,325,242 $1,325,242
Building and improvements, less accumulated depreciation of
$884,062 in 1998 and $507,772 in 1997 4,773,062 5,025,276
Construction in progress 41,263 59,564
---------- ----------
Total real estate assets 6,139,567 6,410,082
Cash and cash equivalents 308,788 219,391
Accounts receivable 111,460 54,524
Prepaid expenses and other assets 233,965 269,568
---------- ----------
Total assets $6,793,780 $6,953,565
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 192,072 $ 170,776
Partnership distributions payable 209,716 131,907
---------- ----------
401,788 302,683
---------- ----------
Partners' capital:
Fund II and III Associates 1,507,807 1,608,215
Wells Real Estate Fund VI 1,682,380 1,789,811
Wells Real Estate Fund VII 3,201,805 3,252,856
---------- ----------
Total partners' capital 6,391,992 6,650,882
---------- ----------
Total liabilities and partners' capital $6,793,780 $6,953,565
========== ==========
</TABLE>
F-16
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental income $872,978 $679,268 $255,062
Other income 36,000 0 0
-------- -------- --------
908,978 679,268 255,062
-------- -------- --------
Expenses:
Depreciation 376,290 325,974 181,798
Operating costs, net of reimbursements 85,983 122,261 75,018
Management and leasing fees 97,701 99,834 28,832
Legal and accounting 6,509 4,885 14,928
Property administration 14,926 17,321 10,286
Computer costs 0 228 1,368
-------- -------- --------
581,409 570,503 312,230
-------- -------- --------
Net income (loss) $327,569 $108,765 $(57,168)
======== ======== ========
Net income (loss) allocated to Fund II and
III Associates $ 78,791 $ 27,213 $(19,378)
======== ======== ========
Net income (loss) allocated to Wells Real
Estate Fund VI $ 87,914 $ 28,409 $(10,193)
======== ======== ========
Net income (loss) allocated to Wells Real
Estate Fund VII $160,864 $ 53,143 $(27,597)
======== ======== ========
</TABLE>
F-17
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Fund II Wells Wells Real Total
and III Real Estate Estate Partners'
Associates Fund VI Fund VII Capital
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
Partnership contributions 0 116,675 121,576 238,251
Partnership distributions (109,242) (115,220) (214,414) (438,876)
Net income 27,213 28,409 53,143 108,765
---------- ---------- ---------- ----------
Balance, December 31, 1997 1,608,215 1,789,811 3,252,856 6,650,882
Partnership contributions 0 4,600 154,049 158,649
Partnership distributions (179,199) (199,945) (365,964) (745,108)
Net income 78,791 87,914 160,864 327,569
---------- ---------- ---------- ----------
Balance, December 31, 1998 $1,507,807 $1,682,380 $3,201,805 $6,391,992
========== ========== ========== ==========
</TABLE>
F-18
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 327,569 $ 108,765 $ (57,168)
--------- --------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation 376,290 325,974 181,798
Changes in assets and liabilities:
Accounts receivable (56,936) 12,810 (67,334)
Prepaid expenses and other assets 35,603 (123,748) (104,792)
Accounts payable and accrued expenses 21,296 (34,194) 88,532
--------- --------- ----------
Total adjustments 376,253 180,842 98,204
--------- --------- ----------
Net cash provided by operating activities 703,822 289,607 41,036
--------- --------- ----------
Cash flows from investing activities:
Decrease in construction payables 0 0 (358,467)
Investment in real estate (102,122) (620,059) (1,736,082)
--------- --------- ----------
Net cash used in investing activities (102,122) (620,059) (2,094,549)
--------- --------- ----------
Cash flows from financing activities:
Contributions from joint venture partners 154,996 230,699 1,434,308
Distributions to joint venture partners (667,299) (356,559) (26,470)
--------- --------- ----------
Net cash (used in) provided by
financing activities (512,303) (125,860) 1,407,838
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents 89,397 (456,312) (645,675)
Cash and cash equivalents, beginning of year 219,391 675,703 1,321,378
--------- --------- ----------
Cash and cash equivalents, end of year $ 308,788 $ 219,391 $ 675,703
========= ========= ==========
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 3,653 $ 7,552 $ 162,597
========= ========= ==========
</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.
F-19
<PAGE>
Following are the financial statements for Fund V and VI Associates:
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Real estate assets, AT COST:
Land $1,622,733 $1,622,733
Building and improvements, less accumulated depreciation of
$1,578,728 in 1998 and $1,184,725 in 1997 7,186,970 7,590,973
Construction in progress 9,763 493
---------- ----------
Total real estate assets 8,819,466 9,214,199
Cash and cash equivalents 213,183 245,298
Accounts receivable 96,830 109,882
Prepaid expenses and other assets 49,599 56,002
---------- ----------
Total assets $9,179,078 $9,625,381
========== ==========
</TABLE>
Liabilities and Partners' Capital
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities:
Accounts payable $ 16,477 $ 17,885
Partnership distributions payable 206,141 265,539
Due to affiliates 6,809 9,657
---------- ----------
Total liabilities 229,427 293,081
---------- ----------
Partners' capital:
Wells Real Estate Fund V 4,159,768 4,342,324
Wells Real Estate Fund VI 4,789,883 4,989,976
---------- ----------
Total partners' capital 8,949,651 9,332,300
---------- ----------
Total liabilities and partners' capital $9,179,078 $9,625,381
========== ==========
</TABLE>
F-20
<PAGE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental income $953,275 $953,007 $914,128
-------- -------- --------
Expenses:
Depreciation 394,003 388,387 371,270
Operating costs, net of reimbursements 19,566 39,492 49,873
Management and leasing fees 57,368 65,612 48,486
Legal and accounting 9,107 24,941 10,816
Property administration 14,012 10,425 10,655
Computer costs 0 0 2,820
Bad debt (recovery) expense 0 (22,115) 30,000
-------- -------- --------
494,056 506,742 523,920
-------- -------- --------
Net income $459,219 $446,265 $390,208
======== ======== ========
Net income allocated to Wells Real Estate
Fund V $213,630 $208,783 $185,438
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $245,589 $237,482 $204,770
======== ======== ========
</TABLE>
F-21
<PAGE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund V Fund VI Capital
<S> <C> <C> <C>
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
Net income 208,783 237,482 446,265
Partnership contributions 0 190,197 190,197
Partnership distributions (390,378) (443,939) (834,317)
---------- ---------- ----------
Balance, December 31, 1997 4,342,324 4,989,976 9,332,300
Net income 213,630 245,589 459,219
Partnership contributions 0 9,762 9,762
Partnership distributions (396,186) (455,444) (851,630)
---------- ---------- ----------
Balance, December 31, 1998 $4,159,768 $4,789,883 $8,949,651
========== ========== ==========
</TABLE>
F-22
<PAGE>
FUND V AND VI ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 459,219 $ 446,265 $ 390,208
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 394,003 388,387 371,270
Changes in assets and liabilities:
Accounts receivable 13,052 10,140 (23,373)
Prepaid expenses and other assets 6,403 (1,033) (13,827)
Accounts payable 9,084 (7,867) 15,752
Due to affiliates (2,848) 4,120 799
--------- --------- ---------
Total adjustments 419,694 393,747 350,621
--------- --------- ---------
Net cash provided by operating activities 878,913 840,012 740,829
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate 0 (185,123) (10,807)
--------- --------- ---------
Cash flows from financing activities:
Contributions from joint venture partners 0 190,197 18,130
Distributions to joint venture partners (911,028) (757,231) (774,404)
--------- --------- ---------
Net cash used in financing activities (911,028) (567,034) (756,274)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (32,115) 87,855 (26,252)
Cash and cash equivalents, BEGINNING OF YEAR 245,298 157,443 183,695
--------- --------- ---------
Cash and cash equivalents, END OF YEAR $ 213,183 $ 245,298 $ 157,443
========= ========= =========
</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-23
<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, 1998 AND 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
Real estate assets, AT COST:
<S> <C> <C>
Land $ 314,591 $ 314,591
Building and improvements, less accumulated depreciation of
$1,356,199 in 1998 and $1,005,614 in 1997 7,011,705 7,362,290
---------- ----------
Total real estate assets 7,326,296 7,676,881
Cash and cash equivalents 235,991 231,232
Accounts receivable 121,594 130,577
---------- ----------
Total assets $7,683,881 $8,038,690
========== ==========
</TABLE>
Liabilities and Partners' Capital
<TABLE>
<CAPTION>
Liabilities:
<S> <C> <C>
Partnership distributions payable $ 235,990 $ 231,232
Due to affiliates 4,864 6,166
---------- ----------
Total liabilities 240,854 237,398
---------- ----------
Partners' capital:
Wells Real Estate Fund V 1,224,896 1,283,867
Wells Real Estate Fund VI 3,113,259 3,263,121
Wells Real Estate Fund VII 3,104,872 3,254,304
---------- ----------
Total partners' capital 7,443,027 7,801,292
---------- ----------
Total liabilities and partners' capital $7,683,881 $8,038,690
========== ==========
</TABLE>
F-24
<PAGE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
Revenues:
<S> <C> <C> <C>
Rental income $971,447 $968,219 $971,017
-------- -------- --------
Expenses:
Depreciation 350,585 350,585 350,585
Management and leasing fees 34,632 39,671 38,841
Legal and accounting 3,450 5,690 7,331
Property administration 7,439 3,878 4,641
Computer costs 0 107 1,410
Operating costs 1,372 2,230 1,254
-------- -------- --------
397,478 402,161 404,062
-------- -------- --------
Net income $573,969 $566,058 $566,955
======== ======== ========
Net income allocated to Wells Real Estate
Fund V $ 94,475 $ 93,173 $ 93,321
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $240,091 $236,782 $237,157
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $239,403 $236,103 $236,477
======== ======== ========
</TABLE>
F-25
<PAGE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<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, 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
Net income 93,173 236,782 236,103 566,058
Partnership distributions (152,896) (388,557) (387,442) (928,895)
---------- ---------- ---------- ----------
Balance, December 31, 1997 1,283,867 3,263,121 3,254,304 7,801,292
Net income 94,475 240,091 239,403 573,969
Partnership distributions (153,446) (389,953) (388,835) (932,234)
---------- ---------- ---------- ----------
Balance, December 31, 1998 $1,224,896 $3,113,259 $3,104,872 $7,443,027
========== ========== ========== ==========
</TABLE>
FUND V, VI, AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 573,969 $ 566,058 $ 566,955
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 350,585 350,585 350,585
Changes in assets and liabilities:
Accounts receivable 8,983 11,781 (61,017)
Due to affiliates (1,302) 471 2,441
--------- --------- ---------
Total adjustments 358,266 362,837 292,009
--------- --------- ---------
Net cash provided by operating activities
932,235 928,895 858,964
Cash flows from financing activities:
Distributions to joint venture partners (927,476) (911,808) (853,946)
--------- --------- ---------
Net increase in cash and cash equivalents 4,759 17,087 5,018
Cash and cash equivalents, beginning of year 231,232 214,145 209,127
--------- --------- ---------
Cash and cash equivalents, end of year $ 235,991 $ 231,232 $ 214,145
========= ========= =========
</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
F-26
<PAGE>
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 1997 and 1998, 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-27
<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, 1998 AND 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
Real estate assets, AT COST:
<S> <C> <C>
Land $1,812,447 $1,812,447
Building and improvements, less accumulated depreciation of
$597,207 in 1998 and $364,311 in 1997 3,720,105 3,834,375
Construction in progress 0 34,669
---------- ----------
Total real estate assets 5,532,552 5,681,491
CASH AND CASH EQUIVALENTS 60,259 33,921
ACCOUNTS RECEIVABLE 133,134 191,854
PREPAID EXPENSES AND OTHER ASSETS 130,683 131,527
---------- ----------
Total assets $5,856,628 $6,038,793
========== ==========
</TABLE>
Liabilities and Partners' Capital
<TABLE>
<CAPTION>
Liabilities:
<S> <C> <C>
Accounts payable $ 37,400 $ 95,044
Partnership distributions payable 67,943 91,435
Due to affiliates 5,338 4,606
---------- ----------
Total liabilities 110,681 191,085
---------- ----------
Partners' capital:
Wells Real Estate Fund VI 2,511,074 2,487,443
Wells Real Estate Fund VII 3,234,873 3,360,265
---------- ----------
Total partners' capital 5,745,947 5,847,708
---------- ----------
Total liabilities and partners' capital $5,856,628 $6,038,793
========== ==========
</TABLE>
F-28
<PAGE>
FUND VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
Revenues:
<S> <C> <C> <C>
Rental income $532,410 $485,346 $316,487
-------- -------- --------
Expenses:
Depreciation 232,896 198,616 137,487
Operating costs, net of reimbursements 36,099 19,833 50,299
Management and leasing fees 77,242 55,990 54,345
Property administration 22,119 20,803 19,123
Legal and accounting 26,676 21,622 14,277
Computer costs 0 0 4,188
Bad debt expense 78,689 0 0
-------- -------- --------
473,721 316,864 279,654
-------- -------- --------
Net income $ 58,689 $168,482 $ 36,833
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $ 25,308 $ 71,983 $ 15,775
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $ 33,381 $ 96,499 $ 21,058
======== ======== ========
</TABLE>
F-29
<PAGE>
FUND VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund VI Fund VII Capital
---------- ---------- -----------
<S> <C> <C> <C>
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
Net income 71,983 96,499 168,482
Partnership contributions 15,378 52,528 67,906
Partnership distributions (148,617) (199,304) (347,921)
---------- ---------- ----------
Balance, December 31, 1997 2,487,443 3,360,265 5,847,708
Net income 25,308 33,381 58,689
Partnership contributions 123,018 5,291 128,309
Partnership distributions (124,695) (164,064) (288,759)
---------- ---------- ----------
Balance, December 31, 1998 $2,511,074 $3,234,873 $5,745,947
========== ========== ==========
</TABLE>
F-30
<PAGE>
FUNDS VI AND VII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 58,689 $168,482 $ 36,833
-------- -------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 232,896 198,616 137,422
Changes in assets and liabilities:
Accounts receivable 58,720 (98,688) (59,241)
Prepaid expenses and other assets 844 (48,821) (13,757)
Accounts payable (27,644) 26,509 21,049
Due to affiliates 732 2,194 (4,485)
-------- -------- --------
Total adjustments 265,548 79,810 80,988
-------- -------- --------
Net cash provided by
operating activities $324,237 248,292 117,821
-------- -------- --------
Cash flows from investing activities:
Decrease in construction payables (30,000) (35,000) (14,116)
Investment in real estate (83,957) (455,042) (1,060,466)
-------- -------- --------
Net cash used in investing activities (113,957) (490,042) (1,074,582)
-------- -------- --------
Cash flows from financing activities:
Contributions from joint venture partners 128,309 67,906 145,002
Distributions to joint venture partners (312,251) (297,959) (79,332)
-------- -------- --------
Net cash (used in) provided by
financing activities (183,942) (230,053) (65,670)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 26,338 (471,803) (891,091)
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year 33,921 505,724 (1,396,815)
-------- -------- ----------
$ 60,259 $ 33,921 $ 505,724
======== ======== ==========
Supplemental disclosure of noncash items:
Deferred project costs contributed $ 0 $ 0 $ 6,304
======== ======== ==========
</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 14.683-
acre parcel of land located in Clemmons, Forsyth County, North Carolina. A
retail shopping center was developed and was substantially complete at
December 31, 1997.
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, deferred project costs related to the
Partnership and Fund VII of $23,160 and $21,739, respectively, were unapplied
when the contributions were withdrawn. During 1996,
F-31
<PAGE>
Fund VIII made an additional contribution of $2,815,965, which included
$115,965 of deferred project costs that were applied. Ownership percentage
interests were recomputed accordingly.
F-32
<PAGE>
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, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
----------- -----------
Real estate assets, at cost:
<S> <C> <C>
Land $ 4,461,819 $ 4,461,819
Building and improvements, less accumulated depreciation of
$1,613,865 in 1998 and $925,106 in 1997
11,276,322 11,747,642
Construction in progress 17,866 94,715
----------- -----------
Total real estate assets 15,756,007 16,304,176
Cash and cash equivalents 800,321 1,059,001
Accounts receivable 183,952 104,021
Prepaid expenses and other assets 633,589 712,814
----------- -----------
Total assets $17,373,869 $18,180,012
=========== ===========
</TABLE>
Liabilities and Partners' Capital
<TABLE>
<CAPTION>
Liabilities:
<S> <C> <C>
Accounts payable $ 52,026 $ 100,792
Partnership distributions payable 339,696 386,390
Due to affiliates 9,735 5,177
----------- -----------
Total liabilities 401,457 492,359
----------- -----------
Partners' capital:
Wells Real Estate Fund VI 5,813,110 6,058,082
Wells Real Estate Fund VII 5,667,955 5,906,810
Wells Real Estate Fund VIII 5,491,347 5,722,761
----------- -----------
Total partners' capital 16,972,412 17,687,653
----------- -----------
Total liabilities and partners' capital $17,373,869 $18,180,012
=========== ===========
</TABLE>
F-33
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
Revenues:
<S> <C> <C> <C>
Rental income $2,258,971 $2,087,588 $ 876,711
Interest income 25,416 19,464 147,581
Other income 9,373 360 150
---------- ---------- ----------
2,293,760 2,107,412 1,024,442
---------- ---------- ----------
Expenses:
Depreciation 688,759 634,699 290,407
Operating costs, net of reimbursements 451,299 460,873 262,090
Management and leasing fees 251,587 232,765 99,330
Legal and accounting 9,205 15,934 17,251
Property administration 25,109 27,180 15,975
Computer costs 128 0 642
---------- ---------- ---------
1,426,087 1,371,451 685,695
---------- ---------- ---------
Net income $ 867,673 $ 735,961 $ 338,747
========== ========== =========
Net income allocated to Wells Real Estate
Fund VI $ 297,181 $ 258,122 $ 134,875
========== ========== =========
Net income allocated to Wells Real Estate
Fund VII $ 289,760 $ 251,676 $ 131,609
========== ========== =========
Net income allocatd to Wells Real Estate
Fund VIII $ 280,732 $ 226,163 $ 72,263
========== ========== =========
</TABLE>
F-34
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<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, 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
Net income 258,122 251,676 226,163 735,961
Partnership contributions 0 0 1,055,900 1,055,900
Partnership distributions (468,498) (456,800) (408,682) (1,333,980)
----------- ---------- ---------- -----------
Balance, December 31, 1997 6,058,082 5,906,810 5,722,761 17,687,653
Net income 297,181 289,760 280,732 867,673
Partnership distributions (542,153) (528,615) (512,146) (1,582,914)
---------- ---------- ---------- -----------
Balance, December 31, 1998 $5,813,110 $5,667,955 $5,491,347 $16,972,412
========== ========== ========== ===========
</TABLE>
F-35
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 867,673 $ 735,961 $338,747
--------- --------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 688,759 634,699 290,407
Changes in assets and liabilities:
Accounts receivable (79,931) (76,170) 5,149
Prepaid expenses and other assets 79,225 21,073 427,363
Accounts payable 6,234 8,312 37,480
Due to affiliates 4,558 3,622 1,555
--------- --------- ----------
Total adjustments 698,845 549,390 (92,772)
--------- --------- ----------
Net cash provided by
operating activities 1,566,518 1,285,351 245,975
--------- --------- ----------
Cash flows from investing activities:
Decrease in construction payables (55,000) (110,795) (607,204)
Investment in real estate (140,590) (828,992) (7,381,063)
--------- --------- ----------
Net cash used in investing activities (195,590) (939,787) (7,988,267)
--------- --------- ----------
Cash flows from financing activities:
Contributions received from
joint venture partners 0 1,000,000 2,700,000
Return of contributions from
joint venture partners 0 0 (1,000,000)
Distributions to joint venture partners (1,629,608) (1,216,246) (375,952)
---------- ---------- ----------
Net cash (used in) provided by
financing activities (1,629,608) (216,246) 1,324,048
---------- ---------- ----------
Net (decrease) increase in cash and
cash equivalents (258,680) 129,318 (6,418,244)
Cash and cash equivalents, beginning of year 1,059,001 929,683 7,347,927
---------- ---------- ----------
Cash and cash equivalents, end of year $ 800,321 $1,059,001 $ 929,683
========== ========== =========
Supplemental disclosure of noncash items:
Deferred project costs contributed $ 0 $ 55,900 $ 71,066
========== ========= =========
</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, 1998, 1997, and 1996 is calculated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ---------
<S> <C> <C> <C>
Financial statement net income $ 855,788 $ 795,654 $589,053
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 383,393 352,316 260,958
Expenses deductible when paid for income tax
purposes, accrued for financial reporting purposes 2,915 4,088 6,032
Rental income accrued for financial reporting
purposes in excess of amounts for income tax
purposes (35,128) (60,288) (46,654)
---------- ---------- --------
Income tax basis net income $1,206,968 $1,091,770 $809,389
========== ========== ========
</TABLE>
The Partnership's income tax basis partners' capital at December 31, 1998,
1997, and 1996 is computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Financial statement partners' capital $18,900,681 $19,785,673 $20,545,091
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 1,036,595 653,202 300,886
Joint venture change in ownership 8,730 8,730 8,730
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 (225,266) (190,138) (129,850)
Accumulated expenses deductible when paid for income
tax purposes, accrued for financial reporting purposes 29,062 26,147 22,059
Partnership's distributions payable 427,995 432,841 330,572
----------- ----------- -----------
Income tax basis partners' capital $23,833,491 $24,372,149 $24,733,182
=========== =========== ===========
</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, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 2,245,543
2000 2,230,991
2001 2,138,858
2002 1,955,403
2003 1,784,687
Thereafter 5,630,251
-----------
$15,985,733
===========
</TABLE>
Three significant tenants contributed approximately 26%, 20%, and 15% of
rental income, which is included in equity in income of joint ventures, for
the year ended December 31, 1998. In addition, four significant tenants will
contribute approximately 21%, 21%, 18%, and 12% 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,
1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 883,301
2000 824,544
2001 737,386
2002 694,469
2003 636,952
Thereafter 4,424,471
----------
$8,201,123
==========
</TABLE>
One tenant contributed approximately 65% of rental income for the year ended
December 31, 1998 and will contribute approximately 88% 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, 1998 is as follows:
Year ending December 31:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 733,044
2000 701,474
2001 654,767
2002 335,261
2003 121,668
Thereafter 263,613
----------
$2,809,827
==========
</TABLE>
Four significant tenants contributed approximately 15%, 14%, 13%, and 12% of
rental income for the year ended December 31, 1998. In addition, two
significant tenants will contribute approximately 31% and 14% of future
minimum rental income.
The future minimum rental income due Fund V and VI Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $1,003,577
2000 1,030,179
2001 1,034,817
2002 1,032,096
2003 965,658
Thereafter 422,679
----------
$5,489,006
==========
</TABLE>
Two significant tenants contributed approximately 75% and 14% of rental
income for the year ended December 31, 1998. In addition, three significant
tenants will contribute approximately 69%, 16%, and 14% of future minimum
rental income.
The future minimum rental income due Fund V, VI, and VII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 980,000
2000 980,000
2001 980,000
2002 990,000
2003 990,000
Thereafter 2,970,000
----------
$7,890,000
==========
</TABLE>
One tenant contributed 100% of rental income for the year ended December 31,
1998 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, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 573,902
2000 531,420
2001 452,507
2002 354,843
2003 238,208
Thereafter 523,375
----------
$2,674,255
==========
</TABLE>
One significant tenant contributed approximately 19% of rental income for the
year ended December 31, 1998. In addition, three significant tenants will
contribute approximately 29%, 18%, and 15% of future minimum rental income.
The future minimum rental income due Fund VI, VII, and VIII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 2,209,325
2000 2,222,645
2001 2,110,978
2002 1,955,979
2003 1,895,574
Thereafter 9,893,439
-----------
$20,287,940
===========
</TABLE>
Three significant tenants contributed approximately 46%, 24%, and 16% of
rental income for the year ended December 31, 1998. In addition, two
significant tenants will contribute approximately 40% and 48% of future
minimum rental income.
7. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 Quarters Ended
--------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues $ 234,159 $ 239,416 $ 228,124 $ 237,820
Net income 215,590 215,061 210,217 214,920
Net income allocated to Class A limited
partners (a) 445,504 444,414 438,480 441,660
Net loss allocated to Class B limited
partners (a) (229,914) (229,353) (228,263) (226,740)
</TABLE>
F-40
<PAGE>
<TABLE>
<CAPTION>
1998 Quarters Ended
--------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Net income per weighted average
Class A limited partner unit (a) $ 0.21 $ 0.21 $ 0.20 $ 0.20
Net loss per weighted average
Class B limited partner unit (a) (0.68) (0.68) (0.74) (0.73)
Cash distribution per weighted average
Class A limited partner unit 0.20 0.20 0.20 0.20
(a) The totals of the four quarterly amounts for the year ended December
31, 1998 do not equal the total 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.
</TABLE>
<TABLE>
<CAPTION>
1997 Quarters Ended
----------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 209,023 $ 198,922 $ 222,291 $ 254,566
Net income 179,641 171,569 208,740 235,704
Net income allocated to Class A limited
partners 382,061 381,924 432,467 481,374
Net loss allocated to Class B limited
partners (202,420) (210,355) (223,727) (245,670)
Net income per weighted average Class A
limited partner unit $ 0.18 $ 0.18 $ 0.20 $ 0.22
Net loss per weighted average Class B
limited partner unit (0.52) (0.58) (0.65) (0.72)
Cash distribution per weighted average Class
A limited partner unit
0.17 0.17 0.19 0.20
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund V, L.P. and
Wells Real Estate Fund VI, L.P.:
We have audited the accompanying balance sheets of THE HARTFORD BUILDING as of
December 31, 1998 and 1997 and the related statements of income, partners'
capital, and cash flows for each of the three years in the period ended
December 31, 1998. these financial statements are the responsibility of the
building's management. Our responsibility is to express an opinion on these
financial statements 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 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 the Hartford Building as of
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-42
<PAGE>
THE HARTFORD BUILDING
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
--------- ----------
<S> <C> <C>
REAL ESTATE ASSETS:
Land $ 528,042 $ 528,042
Building and improvements, less accumulated depreciation of
$1,252,760 in 1998 and $960,729 in 1997 5,549,681 5,841,712
---------- ----------
Total real estate assets 6,077,723 6,369,754
CASH AND CASH EQUIVALENTS 213,181 245,298
ACCOUNTS RECEIVABLE 32,948 39,648
---------- ----------
Total assets $6,323,852 $6,654,700
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Payable to joint venture partners $ 176,828 $ 167,970
Due to affiliate 36,354 78,914
---------- ----------
Total liabilities 213,182 246,884
---------- ----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Wells Real Estate Fund V, L.P. 3,188,522 3,326,547
Wells Real Estate Fund VI, L.P. 2,922,148 3,081,269
---------- ----------
Total partners' capital 6,110,670 6,407,816
---------- ----------
Total liabilities and partners' capital $6,323,852 $6,654,700
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-43
<PAGE>
THE HARTFORD BUILDING
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Rental income $717,499 $717,499 $717,499
-------- -------- --------
EXPENSES:
Depreciation 292,031 292,031 292,031
Operating costs, net of reimbursements 6,030 (19,184) 10,494
Management and leasing fees 27,719 30,189 28,700
Legal and accounting 4,500 9,201 2,044
Computer costs 0 0 1,410
-------- -------- --------
330,280 312,237 334,679
-------- -------- --------
NET INCOME $387,219 $405,262 $382,820
======== ======== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND V, L.P.
$180,142 $189,812 $181,919
======== ======== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND VI, L.P.
$207,077 $215,450 $200,901
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-44
<PAGE>
THE HARTFORD BUILDING
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund V, L.P. Fund VI, L.P. Capital
------------ ------------- ----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $3,608,074 $3,396,668 $7,004,742
Net income 181,919 200,901 382,820
Distributions (323,752) (357,531) (681,283)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 3,466,241 3,240,038 6,706,279
Net income 189,812 215,450 405,262
Distributions (329,294) (374,431) (703,725)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1997 3,326,759 3,081,057 6,407,816
Net income 180,142 207,077 387,219
Distributions (318,379) (365,986) (684,365)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1998 $3,188,522 $2,922,148 $6,110,670
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE>
THE HARTFORD BUILDING
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 387,219 $ 405,262 $ 382,820
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 292,031 292,031 292,031
Changes in assets and liabilities:
Accounts receivable 6,700 6,700 6,700
(Due to) received from affiliate (42,560) 90,681 (30,018)
--------- --------- ---------
Total adjustments 256,171 389,412 268,713
--------- --------- ---------
Net cash provided by operating activities 643,390 794,674 651,533
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to joint venture partners (675,507) (706,819) (677,785)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(32,117) 87,855 (26,252)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 245,298 157,443 183,695
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 213,181 $ 245,298 $ 157,443
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE>
THE HARTFORD BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Hartford Building ("Hartford") is a four-story office building located in
Southington, Connecticut. The building is owned by Fund V and VI Associates,
a joint venture between Wells Real Estate Fund V, L.P. ("Fund V") and Wells
Real Estate Fund VI, L.P. ("Fund VI"). Fund V own 46% of Hartford and Fund
VI owns 54% of Hartford at December 31, 1998 and 1997. Allocation of net
income and distributions are made in accordance with ownership percentages.
Use of Estimates
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.
Income Taxes
Hartford is not deemed to be a taxable entity for federal income tax
purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful life
of the related asset. All repairs and maintenance are expensed as incurred.
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 amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets 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 Hartford as of December 31, 1998.
Depreciation is calculated using the straight-line method over 25 years.
F-47
<PAGE>
Revenue Recognition
The lease on Hartford is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the terms of the
lease.
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 statement of cash flows, Hartford 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.
2. RENTAL INCOME
The future minimum rental income due Hartford under noncancelable operating
leases at December 31, 1998 is as follows:
Year ending December 31:
1999 $ 724,200
2000 724,200
2001 724,200
2002 724,200
Thereafter 663,850
----------
$3,560,650
==========
One tenant contributed 100% of rental income for the year ended December 31,
1998 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund V and Fund VI entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of Fund V and
Fund VI. In consideration for supervising the management of Hartford, Fund V
and Fund VI 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 initial 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.
Hartford incurred management and leasing fees of $27,719, $30,189, and
$28,700 for the years ended December 31, 1998, 1997, and 1996, respectively,
which were paid to Wells Management
F-48
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Cost Carried at December 31, 1998
---------------------- Costs of ----------------------------
Buildings and Capitalized Buildings 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 1,972,492 1,094,691 1,963,257
MARATHON BUILDING (c) None 314,591 8,367,904 0 314,591 8,367,904
STOCKBRIDGE VILLAGE III (d) None 1,015,674 0 1,994,828 1,062,720 1,947,782
STOCKBRIDGE VILLAGE I EXPANSION (e) None 712,234 0 2,405,136 749,727 2,367,643
880 PROPERTY (f) None 1,325,242 0 5,698,385 1,325,242 5,657,122
BELLSOUTH PROPERTY (g) None 1,244,256 0 7,425,154 1,301,890 7,367,520
TANGLEWOOD COMMONS (h) None 3,020,040 0 5,680,422 3,159,928 5,522,668
CHEROKEE COMMONS (i) None 1,142,663 6,462,837 2,833,007 1,219,704 9,218,803
----------- ----------- ----------- ----------- -----------
Total $10,397,961 $21,606,315 $28,036,291 $10,756,535 $49,215,140
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1998
---------------------------- Life on Which
Construction Accumulated Date of Date Depreciation
Description in Progress Total Depreciation Construction Acquired Is Computed (j)
- ------------------------- ----------- ----------- ------------ ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
HARTFORD BUILDING (a) $ 0 $ 7,330,483 $1,252,760 1981 12/29/93 20 to 25 years
STOCKBRIDGE VILLAGE II (b) 9,763 3,067,711 325,968 1994 11/12/94 20 to 25 years
MARATHON BUILDING (c) 0 8,682,495 1,356,199 1991 09/16/94 20 to 25 years
STOCKBRIDGE VILLAGE III (d) 0 3,010,502 209,594 1995 04/07/94 20 to 25 years
STOCKBRIDGE VILLAGE I EXPANSION (e) 0 3,117,370 306,613 1996 06/07/95 20 to 25 years
880 PROPERTY (f) 41,263 7,023,627 884,062 1996 01/31/90 20 to 25 years
BELLSOUTH PROPERTY (g) 0 8,669,410 1,178,399 1996 04/25/95 20 to 25 years
TANGLEWOOD COMMONS (h) 17,866 8,700,462 435,466 1997 05/31/95 20 to 25 years
CHEROKEE COMMONS (i) 0 10,438,507 2,717,803 1986 06/09/87 20 to 25 years
------- ----------- ----------
Total $68,892 $60,040,567 $8,666,864
======= =========== ==========
</TABLE>
(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,
1998.
(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, 1998.
(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, 1998.
(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 44% interest in Fund VI and VII Associates at December
31, 1998.
(e) Stockbridge Village I Expansion is a retail shopping center located in
Stockbridge, Georgia. It is owned by Fund VI and VII Associates. The
Partnership owned a 44% interest in Fund VI and VII Associates at December
31, 1998.
(f) The 880 Property is an office-retail shopping center located 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, 1998.
(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 34% interest in Fund VI, VII, and VIII
Associates at December 31, 1998.
(h) Tanglewood Commons is a retail shopping center located in Clemmons, Forsyth
County, North Carolina. It is owned by the Fund VI, VII, and VIII
Associates. The Partnership owned a 34% interest in Fund VI, VII, and VIII
Associates at December 31, 1998.
(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, 1998.
(j) Depreciation lives used for buildings were 40 years through September 1995,
changed to 25 years thereafter. Depreciation lives used for land
improvements are 20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND VI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
Accumulated
Cost Depreciation
----------- ------------
BALANCE AT DECEMBER 31, 1996 $57,518,842 $3,936,743
1997 additions 2,236,092 2,339,142
1997 deductions (47,840) (15,208)
----------- ----------
BALANCE AT DECEMBER 31, 1997 59,707,094 6,260,677
1998 additions 333,473 2,406,187
----------- ----------
BALANCE AT DECEMBER 31, 1998 $60,040,567 $8,666,864
=========== ==========
S-2
<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.
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*3(a) Certificate of Limited Partnership of Wells Real Estate N/A
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 Wells Real Estate N/A
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 Real Estate Fund VI, N/A
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 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(c) Custodial Agency Agreement dated March 25, 1993, between N/A
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 Venture Agreement N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(e) Sale and Purchase Agreement dated November 17, 1993, N/A
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 Company December 29, N/A
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 Agreement dated N/A
April 1, 1994, 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, 1994, File No. 0-23656)
*10(h) First Amendment to Joint Venture Agreement of Fund V and N/A
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 dated March 29, 1994, N/A
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 September 9, 1994, N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(k) Joint Venture Agreement of Fund V, Fund VI and Fund VII N/A
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 of Property dated N/A
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 Agreement for the Purchase N/A
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, 1991, between N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(o) Limited Guaranty of Lease dated January 1, 1993, by J. N/A
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 of Lease dated N/A
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 dated August 15, N/A
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 dated September 6, N/A
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 of Real Property N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(t) Land and Building Lease Agreement dated August 22, 1994, N/A
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 and Fund VII N/A
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 December 19, 1994, N/A
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, III, VI and VII N/A
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, Fund VII and Fund N/A
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 of Real Property N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(z) Agreement to Lease dated February 15, 1995, between N/A
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, 1995, between Fund N/A
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 April 24, 1995, between N/A
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 15, 1995, between N/A
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 Agreement of Fund VI N/A
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 Agreement of Fund VI, N/A
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)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(ff) Real Estate Purchase Agreement dated April 13, 1995 N/A
(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, 1995, between N/A
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, 1995, between Fund N/A
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, II, II-OW, VI and VII N/A
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 with The Kroger Co. N/A
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)
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