<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
---------------- ---------------------------
Commission file number 0-25606
----------------------------------------------------
Wells Real Estate Fund VII, L.P.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2022629
- ----------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------
--------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
- -
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund VII, L.P.
--------------------------------
INDEX
-----
Page No.
--------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996
and December 31,1995 .................................... 3
Statements of Income for the Three Months and Six Months
Ended June 30, 1996 and 1995............................. 4
Statements of Partners' Capital for the Year Ended
December 31, 1995 and the Six Months Ended
June 30, 1996............................................ 5
Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995...................... 6
Condensed Notes to Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................. 18
PART II. OTHER INFORMATION.................................................. 27
2
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
NON-OPERATING REAL ESTATE ASSETS:
Land $ 0 $ 534,262
Construction in progress 0 738,094
----------- -----------
Total real estate assets 0 1,272,356
INVESTMENT IN JOINT VENTURES (NOTE 3) 19,750,441 18,110,964
DUE FROM AFFILIATES 218,214 156,825
CASH AND CASH EQUIVALENTS 425,394 1,114,066
DEFERRED PROJECT COSTS 19,079 126,613
ORGANIZATIONAL COSTS,
less accumulated amortization of $14,062
in 1996 and $10,938 in 1995 17,188 20,312
PREPAID EXPENSES AND OTHER ASSETS 13,119 29,547
----------- -----------
Total Assets $20,443,435 $20,830,683
=========== ===========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
LIABILITIES:
<S> <C> <C>
Accounts payable and accrued expenses $ 0 $ 178,413
Partnership distributions payable 193,158 191,558
Due to affiliates 2,057 0
----------- -----------
Total liabilities $ 195,215 $ 369,971
----------- -----------
PARTNERS' CAPITAL:
General Partners 0 0
Limited Partners
Class A - 1,775,585 units 15,208,205 14,457,205
Class B - 642,432 units 5,040,015 6,003,507
----------- -----------
Total Partners' capital 20,248,220 20,460,712
----------- -----------
Total liabilities and partners' capital $20,443,435 $20,830,683
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30,1996 June 30,1995 June 30,1996 June 30, 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
- ----------
Equity in income of joint ventures
(Note 2) $ 52,107 $ 75,968 $ 166,574 $ 146,766
Interest Income 12,825 190,768 56,234 392,884
--------- --------- --------- ---------
64,932 266,736 222,808 539,650
--------- -------- --------- --------
Expenses:
- ---------
Legal and accounting 17,414 4,595 23,470 12,944
Partnership administration 16,822 34,154 33,710 64,241
Amortization of organization costs 1,563 1,563 3,125 3,125
--------- -------- --------- --------
35,799 40,312 60,305 80,310
--------- -------- --------- --------
Net income $ 29,133 $ 226,424 $ 162,503 $ 459,340
========= ========= ========= =========
Net loss allocated to
General Partners $ 0 $ (46) $ 0 $ (280)
========= ========= ========= =========
Net income allocated to Class A
Limited Partners $ 227,333 $ 251,207 $ 447,503 $ 507,501
========= ========= ========= =========
Net loss allocated to Class A
Limited Partners $(198,200) $ (24,738) $(285,000) $ (47,881)
========= ========= ========= =========
Net income per weighted average
Class A Limited Partner Unit $ 0.12 $ 0.15 $ 0.25 $ 0.30
========= ========= ========= =========
Net loss per weighted average
Class B Limited Partner Unit $ (0.32) $ (0.03) $ (0.44) $ (0.07)
========= ========= ========= =========
Cash distribution per weighted
average Class A Limited
Partner Unit $ 0.10 $ 0.14 $ 0.21 $ 0.29
========= ======== ========= =========
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE SIX MONTHS ENDED, JUNE 30, 1996
<TABLE>
<CAPTION>
Limited Partners
-----------------------------------------------------------
Class A Class B Total
----------------------- ----------------------- General Partners'
Original Units Amounts Units Amounts Partners Capital
--------- --------- ------------ ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 $ 100 1,631,009 $13,893,443 706,487 $5,984,727 $ 280 19,878,550
Net income (loss) 0 0 950,826 0 (146,503) (280) 804,043
Limited partner contributions 0 47,800 478,000 32,721 327,212 0 805,212
Partnership distributions 0 0 (906,211) 0 0 0 (906,211)
Sales Commissions 0 0 (47,800) 0 (32,721) 0 (80,521)
Other offering expenses 0 0 (23,900) 0 (16,361) 0 (40,261)
Class A conversion elections 0 13,518 112,847 (13,518) (112,847) 0 0
Return of capital (100) 0 0 0 0 0 (100)
----- --------- ----------- ------- ---------- ----- -----------
BALANCE, December 31, 1995 $ 0 1,692,327 $14,457,205 725,690 $6,003,507 $ 0 $20,460,712
Net Income (loss) 0 0 447,503 0 (285,000) 0 162,503
Partnership distributions 0 0 (374,995) 0 0 0 (374,995)
Class A conversion elections 0 83,258 678,492 (83,258) (678,492) 0 0
Return of capital 0 0 0 0 0 0 0
----- --------- ----------- ------- ---------- ----- -----------
BALANCE, June 30, 1996 $ 0 1,775,585 $15,208,205 642,432 $5,040,015 $ 0 $20,248,220
===== ========= =========== ======= ========== ===== ===========
</TABLE>
5
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-----------------
June 30, 1996 June 30, 1995
----------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 162,503 $ 459,340
Adjustments to reconcile net earnings to
net cash (used in) provided by operating
activities:
Equity in income of joint ventures (166,574) (146,766)
Distributions received from joint
ventures 322,878 168,389
Distributions to partners from
accumulated earnings (373,395) (423,270)
Amortization of organization costs 3,125 3,125
Changes in assets and liabilities:
Prepaids and other assets 8,101 (27,229)
Due to affiliates (1,942) 5,170
Accounts payable (174,413) 388
---------- -----------
Total adjustments (382,220) (420,193)
---------- -----------
Net cash (used in) provided by
operating activities (219,717) 39,147
---------- -----------
Cash flows from investing activities:
Investment in joint ventures (468,955) (6,627,409)
Deferred project costs paid 0 (8,392)
Investment in real estate 0 (512,001)
---------- -----------
Net cash used in investing activities (468,955) (7,147,802)
Cash flows from financing activities:
Limited partners contributions 0 805,215
Sales commissions paid 0 (203,946)
Offering costs paid 0 (40,261)
Return of original partner investment 0 (100)
---------- -----------
Net cash provided by financing activities 0 560,908
---------- -----------
Net decrease in cash and cash equivalents (688,672) 6,547,747
Cash and cash equivalents, beginning of year 1,114,066 15,555,869
---------- -----------
Cash and cash equivalents, end of period $ 425,394 $ 9,008,122
========== ===========
Supplemental disclosure of noncash
investing activities:
Deferred project costs applied to real
estate and joint venture property $ 107,533 $ 19,790
---------- -----------
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
June 30, 1996
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-------
Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia
public limited partnership, having Leo F. Wells, III and Wells
Partners, L.P., a Georgia limited partnership, as General Partners.
The Partnership was formed on December 1, 1992, for the purpose of
acquiring, developing, owning, operating, improving, leasing, and
otherwise managing for investment purposes income-producing commercial
properties.
On April 6, 1994, the Partnership commenced an offering of up to
$25,000,000 of Class A or Class B limited partnership units ($10.00
per unit) pursuant to a Registration Statement on Form S-11 filed
under the Securities Act of 1933. The Partnership commenced active
operations when it received and accepted subscriptions for a minimum
of 125,000 units on April 26, 1994. The Partnership terminated its
offering on January 5, 1995, and received gross proceeds of
$24,180,174 representing subscriptions from 1910 Limited Partners.
As of June 30, 1996, the Partnership owned interests in the following
properties: (i) a three-story office building located in Appleton,
Wisconsin; (ii) two retail buildings located in Stockbridge, Georgia;
(iii) a retail/office building in Stockbridge, Georgia; (iv) a retail
center expansion in Stockbridge, Georgia; (v) an office/retail center
located in Roswell, Georgia; (vi) a retail center located in Cherokee
County, Georgia; (vii) an office building located in Gainesville,
Florida; (viii) a four-story office building located in Jacksonville,
Florida; and (ix) a retail center under construction in Winston-Salem,
North Carolina. All of the foregoing properties were acquired on an
all cash basis.
b) 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.
7
<PAGE>
(c) Insurance
---------
Wells Management Company, Inc., an affiliate of the General Partners,
carries comprehensive liability and extended coverage with respect to
all the properties owned directly or indirectly by the Partnership.
In the opinion of management of the registrant, the properties are
adequately insured.
(d) 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.
(e) Basis of Presentation
----------------------
The consolidated financial statements of Wells Real Estate Fund VII,
L.P. (the "Partnership") have been prepared in accordance with
instructions to Form 10-Q and do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. These quarterly statements have not
been examined by independent accountants, but in the opinion of the
General Partners, the statements for the unaudited interim periods
presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for
such periods. For further information, refer to the financial
statements and footnotes included in the Partnership's Form 10-K for
the year ended December 31, 1995.
8
<PAGE>
(f) Partnership Distributions
-------------------------
Cash available for distribution, as defined by the Partnership
Agreement, is distributed to the Limited Partners on a quarterly
basis. In accordance with the Partnership Agreement, distributions
first are paid to Limited Partners holding Class A Units until they
have received a 10% return on their Net 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. Thereafter, the Limited Partners holding Class A Units
will received 90% of any remaining cash available for distribution,
and the General Partners will receive 10%. No distributions will be
made to the Limited Partners holding Class B Units.
(g) Income Taxes
------------
The Partnership has not requested a ruling from the Internal Revenue
Service to the effect that it will be treated as a partnership and not
an association taxable as a corporation for Federal income tax
purposes. The Partnership received an opinion of counsel as to its
tax status, but such opinion is not binding upon the Internal Revenue
Service.
(h) Statement of Cash Flows
-----------------------
For the purpose of the statement of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an
original maturity of three months or less of be cash equivalents.
Cash equivalents include cash and short-term investments.
(2) Short-Term Investments
----------------------
At June 30, 1996, short-term investments are stated at cost which
approximates fair market value and consist primarily of money-market
accounts.
(3) Investments in Joint Ventures
-----------------------------
The Partnership owns interests in nine properties through its ownership in
joint ventures of which three are office buildings and six are retail
centers. 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 June 30, 1996, the properties that are in operation had an occupancy
rate of 81.8%. The office building in Gainesville, Florida was completed
and occupied, at a rate of 93.7%, in mid-December, 1995. The office
building in Jacksonville, Florida was completed and occupied at the rate of
92% in May, 1996. A retail shopping center in Clemmons, North Carolina is
still under construction.
9
<PAGE>
The following describes the properties in which the Partnership owns an
interest as of June 30, 1996:
Fund V-VI-VII Joint Venture
- ---------------------------
On September 8, 1994, the Partnership, Wells Real Estate Fund V, L.P. ("Wells
Fund V") and Wells Real Estate Fund VI, L.P. ("Wells Fund VI"), both of which
are 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 V and Wells Fund VI are substantially
identical to those of the Partnership. The Partnership owns an interest in the
following property through the Fund V-VI-VII Joint Venture:
The Marathon Building
- ---------------------
On September 16, 1994, Fund V-VI-VII Joint Venture purchased a three-story
office building for a purchase price of $8,250,000 plus acquisition costs of
$29,421. The building contains approximately 75,000 rentable square feet,
located on approximately 6.2 acres of land in Appleton, Wisconsin ("the Marathon
Building"). 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 VI totaling $3,470,958, $1,337,505, and
$3,470,958, respectively, for total contributions to Fund V-VI-VII Joint Venture
of $8,279,421 including acquisition costs. The Partnership owns an
approximately 42% equity interest in the Fund V-VI-VII Joint Venture.
The entire Marathon Building is leased to Jaakko Poyry Fluor Daniel for a period
of twelve years, three and one-half months, with options to renew the lease for
two additional five-year periods at market rate. The annual base rent is
$910,000. The current lease expires on December 31, 2006. The lease agreement
is a net lease in that the tenant is responsible for the operational expenses
including real estate taxes.
The occupancy rate at the Marathon Building was 100% for 1996, 1995, and the
last three and one-half months of 1994. The average annual rental per square
foot in the Marathon Building was $12.13 for 1996, 1995 and 1994, the first year
of ownership.
Fund VI-Fund VII Joint Venture
- ------------------------------
On December 9, 1994, the Partnership and Wells Fund VI entered into a Joint
Venture Agreement known as Fund VI and Fund VII Associates ("Fund VI-Fund VII
Joint Venture"). As of June 30, 1996, the Partnership's equity interest in the
Fund VI-Fund VII Joint Venture was approximately 57% and Wells Fund VI equity
interest in the Fund VI-Fund VII Joint Venture was approximately 43%. The
Partnership owns interests in the following two properties through the Fund VI-
Fund VII Joint Venture:
10
<PAGE>
Stockbridge Village III
- -----------------------
In April 1994, Wells Fund VI purchased 3.27 acres of real property located on
the north side of George 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, Wells Fund VI
contributed the property as a capital contribution to the Fund VI - Fund VII
Joint Venture.
Kenny Rogers Roasters is a 3,200 square foot restaurant building which was
completed in March 1995, at a cost of approximately $400,000 excluding land.
The building is leased to Atlanta Foodquest LLC for nine years and eleven months
commencing March 1, 1995. The initial base rent payable is $82,320. In the
fifth year, the annual base rent payable increases to $87,600.
Construction began in January, 1995, on a second outparcel building containing
approximately 15,000 square feet at a cost of approximately $1,500,000 excluding
land. Construction was substantially completed in October, 1995. In October
1995, Damon's Clubhouse restaurant occupied 6,700 square feet. The term of the
lease is for nine years and eleven months commencing October, 1995. The initial
annual base rent is $102,375 through March, 2001 and $115,375 thereafter.
As of June 30, 1996, the Partnership had contributed $1,859,839 and Wells Fund
VI contributed $1,017,097 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 Property was 87% in 1996 and
71% in 1995. The average effective annual rental per square foot at the
Stockbridge Village III Property was $13.10 in 1996 and $4.85 for the partial
year of occupancy in 1995.
Stockbridge Village I Expansion
- -------------------------------
On June 7, 1995, the Fund VI - Fund VII Joint Venture purchased 3.38 acres of
real property located in Clayton County, Georgia for a total price of
approximately $718,000. The Stockbridge Village I Expansion consists of a
multi-tenant shopping center containing approximately 29,000 square feet. The
majority of construction was completed in April, 1996. A lease has been signed
with Cici's Pizza for a 4,000 square foot restaurant. The term of the 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. Negotiations
are being conducted to lease the remaining space.
As of June 30, 1996, the Partnership contributed a total of $1,450,000 and Wells
Fund VI contributed a total of $1,450,000 for total contributions of
approximately $2,900,000 for the purpose of funding the development and
construction on the Stockbridge Village I Expansion.
11
<PAGE>
As of June 30, 1996, the Partnership contributed $3,309,839, and Wells Fund VI
contributed $2,467,907, including its cost to acquire land, to the Fund VI -
Fund VII Joint Venture for the acquisition and development of the Stockbridge
Village III Property and the Stockbridge Village I Expansion. As of June 30,
1996, the Partnership's equity interest in the Fund VI - VII Joint Venture was
approximately 57%, and Wells Fund VI's equity interest in the Fund VI - VII
Joint Venture was approximately 43%. It is anticipated that the Partnership
will contribute the remaining approximately $23,000 needed to complete
Stockbridge Village III, in which event it is estimated Wells Fund VI and the
Partnership's interest will remain at 43% and 57%, respectively. The
Partnership has reserved sufficient funds for this purpose.
Fund II, III, VI and VII Associates/Holcomb Bridge Road Project
- ---------------------------------------------------------------
On January 10, 1995, the Partnership, Fund II-Fund III Joint Venture, and Wells
Fund VI entered into a Joint Venture Agreement known as Fund II, III, VI and VII
Associates ("Fund II, III, VI and VII Joint Venture"). The Fund II-Fund III
Joint Venture is a joint venture between Wells Real Estate Fund III, 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, Wells Fund III and Wells Fund VI 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 and 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 Property") including land improvements.
Development is substantially complete on two buildings containing a total of
approximately 49,500 square feet. As of June 30, 1996, leases have been signed
with Bertucci's Restaurant Corporation for 5,935 square feet, Air Touch Cellular
for 3,046 square feet, Townsend Tax for 1,389 square feet and Coldwell Banker
for 4,801 square feet. Three tenants occupied the 880 Holcomb Bridge property
as of June 30, 1996 for an occupancy rate of 21%. The average effective annual
rental was $0.81 per square foot for the second quarter of 1996.
As of June 30, 1996, Fund II-Fund III Joint Venture contributed $1,729,116 in
land and improvements for an approximate 30.7% equity interest in the Fund II,
III, VI and VII Joint Venture, Wells Fund VI contributed $1,112,691 to the joint
venture for an approximate 20.6% equity interest, and the Partnership
contributed $2,630,000 to the joint venture for an approximate 48.7% equity
interest. The total costs to develop the Holcomb Bridge Road Property is
currently estimated to be approximately $4,000,000 excluding land. It is
anticipated that of the remaining cost of approximately $257,000, $131,300 will
be contributed by Wells Fund VI and $125,700 by the Partnership for an
anticipated equity interest of 48% by the Partnership, 30% by the Fund II-Fund
III Joint Venture and 22% by Wells Fund VI. The Partnership has reserved
sufficient funds for this purpose.
12
<PAGE>
Fund VII - Fund VIII Joint Venture
- ----------------------------------
On February 10, 1995, the Partnership and Wells Real Estate Fund VIII, L.P.
("Wells Fund VIII"), a Georgia public limited partnership affiliated with the
Partnership through common general partners, entered into a Joint Venture
Agreement known as Fund VII and Fund VIII Associates (the "Fund VII - Fund VIII
Joint Venture"). The investment objectives of Wells Fund VIII are substantially
identical to those of the Partnership. The Partnership holds an approximate 38%
equity interest in the Fund VII - Fund VIII Joint Venture, which owns and
operates the two properties described below. The total cost to complete both
properties is anticipated to be approximately $6,500,000. As of June 30, 1996,
the Partnership had contributed $2,448,924 and Wells Fund VIII had contributed
$4,002,732 for total contributions of $6,451,656 to the Fund VII - Fund VIII
Joint Venture for the acquisition and development of the two properties.
As of June 30, 1996, the Partnership's equity interest in the Fund VII - Fund
VIII Joint Venture was approximately 38%, and Wells Fund VIII's equity interest
in the Fund VII - Fund VIII Joint Venture was approximately 62%. It is
currently anticipated that the remaining costs of approximately $48,344 to
complete the final tenant buildout of both projects will be contributed by Wells
Fund VIII, in which event, upon completion, the Partnership will own
approximately 37.7% equity interest in the Fund VII - Fund VIII Joint Venture.
The Hannover Property
- ---------------------
On April 1, 1996, the Partnership contributed 1.01 acres of land located in
Clayton County, Georgia, valued at $512,000 and a 12,000 square foot, single
story combination retail/office building to the Fund VII - Fund VIII Joint
Venture. As of June 30, 1996, the Partnership had funded approximately $900,000
for the development of the Hannover property, in addition to the cost of the
land, and Wells Fund VIII had contributed $150,000 to the joint venture for the
development of the property. The total cost to develop this property, including
land, is estimated to be approximately $1,600,000, and Wells Fund VIII has
reserved the remaining approximately $38,000 to complete the development.
A nine year, eleven month lease has been signed with Moovies, Inc., a video sale
and rental store, to occupy 6,020 square feet. The annual base rent for the
initial term of 36 months is $93,310.00 payable in equal monthly installments of
$7,775.83, for the second term of 36 months, $102,340.00, payable in monthly
installments of $8,528.33, for the third term of 36 months, $111,370.00 payable
in monthly installments of $9,280.83, and the final term of eleven months,
$110,367.00 payable in monthly installments of $10,033.33. The lease provides
for two five year extensions at market rate. The tenant, which provided its own
build-out from the existing shell, moved into the building and opened for
business June 22, 1996. The lease will expire in 2006.
13
<PAGE>
Gainesville Property
- ---------------------
The Partnership made an initial contribution to the Fund VII - Fund VIII Joint
Venture of $677,534, which constituted the total purchase price and all other
acquisition and development costs expended by the Fund VII - Fund VIII Joint
Venture for the purchase of a 5.0 acre parcel of land in Gainesville, Alachua
County, Florida. An agreement was signed with ADEVCO Corporation to supervise,
manage and coordinate the planning, design, construction and completion of a
62,975 square foot office building containing 61,468 rentable square feet.
Integra Construction, Inc. acted as the general contractor, and Smallwood,
Reynolds, Stewart, Stewart and Associates, Inc. as the architect. Construction
was completed in December, 1995. It is anticipated that the total cost of the
building will be approximately $4,900,000 after the remaining unoccupied tenant
space is completed. The occupancy rate, as of June 30, 1996, was 93.6%.
A 9 year, 11 month lease to occupy 57,457 square feet has been signed with CH2M
Hill, Engineers, Planners, Economists, Scientists, with an option to extend for
an additional five year period. The annual base rent during the initial term is
$530,313 payable in equal monthly installments of $44,193. The annual rent for
the extended term will be at market rate. Assuming no options or termination
rights, the lease with CH2M Hill will expire in the year 2005. As of June 30,
1996, the Partnership had contributed $1,036,923 and Wells Fund VIII had
contributed $3,852,732 to the Fund VII - Fund VIII Joint Venture toward the
completion of this project.
Fund VI - VII - VIII Joint Venture
- ----------------------------------
On April 17, 1995, the Partnership, Wells Fund VI and Wells Fund VIII entered
into a Joint Venture Agreement known as the Fund VI, Fund VII and Fund VIII
Associates (the "Fund VI, VII, VIII Joint Venture"). The investment objectives
of Wells Fund VI and Wells Fund VIII are substantially identical to those of the
Partnership. As of June 30, 1996, the Partnership had contributed approximately
$6,432,312 for an approximately 43% equity interest in the Fund VI, VII, VIII
Joint Venture, which is developing an office building in Jacksonville, Florida
and a multi-tenant retail center in Clemmons, NC. As of June 30, 1996, Wells
Fund VI contributed $6,567,688 for an equity interest in the Fund VI - VII -
VIII Joint Venture of approximately 44%, and Wells Fund VIII had contributed
approximately $2,000,000 for an equity interest in the Fund VI - VII - VIII
Joint Venture of approximately 13%. The total cost to complete both properties
is anticipated to be approximately $17,700,000. Although the ultimate
percentages of equity interest in the Fund VI - VII - VIII Joint Venture have
not yet been finally determined, it is anticipated that Wells Fund VIII will
contribute the remaining cost of approximately $2,700,000 needed to complete
construction of both projects, in which event the ultimate equity interests in
the Fund VI - VII - VIII Joint Venture of the Partnership, Wells Fund VI and
Wells Fund VIII would be approximately 36%, 37% and 27%, respectively. The
Partnership owns interest in the following two properties through the Fund VI -
VII - VIII Joint Venture:
14
<PAGE>
BellSouth Property
- -------------------
On April 25, 1995, the Fund VI - VII - VIII Joint Venture purchased a 5.55 acre
parcel of land in Jacksonville, Florida for a total of $1,245,059 including
closing costs. The land purchase and 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 VI, and $2,000,000 by Wells Fund VIII.
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.
The BellSouth lease is for a term of nine years and eleven months with an option
to extend for an additional five-year period at market rate. The annual base
rent during the initial term is $1,048,061 during the first five years and
$1,150,878 for the balance of the initial lease term. The American Express
lease is for a term of five years at an annual base rent of $369,851. BellSouth
and American Express are required to pay additional rent equal to their share of
operating expenses during their respective lease terms.
15
<PAGE>
Tanglewood Commons Shopping Center
- ----------------------------------
On May 31, 1995, the Fund VI - VII - VIII Joint Venture purchase a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina. As
of June 30, 1996, Wells Fund VI had contributed $3,067,688, and the Partnership
had contributed $2,932,312 to the development of this project. The Wells Fund
VIII has not yet contributed.
The Fund VI - VII - VIII Joint Venture will develop and construct one large
strip shopping center building containing approximately 81,000 gross square feet
on a 12.48 acre tract. The remaining 2.2 acre portion of the property consists
of four outparcels which have been graded and will be held for future
development.
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 are anticipated to total approximately $8,700,000. An agreement
was signed with Norcom Development, Inc. to supervise, manage and coordinate the
planning, design and construction of the property. Shook Design Group, Inc. has
been signed as the architect and John S. Clark and Company as the general
contractor. Construction of the project began in March, 1996, and is scheduled
to be substantially completed in the first quarter of 1997.
Harris Teeter, Inc., a regional supermarket chain, executed a lease for a
minimum of 45,000 square feet with an initial term of 20 years with extension
options of four successive five year periods with the same terms as the initial
lease. The annual base rent during the initial term is $448,250, payable in
equal monthly installments of $40,688. In addition, Harris Teeter has agreed to
pay percentage rents equal to one percent of the amount by which Harris Teeter's
gross sales exceed the sum of $35,000,000 for any lease year.
Fund I, II, II - OW, VI, VII Associates
- ---------------------------------------
On August 1, 1995, the Partnership, Wells Real Estate Fund I, a Georgia public
limited partnership ("Wells Fund I"), the Fund II-Fund II-OW Joint Venture and
Wells Fund VI entered into a Joint Venture Agreement known as Fund I, II, II-OW,
VI and VII Associates ("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 VI are substantially identical to those
of the Partnership.
16
<PAGE>
The Cherokee Property
- ---------------------
The Cherokee Property consists of a retail shopping center known as the
"Cherokee Commons Shopping Center" located in metropolitan Atlanta, Cherokee
County, Georgia (the "Cherokee Property"). The Cherokee Property has been
expanded to consist of approximately 103,755 net leaseable square feet. The
Cherokee Property was initially developed through a joint venture between Wells
Fund I and the Fund II-Fund II-OW Joint Venture, which contributed the Cherokee
Property 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 June 30, 1996, Wells Fund I had contributed $2,139,000, the Fund II-Fund
II-OW Joint Venture had contributed property with a book value of $4,860,100,
Wells Fund VI had contributed cash in the amount of $953,798, and the
Partnership had contributed cash in the amount of $953,798 to the Fund I-II-II-
OW-VI-VII Joint Venture. As of June 30, 1996, the equity interest in the
Cherokee Property was Wells Fund I-24% , Fund II-Fund II-OW Joint Venture-54%,
Wells Fund VI-11%, and the Partnership-11%.
The Cherokee Property is anchored by a 67,115 square foot lease with Kroger
Food/Drug 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 June
30, 1996, the Cherokee Property was approximately 95% 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 provides for an annual rent of $392,915 which increased to
$589,102 on August 16, 1995 due to the expansion from 45,528 square feet to
67,115 square feet. The lease expires March 31, 2011 with Kroger entitled to
five successive renewals each for a term of five years at the same rental rate
as the original lease.
The occupancy rate at the Cherokee Property for the quarter ended June 30 was
95% in 1996 and 1995, 86% in 1994, 88% in 1993, and 87% in 1992.
The average effective annual rental per square foot at the Cherokee Property was
$8.61 for 1996, $7.50 for 1995, $5.33 for 1994, $6.47 for 1993, and $6.46 for
1992.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ---------------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
from any forward-looking statement made in this Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon 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
- -------
During its offering, which terminated on January 5, 1995, the Partnership raised
a total of $24,180,174 in capital through the sale of 2,418,017 units. No
additional units will be sold by the Partnership. From the original funds
raised, as of June 30, 1996, the Partnership has incurred $4,473,332 in sales
commissions, acquisition and advisory fees, and organizational and offering
costs; has invested $19,245,831 in properties; has reserved $241,802 as working
capital reserves; and is currently holding net offering proceeds of
approximately $216,664 which are available for investment in properties. As set
forth above, it is currently anticipated that approximately $23,000 will be
contributed to the Fund VI - Fund VII Joint Venture for the completion of the
Stockbridge Village I Expansion and that approximately $125,700 will be
contributed to the Fund II, III, VI and VII Joint Venture for the completion of
the Holcomb Bridge Road Project, leaving approximately $67,964 of the
Partnership's net offering proceeds available for investment in additional
properties.
As of June 30, 1996, the developed properties owned by the Partnership were 82%
occupied. Depreciation expenses increased in 1996 as compared to 1995 due to a
change in the estimated useful lives of buildings and improvements from 40 years
to 25 years, which was effective December 31, 1995. Gross revenues of the
Partnership were $222,808 and $539,650 for the six months ended June 30, 1996
and June 30, 1995, respectively. The revenues decreased for the six months
ended June 30, 1996 compared to 1995 due to the decrease in interest income from
$392,884 to $56,234 which is the result of investment of funds in properties.
Expenses of the Partnership decreased approximately $20,000 due primarily to the
decrease in administrative expenses.
Net income per weighted average Unit for Class A Limited Partners were $ 0.252
for the six months ended June 30, 1996. Net loss per weighted average Unit for
Class B and converted Class A Limited Partners was $ 0.444 for the six months
ended June 30, 1996.
18
<PAGE>
Cash distributions of $0.10 per weighted average Unit were made to Class A
Limited Partners for the quarter ended June 30, 1996. Cash distributions for
the second quarter of 1996 were made from investment income and do not represent
a return of capital.
Net decrease in cash and cash equivalents is primarily the result of investments
in real estate and joint ventures.
Property Operations
- -------------------
As of June 30, 1996, the Partnership owned interest in the following operational
properties:
The Marathon Building/Fund V-VI-VII Joint Venture
- --------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $242,754 $242,754 $485,508 $485,508
Expenses:
Depreciation 87,647 52,300 175,292 104,599
Management and leasing
expenses 9,710 9,710 19,420 19,420
Other operating expenses 5,152 2,902 8,850 13,909
-------- -------- -------- --------
102,509 64,912 203,562 137,928
-------- -------- -------- --------
Net income $140,245 $177,842 $281,946 $347,580
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership %
in Property 41.7% 41.7% 41.7% 41.7%
Cash Distributed to the
Partnership $ 88,946 $ 89,884 $178,498 $176,388
Net Income Allocated to the
Partnership $ 58,496 $ 74,178 $117,600 $144,976
</TABLE>
Net income decreased for the three and six month periods ended June 30, 1996 as
compared to 1995 due primarily to the increase in depreciation expenses which
resulted from the change, as of December 31, 1995, in estimated useful lives of
buildings and improvements.
19
<PAGE>
Stockbridge Village III/Fund VI - Fund VII Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Two Months
Three Months Ended Ended Ended
------------------------ ------------ ----------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $62,308 $14,156 $119,232 $14,156
Expenses:
Depreciation 21,301 8,625 41,678 8,625
Management and leasing
expenses 16,909 1,218 20,886 1,218
Other operating expenses 17,865 263 35,855 263
------- ------- -------- -------
56,075 10,106 98,419 10,106
------- ------- -------- -------
Net income $ 6,233 $ 4,050 $ 20,813 $ 4,050
======= ======= ======== =======
Occupied % 87% 19% 87% 19%
Partnership's Ownership %
in the Fund VI -
Fund VII Joint Venture 57.2% 47.7% 57.2% 47.7%
Cash Distribution to the
Partnership $12,627 $ 0 $ 29,002 $ 0
Net Income Allocated to
the Partnership $ 3,559 $ 1,932 $ 11,864 $ 1,932
</TABLE>
In April 1994, Wells Fund VI purchased 3.27 acres of land located in Clayton
County, Georgia. On December 9, 1994, Wells Fund VI contributed the Stockbridge
Village III property ("Stockbridge Village III") as a capital contribution to
the Fund VI - Fund VII Joint Venture.
Construction was completed on a 3,200 square foot restaurant in March, 1995.
This retail building is leased to Kenny Rogers Roasters, a restaurant, for a
term of nine years and eleven months. The initial base rent is $82,320 with an
increase in the fifth year to $87,600 annually.
The second multi-tenant retail building containing approximately 15,000 square
feet was completed in October, 1995. Damon's Clubhouse, a restaurant, occupied
approximately 6,732 square feet in October. The Damon's lease is for a term of
nine years and eleven months with initial base rent of $102,375 for five years
and increasing to $115,375 for the remainder of the lease. Four additional
tenants have occupied approximately 5,850 square feet as of June 30, 1996.
20
<PAGE>
Holcomb Bridge Road Project/Fund II, III, VI, VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -----------------
June 30, 1996 June 30, 1996
------------------- -----------------
<S> <C> <C>
Revenues:
Rental income $ 43,754 $ 53,175
Expenses:
Depreciation 77,822 83,942
Management and leasing expenses 5,029 6,080
Other operating expenses 28,894 47,733
-------- --------
111,745 137,755
-------- --------
Net Loss $(67,991) $(84,580)
======== ========
Occupied % 20.9% 20.9%
Partnership's Ownership % in the
Fund II, III, VI, VII Joint Venture 48.68% 48.68%
Cash Distribution to the Partnership $ 0 $ 0
Net Loss Allocated to the Partnership $(33,054) $(40,979)
</TABLE>
In January 1995, the Fund II - Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road to the Fund II, III, VI
and VII Joint Venture. Development is being completed on two buildings with a
total of approximately 49,500 square feet. As of June 30, 1996, three tenants
are occupying approximately 10,370 square feet of space in the retail building
under leases of varying lengths. Since the property was not developed as of
June 30, 1995, no comparative figures are available for the quarter.
As of June 30, 1996, Fund II-Fund III Joint Venture contributed $1,729,116 in
land and improvements for an approximate 32.7% equity interest, Wells Fund VI
contributed $982,691 for an approximate 19.5% equity interest, and the
Partnership contributed $2,500,000 for an approximate 47.8% equity interest.
The total costs to develop the Holcomb Bridge Road Project is currently
estimated to be approximately $4,000,000, excluding land. It is anticipated
that of the remaining cost of approximately $257,000, $131,300 will be
contributed by Wells Fund VI and $125,700 by the Partnership for an anticipated
equity interest of 48.7% by the Partnership, 30.7% by the Fund II-Fund III Joint
Venture and 20.6% by Wells Fund VI. The Partnership and Wells Fund VI have
reserved sufficient funds for this purpose.
21
<PAGE>
Gainesville Property/Fund VII-Fund VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -----------------
June 30, 1996 June 30, 1996
------------------- -----------------
<S> <C> <C>
Revenues:
Rental income $132,578 $269,120
Expenses:
Depreciation 54,588 108,925
Management and leasing expenses 15,698 29,096
Other operating expenses (2,055) (2,706)
-------- --------
68,231 135,315
-------- --------
Net income $ 64,347 $133,805
======== ========
Occupied % 93.6% 93.6%
Partnership's Ownership % in the
Fund VII - Fund VIII Joint Venture 38.0% 38.0%
Cash Distribution to the Partnership $ 45,563 $ 62,523
Net income allocated to the Partnership $ 24,422 $ 39,027
</TABLE>
In February, 1995, the Fund VII - Fund VIII Joint Venture acquired a 5.0 acre of
land located in Gainesville, Alachua County, Florida for the purpose of
constructing a 62,975 square foot (61,468 rentable square feet) office building.
A 9 year, 11 month lease to occupy 57,457 square feet was signed by CH2M Hill.
The annual base rent is $530,313 payable in equal monthly installments of
$44,193. The average effective annual rental rate at CH2M Hill property was
$9.22 per square foot. CH2M Hill occupied their portion of the building in mid-
December, 1995, and therefore no comparative financial information is available.
The Partnership's ownership percentage increased from 21%, as of March 31, 1996,
to 38%, as of June 30, 1996, due to the contribution of the Hannover property by
the Partnership to the Fund VII - Fund VIII Joint Venture in April 1996.
22
<PAGE>
<TABLE>
<CAPTION>
Cherokee Commons Shopping Center
--------------------------------
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $223,987 $147,679 $446,608 $293,517
Interest income 18 70 37 95
-------- -------- -------- --------
224,005 147,749 446,645 293,612
Expenses:
Depreciation 107,461 45,717 214,644 91,244
Management and leasing
expenses 13,276 7,401 25,910 14,469
Other operating expenses 46,632 36,597 95,504 81,820
-------- -------- -------- --------
167,369 89,715 336,058 187,533
-------- -------- -------- --------
Net income $ 56,636 $ 58,034 $110,587 $106,079
======== ======== ======== ========
Occupied % 95% 95% 95% 95%
Partnership's Ownership % 11% 0% 11% 0%
Cash distribution to the
Partnership $ 18,376 $ 0 $ 34,863 $ 0
Net income allocated to the
Partnership $ 6,065 $ 0 $ 11,842 $ 0
</TABLE>
Rental income increased in 1996 over 1995 due to the Kroger expansion which was
completed in November 1994; however, the additional rent was billed
retroactively and paid in September, 1995. The increase in depreciation
expenses for 1996 as compared to 1995 are the result of the change in the
estimated useful lives of the buildings and improvements as previously discussed
under the "General" section of "Results of Operations and Changes in Financial
Condition". Management and leasing expenses increased in 1996 as compared to
1995 due to the increased revenue. Other operating expenses increased in 1996
due to increased repairs and maintenance. Net income of the property remained
relatively stable due to the increase in revenue which was offset by the
increase in expenses.
In 1994, a lease amendment was entered into with Kroger providing for an
expansion of its existing store at the Cherokee Commons Shopping Center from
45,528 square feet to 66,918 square feet. In November, 1994, construction was
completed on the Kroger expansion and remodeling of the center. The total cost
for both the Kroger expansion and remodeling of the Center was $2,807,367. The
costs of this expansion were funded in the following amounts: Wells Fund I
$94,679 and the Fund II-Fund II-OW Joint Venture $805,092, Wells Fund VI
$953,798, and the Partnership $953,798 as of June 30, 1996. Wells Fund VI and
the Partnership did not make their respective capital contributions until
August, 1995.
23
<PAGE>
Stockbridge Village I Expansion/Fund VI - Fund VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------
June 30, 1996
-------------
<S> <C>
Revenues:
Rental Income $ 1,009
Expenses:
Depreciation 12,738
Management & leasing expenses 155
Other operating expenses 6,676
--------
19,569
--------
Net loss $(18,560)
========
Occupied % 19%
Partnership's Ownership % in the Fund VI -
Fund VII Joint Venture 57.2%
Cash Distribution to Partnership $ 0
Net Loss Allocated to the Partnership $(10,599)
</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,
and Cici's Pizza has occupied a 4,000 square feet restaurant. The term of the
lease is for nine years and eleven months commencing April, 1996. The initial
base rent is $48,000. In the third year, annual base rent increases to $50,000,
in the sixth year to $52,000, and in the ninth year to $56,000. One additional
tenant is occupying 1,600 square feet at the property as of June 30, 1996.
Negotiations are being conducted to lease the remaining space.
24
<PAGE>
The Hannover Retail Center/Fund VII - Fund VIII Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------
June 30, 1996
-------------
<S> <C>
Revenues:
Rental Income $ 2,325
Expenses:
Depreciation 11,355
Other operating expenses 8,325
--------
19,680
--------
Net loss $(17,355)
========
Occupied % 50.17%
Partnership's Ownership % in the Fund VII -
Fund VIII Joint Venture 37.95%
Cash Distribution to Partnership $ 0
Net Loss Allocated to the
Partnership $ (6,587)
</TABLE>
On April 1, 1996, Fund VII - Fund VIII Joint Venture acquired a 1.01 acre tract
of land and a 12,000 square foot combination retail/office building known as the
Hannover Retail Center.
Moovies, Inc., a video sales and rental store, has signed a nine year, eleven
month lease to occupy 6,020 square feet. The tenant occupied the space and
opened for business on June 22, 1996, and therefore, no comparative financial
data is available.
25
<PAGE>
BellSouth Property/Fund VI - Fund VII - Fund VIII Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Two Months Ended
-----------------
June 30, 1996
-------------
<S> <C>
Revenues:
Rental income $146,740
Interest income 56,634
--------
203,374
--------
Expenses:
Depreciation 76,976
Management & leasing expenses 17,928
Other operating expenses 65,960
--------
160,864
--------
Net income $ 42,510
========
Occupied % 96%
Partnership's Ownership % in the Fund VI -
Fund VII - Fund VIII Joint Venture 42.8%
Cash Distribution to Partnership $ 52,890
Net Income Allocated to the
Partnership $ 18,209
</TABLE>
On April 25, 1995, the Fund VI - Fund VII - Fund 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 64,558 square feet and American
Express occupying approximately 22,607 square feet.
The initial term of the BellSouth lease is nine years and eleven months. The
annual base rent during the initial term is $1,048,061 for the first five years
and $1,150,878 for the balance of the initial lease term. The American Express
lease is for a term of five years at an annual base rent of $369,851. BellSouth
and American Express are required to pay additional rent equal to their share of
operating expenses during their respective lease terms.
During 1996, interest income was generated from construction dollars, not as yet
funded on construction, being invested in interest bearing accounts.
26
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports were filed on Form 8-K during the second quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND VII, L.P.
(Registrant)
Dated: August 13, 1996 By: /s/Leo F. Wells, III
--------------------
Leo F. Wells, III, as Individual General
Partner and as President, Sole Director
and Chief Financial Officer of Wells
Capital, Inc., the General Partner of
Wells Partners, L.P.
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 425,394
<SECURITIES> 19,750,441
<RECEIVABLES> 218,214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,198
<PP&E> 31,250
<DEPRECIATION> (14,062)
<TOTAL-ASSETS> 20,443,435
<CURRENT-LIABILITIES> 195,215
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,248,220
<TOTAL-LIABILITY-AND-EQUITY> 20,443,435
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
