<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, 1997 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 (I.R.S. Employer Identification Number)
of incorporation or organization)
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 I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1997
and December 31, 1996............................. 3
Statements of Income for the Three Months and
Six Months Ended June 30, 1997 and 1996........... 4
Statements of Partners' Capital for the Year Ended
December 31, 1996 and the Six Months Ended
June 30, 1997..................................... 5
Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996............... 6
Condensed Notes to Financial Statements............ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................ 8
PART II. OTHER INFORMATION.......................................... 19
2
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WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
Assets June 30, 1997 December 31, 1996
------ ------------- -----------------
Investment in joint ventures (Note 2) $19,269,838 $19,625,041
Due from affiliates 377,447 366,301
Cash and cash equivalents 348,315 291,778
Deferred project costs 9,002 9,002
Organizational costs,
less accumulated amortization of $20,312
in 1997 and $17,188 in 1996 10,938 14,062
Prepaid expenses and other assets 4,546 6,546
----------- -----------
Total assets $20,020,086 $20,312,730
=========== ===========
Liabilities And Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable $ 362,390 $ 296,706
----------- -----------
Total liabilities 362,390 296,706
----------- -----------
Partners' capital:
General Partners 0 0
Limited Partners
Class A - 1,859,447 units outstanding 15,978,408 15,698,900
Class B - 558,570 units outstanding 3,679,288 4,317,124
----------- -----------
Total partners' capital 19,657,696 20,016,024
----------- -----------
Total liabilities and partners' capital $20,020,086 $20,312,730
=========== ===========
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, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint
ventures (Note 2) $ 201,079 $ 52,107 $ 382,142 $ 166,574
Interest income 9,627 12,825 20,340 56,234
--------- --------- --------- ---------
210,706 64,932 402,482 222,808
Expenses:
Legal and accounting 5,947 17,414 16,541 23,470
Partnership administration 17,940 16,822 32,345 33,710
Amortization of organization
costs 1,563 1,563 3,125 3,125
--------- --------- --------- ---------
25,450 35,799 52,011 60,305
--------- --------- --------- ---------
Net income $ 185,256 $ 29,133 $ 350,471 $ 162,503
========= ========= ========= =========
Net income allocated to Class
A Limited Partners $ 393,903 $ 227,333 $ 756,947 $ 447,503
Net loss allocated to Class B
Limited Partners $(208,647) $(198,200) $(406,476) $(285,000)
Net income per Class A Limited
Partner Unit $ 0.21 $ 0.12 $ 0.41 $ 0.25
Net loss per Class B Limited
Partner Unit $ (0.38) $ (0.32) $ (0.72) $ (0.44)
Cash distribution per Class A
Limited Partner Unit $ 0.19 $ 0.10 $ 0.38 $ 0.21
</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, 1996 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------------
Class A Class B Total
-------------------------- ---------------------- General Partners'
Units Amounts Units Amounts Partners Capital
--------- ------------ ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1995 1,692,327 $14,457,205 725,690 $6,003,507 $ 0 $20,460,712
Net income (loss) 0 1,062,605 0 (609,829) 0 452,776
Partnership distributions 0 (897,464) 0 0 0 (897,464)
Class B conversion elections 134,503 1,076,554 (134,503) (1,076,554) 0 0
--------- ---------- --------- ---------- ----------- -----------
BALANCE,
December 31, 1996 1,826,830 $15,698,900 591,187 $4,317,124 $ 0 $20,016,024
Net income (loss) 0 756,947 0 (406,476) 0 350,471
Partnership distributions 0 (708,799) 0 0 0 (708,799)
Class B conversion elections 32,617 231,360 (32,617) (231,360) 0 0
--------- ---------- --------- ---------- ----------- -----------
BALANCE,
June 30, 1997 1,859,447 $15,978,408 558,570 $3,679,288 $ 0 $19,657,696
========= =========== ========= ========== =========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
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, 1997 June 30, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 350,471 $ 162,503
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (382,142) (166,574)
Amortization of organization costs 3,125 3,125
Changes in assets and liabilities:
Prepaids and other assets 2,000 8,101
Due to affiliates 0 (1,942)
Accounts payable 0 (174,413)
--------- ----------
Total adjustments (377,017) (331,703)
--------- ----------
Net cash used in operating
activities (26,546) (169,200)
--------- ----------
Cash flows from investing activities:
Investment in joint ventures 0 (468,955)
Distributions received from joint ventures 651,676 322,878
--------- ----------
Net cash provided by (used in)
investing activities 651,676 (146,077)
Cash flows from financing activities:
Distributions to partners from
accumulated earnings (643,116) (373,395)
--------- ----------
Net cash used in financing
activities (643,116) (373,395)
--------- ----------
Net decrease in cash and cash equivalents (17,986) (688,672)
Cash and cash equivalents, beginning of year 366,301 1,114,066
--------- ----------
Cash and cash equivalents, end of period $ 348,315 $ 425,394
========= ==========
Supplemental disclosure of noncash
investing activities:
Deferred project costs applied to real estate
and joint venture property $ 0 $ 107,533
========= ==========
</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, 1997
(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.
The Partnership owns interests in properties through ownership in the
following joint ventures: (i) Fund V, Fund VI, Fund VII Associates, a
joint venture between the Partnership, Wells Real Estate Fund V, L.P., and
Wells Real Estate Fund VI, L.P. ("Fund V-VI-VII Joint Venture"); (ii) Fund
VI and Fund VII Associates a joint venture between the Partnership and
Wells Real Estate Fund VI L.P. ("Fund VI-Fund VII Joint Venture");
(iii) Fund II, III, VI and VII Associates, a joint venture between the
Partnership, Wells Fund II-III Joint Venture, Wells Real Estate Fund VI,
L.P., and Wells Real Estate Fund VII, L.P. (the "Fund II-III-VI-VII Joint
Venture"); (iv) Fund VII and Fund VIII Associates, a joint venture between
the Partnership and Wells Real Estate Fund VIII, L.P. ("Fund VII-Fund VIII
Joint Venture"); (v) Fund VI, Fund VII and Fund VIII Associates, a joint
venture between the Partnership, Wells Real Estate Fund VI, 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, the Fund II and Fund II-OW Joint
Venture and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW, VI,
VII Joint Venture").
As of June 30, 1997, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
three-story office building located in Appleton, Wisconsin (the "Marathon
Building"); (ii) two retail buildings located in Stockbridge, Georgia
("Stockbridge Village III"), and a retail shopping center expansion in
7
<PAGE>
Stockbridge, Georgia ("Stockbridge Village I Expansion"); (iii) an
office/retail center located in Roswell, Georgia ("Holcomb Bridge Road");
(iv) a retail center located in Stockbridge, Georgia ("the Hannover
Center"); (v) a four-story office building located in Jacksonville, Florida
("BellSouth"); (vi) an office building located in Gainesville, Florida
("CH2M Hill"); (vii) a retail center in Winston-Salem, North Carolina
("Tanglewood Commons"); and (viii) a retail center located in Cherokee
County, Georgia ("Cherokee Commons").
(b) 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, 1996.
(2) 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.
For a description of the joint ventures and properties owned by the
Partnership, please refer to the Partnership's Form 10-K for the year ended
December 31, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes thereto.
This Report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially 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
8
<PAGE>
to fund tenant improvements or other capital expenditures out of operating
cash flow.
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of June 30, 1997, the developed properties owned by the Partnership were
85% occupied. Gross revenues of the Partnership were $402,482 and $222,808
for the six months ended June 30, 1997 and June 30, 1996, respectively.
The revenues increased in 1997 compared to 1996 due to the increase in
income from the joint ventures. Expenses of the Partnership decreased
primarily due to a decrease in legal and accounting fees.
Net income per weighted average Unit for Class A Limited Partners was $0.41
for the six months ended June 30, 1997. Net loss per weighted average Unit
for Class B and converted Class A Limited Partners was $0.72 for the six
months ended June 30, 1997.
Cash distributions of $0.19 per weighted average Unit were made to Class A
Limited Partners for the three months ended June 30, 1997. The Partnership
anticipates that distributions will continue to be paid on a quarterly
basis on a level at least consistent with 1996.
The Partnership's net cash used in operating activities decreased from
$169,200 in 1996 to $26,546 in 1997 due primarily to the decrease in
construction payables. Net cash used in investing activities increased
from $146,077 in 1996 to $651,676 provided by investing activities in 1997
due primarily to the decrease in investment in joint ventures and real
estate and increase in distributions received from the joint ventures.
The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to
meet both operating requirements and distributions to Limited Partners. At
this time, given the nature of the joint ventures in which the Partnership
has invested, there are no known improvements and renovations to the
properties expected to be funded from cash flow from operations.
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures, from Limited Partners'
contributions. It is anticipated that the Partnership will contribute
approximately $40,000 to the Fund VI-Fund VII Joint Venture for the
completion of the Stockbridge Village III Property and $83,000 to the Fund
II-III-VI-VII Joint Venture for the completion of the Holcomb Bridge Road
Property, from Limited Partners' remaining contributions.
Since properties are acquired on all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
9
<PAGE>
PROPERTY OPERATIONS
- -------------------
As of June 30, 1997, the Partnership owned an interest in the following
operational properties:
Marathon/Fund V-VI-VII Joint Venture
- -------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $242,755 $242,754 $482,711 $485,508
Expenses:
Depreciation 87,646 87,647 175,292 175,292
Management & leasing expenses 9,890 9,710 19,892 19,420
Other operating expenses 3,635 5,152 4,763 8,850
-------- -------- -------- --------
101,171 102,509 199,947 203,562
-------- -------- -------- --------
Net income $141,584 $140,245 $282,764 $281,946
======== ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % in the
Fund V-VI-VII Joint Venture 41.7% 41.7% 41.7% 41.7%
Cash distribution to the Partnership $ 96,586 $ 88,946 $194,217 $178,498
Net income allocated to the
Partnership $ 59,055 $ 58,496 $117,941 $117,600
</TABLE>
Rental income decreased for the six months ended June 30, 1997, compared to the
same period of 1996, due to a one-time adjustment of straight-line rent in the
first quarter of 1997. A small increase in management and leasing fees was
offset by a decrease in operating expenses, primarily relating to accounting and
administrative fees. Cash distributions to the Partnership increased for the
six months ended June 30, 1997 compared to 1996 due to the scheduled increase in
rent which became effective January 1, 1997.
10
<PAGE>
Stockbridge Village III/Fund VI-Fund VII Joint Venture
- ------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 71,388 $62,308 $139,961 $119,232
Expenses:
Depreciation 21,451 21,301 42,903 41,678
Management & leasing expenses 8,499 16,909 15,982 20,886
Other operating expenses (18,831) 17,865 (5,358) 35,855
-------- ------- -------- --------
11,119 56,075 53,527 98,419
-------- ------- -------- --------
Net income $ 60,269 $ 6,233 $ 86,434 $ 20,813
======== ======= ======== ========
Occupied % 87.0% 87.0% 87.0% 87.0%
Partnership Ownership % in the
Fund VI-Fund VII Joint Venture 57.2% 57.2% 57.2% 57.2%
Cash distribution to the Partnership $ 53,650 $12,627 $ 73,735 $ 29,002
Net income allocated to the
Partnership $ 38,277 $ 3,559 $ 49,467 $ 11,864
</TABLE>
Rental income increased in 1997 as compared to 1996 due to an additional
adjustment to straight line rent in 1997. Net income has increased for the six
months ended June 30, 1997, as compared to the same period in 1996, due
primarily to the increased rental income and decreased expenses as a result of
timing differences in billing of tenant CAM charges.
11
<PAGE>
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997
------------- ------------- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $39,974 $ 1,009 $71,884
Expenses:
Depreciation 23,754 12,738 46,128
Management & leasing expense 5,077 155 8,486
Other operating expenses 15,291 6,676 23,813
------- -------- -------
44,122 19,569 78,427
------- -------- -------
Net loss $(4,148) $(18,560) $(6,543)
======= ======== =======
Occupied 49.0% 19.0% 49.0%
Partnership's Ownership % in the
Fund VI - Fund VII Joint Venture 57.2% 57.2% 57.2%
Cash distribution to Partnership $ 9,636 $ 0 $15,698
Net loss allocated to Partnership $(2,374) $(10,599) $(3,745)
</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.
Cici's Pizza occupies a 4,000 square foot 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 will increase to $50,000, in
the sixth year to $52,000, and in the ninth year to $56,000. Five additional
tenants are occupying an additional 8,000 square feet at the property as of June
30, 1997. Negotiations are being conducted to lease the remaining space.
Since this property commenced operations during the second quarter 1996, there
is no comparable financial information for the first quarter of the prior year.
It is anticipated that no additional funding by the Partnership or Wells Fund VI
will be required to complete tenant build-out.
12
<PAGE>
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $135,912 $ 43,754 $296,097 $ 53,175
Expenses:
Depreciation 69,982 77,822 136,112 83,942
Management & leasing expenses 22,483 5,029 43,063 6,080
Other operating expenses 13,633 28,894 43,940 47,733
-------- -------- -------- --------
106,098 111,745 223,115 137,755
-------- -------- -------- --------
Net income (loss) $ 29,814 $(67,991) $ 72,982 $(84,580)
======== ======== ======== ========
Occupied % 72.7% 20.9% 72.7% 20.9%
Partnership Ownership % in the
Fund II, III, VI, VII Joint Venture 48.8% 48.7% 48.8% 48.7%
Cash distributed to the Partnership $ 50,146 $ 0 $103,530 $ 0
Net income (loss) allocated to the
Partnership $ 14,558 $(33,054) $ 35,637 $(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 (the "Holcomb Bridge Road
Property") to the Fund II, III, VI, VII Joint Venture. Development is being
completed on two buildings with a total of approximately 49,500 square feet.
Approximately 4,000 square feet is currently under construction for which leases
have been signed. Efforts are continuing to lease the remaining space of
approximately 9,300 square feet.
As of June 30, 1997, ten tenants are occupying approximately 36,100 square feet
of space in the retail and office building under leases of varying lengths.
Operating expenses decreased for the three month period ended June 30, 1997, as
compared to June 30, 1996, due to the billing of CAM reimbursements for prior
periods in 1997. Increases in revenues, expenses and net income for the six
months ended June 30, 1997, compared to the six months ended June 30, 1996, are
due to increased occupancy at the property.
13
<PAGE>
The Hannover Center/Fund VII-Fund VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended One Month Ended
June 30, 1997 June 30, 1997 June 30, 1996
------------------- ----------------- -------------------
<S> <C> <C> <C>
Revenues:
Rental income $26,061 $55,257 $ 2,325
Expenses:
Depreciation 10,982 21,963 11,355
Management & leasing expense 2,434 5,004 0
Other operating expenses 5,472 14,153 8,325
------- ------- --------
18,888 41,120 19,680
------- ------- --------
Net income (loss) $ 7,173 $14,137 $(17,355)
======= ======= ========
Occupied 50.0% 50.0% 50.0%
Partnership's Ownership % in the
Fund VII - Fund VIII Joint Venture 37.95% 37.95% 37.95%
Cash distribution to Partnership $ 6,163 $11,126 $ 0
Net income allocated to Partnership $ 2,722 $ 5,365 $ (6,587)
</TABLE>
On April 1, 1996, Fund VII-Fund VIII Joint Venture acquired a 1.01 acre tract of
land located in Stockbridge, Georgia, upon which it has developed a 12,000
square foot combination retail/office building known as the Hannover Retail
Center.
Moovies, Inc., a video sales and rental store, signed a nine year, eleven month
lease for 6,020 square feet and occupied the space on June 22, 1996. Efforts are
being made to lease the remaining space. Accordingly, no comparative financial
data is available for the second quarter of prior year.
14
<PAGE>
CH2M Hill at Gainesville/Fund VII - Fund VIII Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $132,579 $132,578 $265,157 $269,120
Expenses:
Depreciation 54,548 54,588 106,132 108,925
Management & leasing expenses 21,308 15,698 42,617 29,096
Other operating expenses (14,649) (2,055) (34,273) (2,706)
-------- -------- -------- --------
61,207 68,231 114,476 135,315
-------- -------- -------- --------
Net income $ 71,372 $ 64,347 $150,681 $133,805
======== ======== ======== ========
Occupied % 94% 94% 94% 94%
Partnership's Ownership % in the
Fund VII-VIII Joint Venture 37.95% 37.95% 37.95% 37.95%
Cash distribution to Partnership $ 48,212 $ 45,563 $ 98,316 $ 62,523
Net income allocated to the
Partnership $ 27,086 $ 24,422 $ 57,189 $ 39,027
</TABLE>
Rental income remained stable in 1997 as compared to 1996. Net income increased
in 1997 as compared to 1996 due to savings in various office expenses,
accounting fees, and timing differences in billing common area maintenance
offset partially by increased management and leasing expenses.
15
<PAGE>
BellSouth /Fund VI - Fund VII-Fund VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Two Months Ended
June 30, 1997 June 30, 1997 June 30, 1996
------------------- ----------------- -------------------
<S> <C> <C> <C>
Revenues:
Rental income $407,513 $786,563 $146,740
Interest income 2,041 4,017 56,634
-------- -------- --------
409,554 790,580 203,374
-------- -------- --------
Expenses:
Depreciation 110,889 221,778 76,976
Management & leasing expense 51,286 96,459 17,928
Other operating expenses 143,280 227,247 65,960
-------- -------- --------
305,455 545,484 160,864
-------- -------- --------
Net income $104,099 $245,096 $ 42,510
======== ======== ========
Occupied 100.0% 100.0% 96.0%
Partnership's Ownership % in the
Fund VI - Fund VII - Fund VIII Joint Venture 34.4% 34.4% 42.8%
Cash distribution to Partnership $ 77,277 $168,620 $ 52,890
Net income allocated to Partnership $ 35,820 $ 85,836 $ 18,209
</TABLE>
On April 25, 1996, 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 66,333 square feet and American Express
occupying approximately 22,607 square feet. An additional approximate 2,900
square feet of space was occupied by BellSouth commencing in December, 1996
bringing occupancy to 100%.
Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts.
Since the building opened in May 1996, comparative income and expense figures
are not available. The Partnership's ownership percentage in the Fund VI - Fund
VII - Fund VIII Joint Venture decreased to 34.4% for 1997, as compared to 42.8%
in 1996, due to additional funding by Wells Fund VIII.
16
<PAGE>
Tanglewood Commons/Fund VI - VII - VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Five Months Ended
June 30, 1997 June 30, 1997
------------------ -----------------
<S> <C> <C>
Revenues:
Rental income $160,049 $209,583
Interest income 2,785 6,385
-------- --------
162,834 215,968
-------- --------
Expenses:
Depreciation 51,145 82,251
Management & leasing expense 10,173 13,337
Other operating expenses 29,706 51,612
-------- --------
91,024 147,200
-------- --------
Net income $ 71,810 $ 68,768
======== ========
Occupied 78.0% 78.0%
Partnership's Ownership % in the
Fund VI - Fund VII - Fund VIII Joint Venture 34.4% 34.4%
Cash distribution to Partnership $ 25,984 $ 35,939
Net income allocated to Partnership $ 24,709 $ 23,630
</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 Wells Fund VI.
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. It is anticipated that Wells
Fund VIII will fund approximately $700,000 needed to complete construction of
Tanglewood Commons.
The Fund VI-VII-VIII Joint Venture developed a large strip shopping center
building containing approximately 67,320 gross square feet which opened on
February 26, 1997, on a 12.48 acre tract. The remaining 2.2 acre portion of
the property will remain in a vegetative or natural state.
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 $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. Since
this property commenced operations in February 1997, comparable income and
expense figures for prior year are not available.
Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts.
17
<PAGE>
Cherokee Commons /Fund I, II, II-OW, VI, VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $215,973 $223,987 $433,412 $446,608
Interest income 19 18 37 37
-------- -------- -------- --------
215,992 224,005 433,449 446,645
Expenses:
Depreciation 109,697 107,461 217,222 214,644
Management & leasing expenses 19,323 13,276 50,864 25,910
Other operating expenses 40,203 46,632 64,322 95,504
-------- -------- -------- --------
169,223 167,369 332,408 336,058
-------- -------- -------- --------
Net income $ 46,769 $ 56,636 $101,041 $110,587
======== ======== ======== ========
Occupied % 92.0% 95.0% 92.0% 95.0%
Partnership Ownership % 10.70% 10.70% 10.70% 10.70%
Cash distributed to the Partnership $ 16,592 $ 18,376 $ 36,163 $ 34,863
Net income allocated to the
Partnership $ 5,008 $ 6,065 $ 10,819 $ 11,842
</TABLE>
Rental income decreased in 1997 as compared to 1996 levels due primarily to the
decrease in occupancy. Management and leasing expenses increased in 1997, as
compared to 1996, due to one-time payments of lease acquisition fees. Operating
expenses decreased due primarily to a timing difference in billings to tenants
for property taxes.
18
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the second quarter of 1997.
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 8, 1997 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.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 348,315
<SECURITIES> 19,269,838
<RECEIVABLES> 377,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,486
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,020,086
<CURRENT-LIABILITIES> 362,390
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,657,696
<TOTAL-LIABILITY-AND-EQUITY> 20,020,086
<SALES> 0
<TOTAL-REVENUES> 402,482
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 52,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 350,471
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
