<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 September 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 of (I.R.S. Employer Identification Number)
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
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1997
and December 31, 1996.......................................3
Statements of Income for the Three Months and Nine Months
Ended September 30, 1997 and 1996...........................4
Statements of Partners' Capital for the Year Ended
December 31, 1996 and the Nine Months Ended
September 30, 1997..........................................5
Statements of Cash Flows for the Nine
Months Ended September 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
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 1997 December 31, 1996
------ ------------------ -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $ 19,117,413 $ 19,625,041
Due from affiliates 391,002 366,301
Cash and cash equivalents 326,846 291,778
Deferred project costs 7,621 9,002
Organizational costs,
less accumulated amortization of $21,875 in
1997 and $17,188 in 1996 9,375 14,062
Prepaid expenses and other assets 4,546 6,546
-------------- --------------
Total assets $ 19,856,803 $ 20,312,730
============== ==============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 95 $ 0
Partnership distribution payable 373,281 296,706
-------------- --------------
Total liabilities 373,376 296,706
-------------- --------------
Partners' capital:
General Partners 0 0
Limited Partners:
Class A - 1,865,628 units outstanding 16,343,310 15,698,900
Class B - 552,389 units outstanding 3,140,117 4,317,124
-------------- --------------
Total partners' capital 19,483,427 20,016,024
-------------- --------------
Total liabilities and partners' capital $ 19,856,803 $ 20,312,730
============== ==============
</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 Nine Months Ended
--------------------------------------- ----------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30,1996
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of
joint ventures (Note 2) $ 206,596 $ 121,365 $ 588,738 $ 287,939
Interest income 6,595 10,866 26,935 67,100
----------- ----------- ----------- -----------
213,191 132,231 615,673 355,039
----------- ----------- ----------- -----------
Expenses:
Legal and accounting 1,310 1,135 17,851 24,605
Partnership administration 10,509 12,658 42,854 46,368
Amortization of
organization costs 1,562 1,562 4,687 4,687
----------- ----------- ----------- -----------
13,381 15,355 65,392 75,660
----------- ----------- ----------- -----------
Net income $ 199,810 $ 116,876 $ 550,281 $ 279,379
=========== =========== =========== ===========
Net loss allocated to
General Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to
Class A Limited Partners $ 437,946 $ 261,135 $ 1,194,894 $ 708,638
Net loss allocated to Class
B Limited Partners $ (238,136) $ (144,259) $ (644,613) $ (429,259)
Net income per weighted
average Class A Limited
Partner Unit $ 0.23 $ 0.14 $ 0.64 $ 0.39
Net loss per weighted average
Class B Limited Partner
Unit $ (0.43) $ (0.27) $ (1.15) $ (0.71)
Cash distribution per weighted
average Class A Limited
Partner Unit $ 0.20 $ 0.12 $ 0.58 $ 0.33
</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 NINE MONTHS ENDED
SEPTEMBER 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 1,194,894 0 (644,613) 0 550,281
Partnership distributions 0 (1,082,878) 0 0 0 (1,082,878)
Class B conversion elections 38,798 532,394 (38,798) (532,394) 0 0
--------- ------------ -------- ------------ ------------ ------------
BALANCE, September 30, 1997 1,865,628 $ 16,343,310 552,389 $ 3,140,117 $ 0 $ 19,483,427
========= ============ ======== ============ ============ ============
</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>
Nine Months Ended
-----------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 550,281 $ 279,379
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (588,738) (287,939)
Amortization of organization costs 4,687 4,687
Changes in assets and liabilities:
Prepaids and other assets 2,000 24,900
Due to affiliates 0 (4,000)
Accounts payable 95 (174,413)
----------- -----------
Total adjustments (581,956) (436,765)
----------- -----------
Net cash used in operating activities (31,675) (157,386)
----------- -----------
Cash flow from investing activities:
Investment in joint ventures (30,600) (570,874)
Distributions received from joint ventures 1,029,123 546,331
----------- -----------
Net cash provided by (used in)
investing activities 998,523 (24,543)
Cash flow from financing activities:
Partnership distributions paid (1,006,303) (567,427)
----------- -----------
Net decrease in cash and cash equivalents (39,455) (749,356)
Cash and cash equivalents, beginning of year 366,301 1,114,066
----------- -----------
Cash and cash equivalents, end of period $ 326,846 $ 364,710
=========== ===========
Supplemental disclosure of noncash investing activities:
Deferred project costs applied to real estate
and joint venture property $ 1,381 $ 117,610
=========== ===========
</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
September 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 among 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 among the Partnership, Wells
Fund II-III Joint Venture and Wells Real Estate Fund VI, 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 among 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 among 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 September 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
Stockbridge, Georgia ("Stockbridge Village I Expansion"); (iii) an
7
<PAGE>
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 financial statements of 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
to fund tenant improvements or other capital expenditures out of operating
cash flow.
8
<PAGE>
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of September 30, 1997, the developed properties owned by the Partnership
were 90% occupied, compared to 87% occupied as of September 30, 1996. Gross
revenues of the Partnership were $615,673 and $355,039 for the nine months
ended September 30, 1997 and September 30, 1996, respectively. The revenues
increased in 1997 compared to 1996 due to the increase in income from the
joint ventures offset partially by a decrease in interest income. 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 $0.64
for the nine months ended September 30, 1997. Net loss per weighted average
Unit for Class B and converted Class A Limited Partners was $1.15 for the
nine months ended September 30, 1997.
Cash distributions of $0.20 per weighted average Unit were made to Class A
Limited Partners for the three months ended September 30, 1997 and $0.12
for the same period in 1996. The Partnership anticipates that distributions
will continue to be paid on a quarterly basis on a level at least
consistent with 1996 distributions.
The Partnership's net cash used in operating activities decreased from
$157,386 in 1996 to $31,675 in 1997 due primarily to the decrease in
accounts payable. Cash flow from investing activities increased in 1997 to
$998,523 from $(24,543) in 1996, due primarily to the decrease in
investment in joint ventures and real estate and the increase in
distributions received from the joint ventures. Partnership distributions
paid increased from $567,427 in 1996 to $1,006,303 in 1997, due primarily
to the increase in distributions received from the joint ventures.
Distributions from the joint ventures increased, due primarily to increased
occupancy at the properties. As a result, cash and cash equivalents
decreased from $364,710 in September 1996 to $326,846 in 1997.
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 $36,000 to the Fund VI-Fund VII Joint Venture for the
completion of the Stockbridge Village III Property and $56,000 to the Fund
II-III-VI-VII Joint Venture for the completion of the Holcomb Bridge Road
Property.
Since properties are acquired on all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
9
<PAGE>
Property Operations
- -------------------
As of September 30, 1997, the Partnership owned an interest in the following
operational properties:
Marathon /Fund V-VI-VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------- ----------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 242,754 $ 242,755 $ 725,465 $ 728,263
Expenses:
Depreciation 87,647 87,647 262,939 262,939
Management and leasing
expenses 9,889 9,710 29,781 29,130
Other operating expenses 3,174 1,531 7,937 10,381
---------- ---------- ---------- ----------
100,710 98,888 300,657 302,450
---------- ---------- ---------- ----------
Net income $ 142,044 $ 143,867 $ 424,808 $ 425,813
========== ========== ========== ==========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 41.7% 41.7% 41.7% 41.7%
Cash distributed to the
Partnership $ 96,778 $ 90,456 $ 290,995 $ 268,954
Net income allocated to the
Partnership $ 59,246 $ 60,006 $ 177,187 $ 177,607
</TABLE>
Rental income remained relatively stable for the nine months ended September 30,
1997, compared to the same period of 1996. 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 nine months ended September 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 Nine Months Ended
------------------------------------------- ------------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 71,127 $ 68,558 $ 211,088 $ 187,790
Expenses:
Depreciation 21,452 21,400 64,355 63,078
Management and leasing
expenses 6,730 16,387 22,712 37,273
Other operating expenses 2,891 8,696 (2,467) 44,551
--------- --------- --------- ---------
31,073 46,483 84,600 144,902
--------- --------- --------- ---------
Net income $ 40,054 $ 22,075 $ 126,488 $ 42,888
========= ========= ========= =========
Occupied % 87% 87% 87% 87%
Partnership's Ownership % in
the Fund VI - Fund VII
Joint Venture 57.3% 57.2% 57.3% 57.2%
Cash distributed to the
Partnership $ 35,525 $ 30,925 $ 109,260 $ 59,927
Net income allocated to the
Partnership $ 22,927 $ 12,632 $ 72,394 $ 24,496
</TABLE>
Rental income increased in 1997 as compared to 1996 due to an adjustment to
straight line rent in 1997 regarding 1996. Net income increased for the nine
months ended September 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.
The Partnership's ownership percentage in the Fund VI - Fund VII Joint Venture
increased to 57.3% for 1997, as compared to 57.2% in 1996, due to additional
funding by the Partnership in 1997.
11
<PAGE>
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Six Months Ended
------------------------------------------ ------------------ ------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 53,719 $ 5,994 $ 125,603 $ 7,003
Expenses:
Depreciation 29,297 19,107 75,425 31,845
Management and leasing
expenses 7,223 822 15,709 977
Other operating expenses 6,066 9,037 29,879 15,713
--------- --------- --------- ---------
42,586 28,966 121,013 48,535
--------- --------- --------- ---------
Net income (loss) $ 11,133 $ (22,972) $ 4,590 $ (41,532)
========= ========= ========= =========
Occupied % 87% 19% 81% 19%
Partnership's Ownership %
in the Fund VI - Fund VII
Joint Venture 57.3% 57.2% 57.3% 57.2%
Cash distributed to the
Partnership $ 21,842 $ 0 $ 37,540 $ 0
Net income (loss) allocated
to the Partnership $ 6,374 $ (13,143) $ 2,629 $ (23,742)
</TABLE>
On September 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. Nine additional tenants
are occupying an additional 14,400 square feet at the property as of September
30, 1997. Negotiations are being conducted to lease the remaining space.
It is anticipated that no additional funding by the Partnership or Wells Fund VI
will be required to complete tenant build-out in 1997.
The Partnership's ownership percentage in the Fund VI - Fund VII Joint Venture
increased to 57.3% for 1997, as compared to 57.2% in 1996, due to additional
funding by the Partnership in 1997.
12
<PAGE>
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Six Months Ended
---------------------------------------- ------------------ ------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 181,877 $ 82,869 $ 477,974 $ 136,044
Expenses:
Depreciation 84,509 54,939 220,621 138,881
Management and leasing
expenses 26,156 8,530 69,219 14,610
Other operating expenses 48,870 22,279 92,810 70,012
--------- --------- --------- ---------
159,535 85,748 382,650 223,503
--------- --------- --------- ---------
Net income (loss) $ 22,342 $ (2,879) $ 95,324 $ (87,459)
========= ========= ========= =========
Occupied % 87.1% 53.6% 87.1% 53.6%
Partnership's Ownership %
in the Fund II-III-VI-VII
Joint Venture 49.0% 48.8% 49.0% 48.8%
Cash distributed to the
Partnership $ 46,418 $ 13,022 $ 149,948 $ 13,022
Net income (loss) allocated
to Partnership $ 10,923 $ (1,409) $ 46,560 $ (42,388)
</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 3,500 square feet is currently under construction for which leases
have been signed. Efforts are continuing to lease the remaining space of
approximately 2,900 square feet.
As of September 30, 1997, thirteen tenants are occupying approximately 43,100
square feet of space in the retail and office building under leases of varying
lengths. Operating expenses increased for the three month period ended September
30, 1997, as compared to September 30, 1996, due to the increased occupancy at
the property. Increases in revenues, expenses and net income for the nine months
ended September 30, 1997, compared to the six months ended September 30, 1996,
are also due to increased occupancy at the property.
13
<PAGE>
The Hannover Center/Fund VII-Fund VIII Joint Venture
- ----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Four Months Ended
----------------------------------------- ------------------ ------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 26,061 $ 23,335 $ 81,318 $ 25,660
Expenses:
Depreciation 10,981 9,362 32,944 20,717
Management and leasing
expenses 2,775 1,830 7,779 1,830
Other operating expenses 4,872 3,149 19,025 11,474
-------- -------- -------- --------
18,628 14,341 59,748 34,021
-------- -------- -------- --------
Net income (loss) $ 7,433 $ 8,994 $ 21,570 $ (8,361)
======== ======== ======== ========
Occupied % 50.00% 50.17% 50.00% 50.17%
Partnership's Ownership %
in the Fund VII - Fund VIII
Joint Venture 37.95% 37.95% 37.95% 37.95%
Cash distributed to the
Partnership $ 6,390 $ 1,862 $ 17,516 $ 1,862
Net income (loss) allocated
to Partnership $ 2,822 $ 3,414 $ 8,187 $ (3,173)
</TABLE>
On April 1, 1996, the 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
September 22, 1996. Efforts are being made to lease the remaining space.
Rental income increased for the three months ended September 30, 1997, compared
to the same period of 1996, due to the straight-lining of rent in 1997.
Depreciation expense increased for the quarter ended September 30, 1997,
compared to the same quarter of 1996, due to the calculation of expense for a
partial year in 1996. Management and leasing expenses increased slightly for the
three months ended September 30, 1997, compared to the three months ended
September 30, 1996, due primarily to adjustments in the amortization of leasing
fees in 1997. Other operating expenses increased for the period ended September
30, 1997, as compared to the same period of 1996, due primarily to an increase
in property taxes and insurance. Since Moovies, Inc. did not occupy its space
until June 1996, no comparative, year-to-date data are available.
14
<PAGE>
CH2M Hill at Gainesville/Fund VII - Fund VIII Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------------- -----------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 132,578 $ 132,578 $ 397,735 $ 401,698
Expenses:
Depreciation 56,025 54,476 162,157 163,401
Management and leasing
expenses 21,473 25,939 64,090 55,035
Other operating expenses (25,759) (922) (60,032) (3,628)
--------- --------- --------- ---------
51,739 79,493 166,215 214,808
--------- --------- --------- ---------
Net income $ 80,839 $ 53,085 $ 231,520 $ 186,890
========= ========= ========= =========
Occupied % 93.6% 93.6% 93.6% 93.6%
Partnership's Ownership %
in the Fund VII - Fund
VIII Joint Venture 38.0% 38.0% 38.0% 38.0%
Cash distribution to
Partnership $ 52,369 $ 41,247 $ 150,685 $ 103,770
Net income allocated to the
Partnership $ 30,682 $ 20,148 $ 87,871 $ 59,175
</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 Nine Months Ended Five Months Ended
------------------------------------------ ------------------ ------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 350,461 $ 364,732 $1,137,024 $ 511,472
Interest income 2,097 1,366 6,114 58,000
---------- ---------- ---------- ----------
352,558 366,098 1,143,138 569,472
---------- ---------- ---------- ----------
Expenses:
Depreciation 110,889 109,116 332,667 186,092
Management and leasing
expenses 47,095 39,597 143,554 57,525
Other operating expenses 85,739 147,446 312,986 213,407
---------- ---------- ---------- ----------
243,723 296,159 789,207 457,024
---------- ---------- ---------- ----------
Net income $ 108,835 $ 69,939 $ 353,931 $ 112,448
========== ========== ========== ==========
Occupied % 100.0% 96.0% 100.0% 96.0%
Partnership's Ownership %
in the Fund VI - Fund VII
Fund VIII Joint Venture 33.4% 38.2% 33.4% 38.2%
Cash distribution to
Partnership $ 78,100 $ 25,142 $ 246,720 $ 78,032
Net income allocated to the
Partnership $ 37,056 $ 28,159 $ 122,892 $ 46,368
</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 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 year-to-date income and
expense figures are not available. The Partnership's ownership percentage in the
Fund VI - Fund VII - Fund VIII Joint Venture decreased to 33.4% for 1997, as
compared to 38.2% in 1996, due to additional funding by Wells Fund VIII in 1997.
16
<PAGE>
Tanglewood Commons/Fund VI - VII - VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Eight Months Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Revenues:
Rental income $ 172,682 $ 382,265
Interest income 3,890 10,275
---------- ----------
176,572 392,540
---------- ----------
Expenses:
Depreciation 53,435 135,686
Management & leasing expense 13,390 26,727
Other operating expenses 20,740 72,352
---------- ----------
87,565 234,765
---------- ----------
Net income $ 89,007 $ 157,775
========== ==========
Occupied % 78.0% 78.0%
Partnership's Ownership % in the
Fund VI - Fund VII - Fund VIII Joint Venture 33.4% 33.4%
Cash distribution to Partnership $ 45,106 $ 81,045
Net income allocated to Partnership $ 30,264 $ 53,894
</TABLE>
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.7 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 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 be approximately $8,700,000. It is anticipated that
Wells Fund VIII will fund approximately $200,000 needed to complete construction
of Tanglewood Commons.
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 $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.
17
<PAGE>
Cherokee Commons /Fund I, II, II-OW, VI, VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------- ----------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 215,367 $ 219,956 $ 648,779 $ 666,564
Interest income 10 18 47 55
---------- ---------- ---------- ----------
215,377 219,974 648,826 666,619
---------- ---------- ---------- ----------
Expenses:
Depreciation 110,037 107,607 327,259 322,251
Management and leasing
expenses 7,017 12,101 57,881 38,011
Other operating expenses 39,455 38,084 103,777 133,588
---------- ---------- ---------- ----------
156,509 157,792 488,917 493,850
---------- ---------- ---------- ----------
Net income $ 58,868 $ 62,182 $ 159,909 $ 172,769
========== ========== ========== ==========
Occupied % 93% 95% 93% 95%
Partnership's Ownership % 10.7% 10.7% 10.7% 10.7%
Cash distributed to the
Partnership $ 8,475 $ 18,722 $ 44,639 $ 53,585
Net income allocated to the
Partnership $ 6,304 $ 6,658 $ 17,123 $ 18,500
</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 third 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: November 10, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 326,846
<SECURITIES> 19,117,413
<RECEIVABLES> 391,002
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,542
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,856,803
<CURRENT-LIABILITIES> 373,376
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,483,427
<TOTAL-LIABILITY-AND-EQUITY> 19,856,803
<SALES> 0
<TOTAL-REVENUES> 615,673
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 65,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 550,281
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
