<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, 1999 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 0-27888
---------------
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 No.)
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.
(A Georgia Public Limited Partnership)
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--September 30, 1999 and December 31, 1998 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 1999 and 1998 4
Statements of Partners' Capital for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999 5
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 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 20
</TABLE>
-2-
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------------- ---------------
<S> <C> <C>
ASSETS:
Investment in joint ventures (Note 2) $17,711,124 $18,368,726
Cash and cash equivalents 116,210 75,740
Due from affiliates 388,086 339,387
Organizational costs, less accumulated amortization of 0 1,562
$29,688 in December 1998 and $31,250 in September 1999
Prepaid expenses and other assets 2,546 4,263
----------- -----------
Total assets $18,217,966 $18,789,678
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Accounts payable $ 982 $ 5,208
Partnership distributions payable 442,684 396,500
----------- -----------
Total liabilities 443,666 401,708
----------- -----------
Partners' capital:
Limited partners:
Class A--2,019,011 units outstanding 17,075,938 16,935,935
Class B--399,006 units outstanding 698,362 1,452,035
----------- -----------
Total partners' capital 17,774,300 18,387,970
----------- -----------
Total liabilities and partners' capital $18,217,966 $18,789,678
=========== ===========
</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, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Equity in income of joint ventures (Note 2) $ 235,835 $ 207,089 $ 745,020 $ 623,694
Interest income 537 1,515 683 7,110
--------- --------- ---------- ----------
236,372 208,604 745,703 630,804
--------- --------- ---------- ----------
EXPENSES:
Legal and accounting 200 489 15,660 15,547
Partnership administration 14,370 18,334 50,360 41,630
Amortization of organization costs 0 1,562 1,563 4,687
--------- --------- ---------- ----------
14,570 20,385 67,583 61,864
--------- --------- ---------- ----------
Net income $ 221,802 $ 188,219 $ 678,120 $ 568,940
========= ========= ========== ==========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 468,238 $ 426,322 $1,403,161 $1,290,354
========= ========= ========== ==========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $(246,436) $(238,103) $ (725,041) $ (721,414)
========= ========= ========== ==========
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 0.23 $ 0.22 $ 0.69 $ 0.66
========= ========= ========== ==========
NET LOSS PER CLASS B LIMITED PARTNER UNIT $ (0.62) $ (0.50) $ (1.76) $ (1.62)
========= ========= ========== ==========
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 0.22 $ 0.20 $ 0.64 $ 0.62
========= ========= ========== ==========
</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, 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Limited Partners Total
---------------------------------------------
Class A Class B General Partners'
---------------------- --------------------
Units Amounts Units Amounts Partners Capital
--------- ----------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 1,971,399 $16,701,193 446,618 $2,560,972 $0 $19,262,165
Net income (loss) 0 1,704,213 0 (949,879) 0 754,334
Partnership distributions 0 (1,628,529) 0 0 0 (1,628,529)
Class B conversion elections 38,118 159,058 (38,118) (159,058) 0 0
--------- ----------- ------- ---------- -------- -----------
BALANCE, December 31, 1998 2,009,517 16,935,935 408,500 1,452,035 0 18,387,970
Net income (loss) 0 1,403,161 0 (725,041) 0 678,120
Partnership distributions 0 (1,291,790) 0 0 0 (1,291,790)
Class B conversion elections 9,494 28,631 (9,494) (28,631) 0 0
--------- ----------- ------- ---------- -------- -----------
BALANCE, September 30, 1999 2,019,011 $17,075,937 399,006 $ 698,363 $0 $17,774,300
========= =========== ======= ========== ======== ===========
</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>
For the Nine Months Ended
----------------------------
September 30, September 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 678,120 $ 568,940
----------- -----------
Adjustments to reconcile net income to net cash used in operating
activities:
Equity in income of joint ventures (745,020) (623,694)
Amortization of organization costs 1,563 4,687
Changes in assets and liabilities:
Prepaids and other assets 1,717 1,051
Accounts payable (4,226) 1,655
----------- -----------
Total adjustments (745,966) (616,301)
----------- -----------
Net cash used in operating activities (67,846) (47,361)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures 0 (158,564)
Distributions received from joint ventures 1,353,928 1,299,610
----------- -----------
Net cash provided by investing activities 1,353,928 1,141,046
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership distributions paid (1,245,612) (1,229,274)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 40,470 (135,589)
CASH AND CASH EQUIVALENTS, beginning of year 75,740 194,420
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 116,210 $ 58,831
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs applied to real estate and joint venture property $ 0 $ 4,070
=========== ===========
</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, 1999 AND 1998 AND DECEMBER 31, 1998
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 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 1,910 limited
partners.
The Partnership owns interests in properties through ownership in the
following joint ventures: (i) Fund V, Fund VI, and Fund VII Associates, a
joint venture between the Partnership, Wells Real Estate Fund V, L.P., and
Wells Real Estate Fund VI, L.P. (the "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. (the "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. (the "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, and 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, and
VII Joint Venture").
As of September 30, 1999, 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"); (iii) a retail shopping center expansion in
Stockbridge, Georgia ("Stockbridge Village I Expansion"); (iv) an
office/retail center located in Roswell, Georgia ("880 Holcomb Bridge Road");
(v) a retail center located in
-7-
<PAGE>
Stockbridge, Georgia (the "Hannover Center"); (vi) a four-story office
building located in Jacksonville, Florida ("BellSouth"); (vii) an office
building located in Gainesville, Florida ("CH2M Hill"); (viii) a retail
center in Winston-Salem, North Carolina ("Tanglewood Commons"); and (ix) 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.
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, 1998.
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 using 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,
1998.
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 Section 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>
1. RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS
(a) General
As of September 30, 1999, the developed properties owned by the Partnership
were 96% occupied as compared to 93.5% for the same period ended September
30, 1998. Gross revenues of the Partnership were $236,372 and $745,703 for
the three months and nine months ended September 30, 1999, respectively, as
compared to $208,604 and $630,804 for the three months and nine months ended
September 30, 1998, respectively. The revenues increased in 1999 compared to
1998 due to the increase in income from the joint ventures which were
primarily due to increased occupancy. Expenses of the Partnership increased
primarily due to an increase in administrative costs.
Net income per unit for Class A limited partners was $.23 and $.69 for the
three months and nine months ended September 30, 1999, respectively. Net loss
per unit for Class B and converted Class A limited partners was $.62 and
$1.78 for the three months and nine months ended September 30, 1999,
respectively.
Cash distributions of $.22 per weighted average unit were made to Class A
limited partners for the three months ended September 30, 1999. The
Partnership anticipates that distributions will continue to be paid on a
quarterly basis on a level at least consistent with 1998.
The Partnership's net cash used in operating activities increased from
$47,361 in 1998 to $67,846 in 1999 due to the decrease in accounts payable
and an increase in administrative expenses. Net cash provided by investing
activities increased from $1,141,046 in 1998 to $1,353,928 in 1998, due
primarily to the increase in distributions received from the joint ventures.
As a result, cash and cash equivalents increased from $58,831 as of September
30, 1998 to $116,210 as of September 30, 1999.
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.
Year 2000
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and was
completed during the first half of 1999. Renovations and replacements of
equipment have been and are being made as warranted. The costs incurred by
the Partnership and its affiliates thus far for renovations and replacements
have been immaterial. All testing of systems has been completed as of
September 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages are Year 2000
compliant. At the
-9-
<PAGE>
present time, it is believed that all major noninformation technology systems
are Year 2000 compliant. The cost to upgrade any noncompliant systems is
believed to be immaterial.
The Partnership has confirmed with the Partnership's vendors, including
third-party service providers such as banks, that their systems are Year 2000
compliant.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use
with its accounting, property management, and investment portfolio tracking.
The Partnership has preliminarily determined that any costs, problems, or
uncertainties associated with the potential consequences of Year 2000 issues
are not expected to have a material impact on the future operations or
financial condition of the Partnership. The Partnership will perform due
diligence as to the Year 2000 readiness of each property owned by the
Partnership and each property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e.,
microcontrollers) is limited to facilities-related matters, such as office
security systems and environmental control systems.
The Partnership is currently formulating contingency plans to cover any areas
of concern. Alternate means of operating the business are being developed in
the unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors. A written plan is being developed for testing and dispensed to each
staff member of the general partner of the Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst-case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor
information. In the event that the elevator shuts down, the Partnership has
devised a plan for each building whereby the tenants will use the stairs
until the elevators are fixed. In the event that the security system shuts
down, the Partnership has devised a plan for each building to hire temporary
on-site security guards. In the event that a third-party vendor has Year 2000
problems relating to investor information, the Partnership intends to perform
a full system back-up of all investor information as of December 31, 1999 so
that the Partnership will have accurate hard-copy investor information.
-10-
<PAGE>
2. PROPERTY OPERATIONS
As of September 30, 1999, the Partnership owned interest in the following
operational properties:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
The Marathon Building/ September 30, September 30, September 30, September 30,
Fund V-VI-VII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $243,182 $242,755 $728,690 $728,693
-------- -------- -------- --------
Expenses:
Depreciation 87,646 87,647 262,939 262,939
Management and leasing expenses 14,627 9,890 37,314 29,670
Other operating expenses 4,181 3,044 14,592 9,785
-------- -------- -------- --------
106,454 100,581 314,845 302,394
-------- -------- -------- --------
Net income $136,728 $142,174 $413,845 $426,299
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
======== ======== ======== ========
Partnership's ownership % in the
Fund V-VI-VII Joint Venture 41.7% 41.7% 41.7% 41.7%
======== ======== ======== ========
Cash distribution to the Partnership $ 94,315 $ 96,832 $284,813 $290,404
======== ======== ======== ========
Net income allocated to the
Partnership $ 57,029 $ 59,301 $172,615 $177,809
======== ======== ======== ========
</TABLE>
Rental income remained relatively stable for the nine months ended September
30, 1999 as compared to the nine months ended September 30, 1998.
The increase in management and leasing fees for the nine months ended
September 30, 1999 was due to an underaccrual of fees in 1998. The increase
in operating expenses was due primarily to increases in accounting and
administrative fees.
-11-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Stockbridge Village III/ September 30, September 30, September 30, September 30,
Fund VI-Fund VII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $76,916 $59,652 $233,518 $178,405
------- -------- --------- ---------
Expenses:
Depreciation 20,711 22,781 65,754 68,273
Management and leasing expenses 9,260 20,952 27,999 37,316
Other operating expenses 10,105 22,325 19,683 91,679
------- -------- --------- ---------
40,076 66,058 113,436 197,268
------- -------- --------- ---------
Net income (loss) $36,840 $ (6,406) $120,082 $ (18,863)
======= ======== ========= =========
Occupied % 100% 82% 100% 82%
======= ======== ========= =========
Partnership's ownership % in the
Fund VI-Fund VII Joint Venture 56.3% 56.6% 56.3% 56.6%
======= ======== ========= =========
Cash distribution to the Partnership $35,266 $ 9,979 $104,235 $ 30,214
======= ======== ========= =========
Net income (loss) allocated to the
Partnership $20,740 $ (3,648) $ 67,604 $ (10,736)
======= ======== ========= =========
</TABLE>
Rental income, net income, and cash distributions increased for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998 due primarily to increased occupancy at the property.
Operating expenses decreased as compared to the same period in 1998 due to
bad debt expense recorded in 1998. Management and leasing expenses decreased
in 1999 due to a write-off in 1998 of leasing fees related to the bad debt
expense.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 56.3% for 1999, as compared to 56.6% in September 1998, due to
additional funding by Wells Fund VI, which decreased the Partnership's
ownership in the Fund VI-Fund VII Joint Venture.
-12-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Stockbridge Village I Expansion/ September 30, September 30, September 30, September 30,
Fund VI-Fund VII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $67,729 $73,471 $212,355 $219,153
-------- ------- --------- ---------
Expenses:
Depreciation 37,350 35,003 111,553 104,657
Management and leasing expenses 14,104 10,175 31,831 29,912
Other operating expenses 3,811 (529) 4,797 13,848
-------- ------- --------- ---------
55,265 44,649 148,181 148,417
-------- ------- --------- ---------
Net income $12,464 $28,822 $ 64,174 $ 70,736
======== ======= ========= =========
Occupied % 86% 79% 86% 79%
======== ======= ========= =========
Partnership's ownership % in the
Fund VI-Fund VII Joint Venture 56.3% 56.6% 56.3% 56.6%
======== ======= ========= =========
Cash distribution to the Partnership $35,985 $35,899 $119,583 $ 95,581
======== ======= ========= =========
Net income allocated to the
Partnership $ 7,017 $16,382 $ 36,129 $ 40,276
======== ======= ========= =========
</TABLE>
Rental income decreased for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 due primarily to an
overestimate of straight-line adjustments in 1998. Expenses remained
relatively stable for the nine months ended September 30, 1999 as compared to
the nine months ended September 30, 1998.
Cash distributions to the Partnership increased due to an increased cash
revenue related to the increased occupancy.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 56.3% for 1999, as compared to 56.6% in September 1998, due to
additional fundings by Wells Fund VI, which decreased the Partnership's
ownership in the Fund VI-Fund VII Joint Venture.
-13-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Holcomb Bridge Road/ September 30, September 30, September 30, September 30,
Fund II, III, VI, and VII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $213,028 $226,233 $670,852 $648,113
--------- --------- -------- --------
Expenses:
Depreciation 79,605 94,128 277,862 282,161
Management and leasing expenses 22,263 20,198 93,200 79,450
Other operating expenses 14,889 27,664 39,670 64,494
--------- --------- -------- --------
116,757 141,990 410,732 426,105
--------- --------- -------- --------
Net income $ 96,271 $ 84,243 $260,120 $222,008
========= ========= ======== ========
Occupied % 94% 100% 94% 100%
========= ========= ======== ========
Partnership's ownership % in the
Fund II, III, VI, and VII Joint
Venture 49.1% 49% 49.1% 49%
========= ========= ======== ========
Cash distribution to the Partnership $ 83,775 $ 92,587 $250,127 $263,056
========= ========= ======== ========
Net income allocated to the
Partnership $ 47,240 $ 41,276 $127,641 $109,065
========= ========= ======== ========
</TABLE>
Rental income has increased for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 due primarily to an
underestimate of straight-line rent adjustments in 1998. Expenses decreased
due to a decrease in 1999 property taxes.
-14-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
The Hannover Center/ September 30, September 30, September 30, September 30,
Fund VII-Fund VIII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $53,354 $26,061 $165,847 $78,183
------- ------- --------- --------
Expenses:
Depreciation 10,981 10,981 32,944 32,944
Management and leasing expenses 3,746 2,661 16,788 7,983
Other operating expenses 3,683 2,133 6,601 16,422
------- ------- --------- --------
18,410 15,775 56,333 57,349
------- ------- --------- --------
Net income $34,944 $10,286 $109,514 $20,834
======= ======= ========= ========
Occupied % 100% 50% 100% 50%
======= ======= ========= ========
Partnership's ownership % in the
Fund VII-Fund VIII Joint Venture 36.7% 36.7% 36.7% 36.7%
======= ======= ========= ========
Cash distribution to the Partnership $16,731 $ 0 $ 48,374 $ 2,413
======= ======= ========= ========
Net income allocated to the
Partnership $12,807 $ 3,773 $ 40,137 $ 7,691
======= ======= ========= ========
</TABLE>
Rental income, net income, and cash distributions increased for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998 due to increased occupancy at the center. Operating
expenses for the nine-month period ending September 30, 1999 decreased due to
common-area maintenance reimbursements. Tenants are billed an estimated
amount for the current year common-area maintenance which is then reconciled
in the second quarter of the following year and the difference billed to the
tenants.
-15-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
CH2M Hill/ September 30, September 30, September 30, September 30,
Fund VII-Fund VIII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $144,035 $143,832 $431,747 $420,850
-------- -------- -------- --------
Expenses:
Depreciation 66,077 68,946 202,902 182,837
Management and leasing expenses 17,890 14,330 65,886 65,019
Other operating expenses 16,225 14,902 5,806 43,967
-------- -------- -------- --------
100,192 98,178 274,594 291,823
-------- -------- -------- --------
Net income $ 43,843 $ 45,654 $157,153 $129,027
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
======== ======== ======== ========
Partnership's ownership % in the
Fund VII-Fund VIII Joint Venture 36.7% 36.7% 36.7% 36.7%
======== ======== ======== ========
Cash distribution to the Partnership $ 41,057 $ 42,940 $132,598 $116,170
======== ======== ======== ========
Net income allocated to the
Partnership $ 16,069 $ 16,762 $ 57,597 $ 47,830
======== ======== ======== ========
</TABLE>
Rental income increased for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 due to an underestimate
of straight-line rent adjustments in 1998. Expenses decreased due primarily
to common-area maintenance billings to tenants that were underestimated in
1998. Tenants are billed an estimated amount for the current year common-area
maintenance which is then reconciled in the second quarter of the following
year and the difference billed to the tenants.
-16-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
BellSouth/Fund VI-VII-VIII September 30, September 30, September 30, September 30,
Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $380,278 $380,278 $1,140,832 $1,140,832
Interest income 1,159 2,096 3,461 6,268
-------- -------- ---------- ----------
381,437 382,374 1,144,293 1,147,100
-------- -------- ---------- ----------
Expenses:
Depreciation 111,606 110,985 334,818 332,827
Management and leasing expenses 47,891 47,414 144,824 142,610
Other operating expenses 111,440 121,718 321,275 311,783
-------- -------- ---------- ----------
270,937 280,117 800,917 787,220
-------- -------- ---------- ----------
Net income $110,500 $102,257 $ 343,376 $ 359,880
======== ======== ========== ==========
Occupied % 100% 100% 100% 100%
======== ======== ========== ==========
Partnership's ownership % in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4% 33.4% 33.4%
======== ======== ========== ==========
Cash distribution to the Partnership $ 76,959 $ 72,998 $ 234,842 $ 239,688
======== ======== ========== ==========
Net income allocated to the
Partnership $ 36,902 $ 34,149 $ 114,671 $ 120,182
======== ======== ========== ==========
</TABLE>
Net income and cash distributions for the nine months ended September 30,
1999 as compared to the same period in 1998 have decreased slightly due
primarily to increased expenditures in electricity and lighting replacement,
while net income and cash distributions increased slightly for the three
months ended September 30, 1999 as compared to 1998.
-17-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Tanglewood Commons/ September 30, September 30, September 30, September 30,
Fund VI-VII-VIII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $192,850 $183,587 $579,169 $548,339
Interest income 2,374 4,345 7,663 14,070
-------- -------- --------- --------
195,224 187,932 586,832 562,409
-------- -------- --------- --------
Expenses:
Depreciation 64,677 61,235 190,779 182,721
Management and leasing expenses 16,639 14,953 49,281 44,804
Other operating expenses 18,093 19,150 47,541 24,380
-------- -------- --------- --------
99,409 95,338 287,601 251,905
-------- -------- --------- --------
Net income $ 95,815 $ 92,594 $299,231 $310,504
======== ======== ========= ========
Occupied % 91% 90% 91% 90%
======== ======== ========= ========
Partnership's ownership % in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4% 33.4% 33.4%
======== ======== ========= ========
Cash distribution to the Partnership $ 53,999 $ 50,990 $164,741 $163,797
======== ======== ========= ========
Net income allocated to the
Partnership $ 31,997 $ 30,922 $ 99,928 $103,693
======== ======== ========= ========
</TABLE>
Rental income, depreciation expense, and management and leasing expenses have
increased in 1999 as compared to 1998 due to the increased occupancy at the
center for the nine months ended September 30, 1999. Other operating expenses
increased in 1999 over 1998 due primarily to a timing difference in billing
tenants for common-area maintenance expenses. Tenants are billed an estimated
amount for the current year common-area maintenance which is then reconciled
the following year and the difference billed to the tenants.
-18-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Cherokee Commons/Fund I, II, II-OW, September 30, September 30, September 30, September 30,
VI, and VII Joint Venture 1999 1998 1999 1998
---------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $238,923 $226,733 $703,538 $681,415
Interest income 8 2 47 43
-------- -------- -------- --------
238,931 226,735 703,585 681,458
-------- -------- -------- --------
Expenses:
Depreciation 111,379 111,285 332,906 332,412
Management and leasing expenses 22,863 18,478 73,992 62,966
Other operating expenses 48,342 20,630 28,699 25,680
-------- -------- -------- --------
182,584 150,393 435,597 421,058
-------- -------- -------- --------
Net income $ 56,347 $ 76,342 $267,988 $260,400
======== ======== ======== ========
Occupied % 97% 91% 97% 91%
======== ======== ======== ========
Partnership's ownership % in the
Fund I, II, II-OW, VI, and VII
Joint Venture 10.7% 10.7% 10.7% 10.7%
======== ======== ======== ========
Cash distribution to the Partnership $ 18,629 $ 20,348 $ 63,310 $ 63,224
======== ======== ======== ========
Net income allocated to the
Partnership $ 6,034 $ 8,175 $ 28,696 $ 27,884
======== ======== ======== ========
</TABLE>
Rental income increased in 1999 over 1998 due to increased occupancy. The
increase in operating expenses for the three-month period ended September 30,
1999 was due to increased expenditures for tenant improvements, HAVC repairs,
and parking lot repairs.
-19-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.) NO REPORTS ON FORM 8-K WERE FILED DURING THE THIRD QUARTER OF 1999.
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, 1999 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.
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 116,210
<SECURITIES> 17,711,124
<RECEIVABLES> 388,086
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,546
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,217,966
<CURRENT-LIABILITIES> 443,666
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,774,300
<TOTAL-LIABILITY-AND-EQUITY> 18,217,966
<SALES> 0
<TOTAL-REVENUES> 745,703
<CGS> 0
<TOTAL-COSTS> 67,583
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 678,120
<INCOME-TAX> 0
<INCOME-CONTINUING> 678,120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 678,120
<EPS-BASIC> 0.69
<EPS-DILUTED> 0
</TABLE>
