<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 March 31, 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 0-25606
--------------
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
-----
Page No.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C>
Balance Sheets - March 31, 1999
and December 31, 1998............................... 3
Statements of Income for the Three Months
Ended March 31, 1999 and 1998....................... 4
Statements of Partners' Capital for the Year Ended
December 31, 1998 and the Three Months Ended
March 31, 1999...................................... 5
Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998................ 6
Condensed Notes to Financial Statements.............. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................... 9
PART II. OTHER INFORMATION.......................................... 20
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1999 December 31, 1998
------ -------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) 18,158,819 18,368,726
Due from affiliates 375,350 339,387
Cash and cash equivalents 58,726 75,740
Organizational costs, less accumulated
amortization of $32,500
in 1999 and $29,688 in 1998 0 1,562
Prepaid expenses and other assets 2,746 4,263
----------- -----------
Total assets $18,595,641 $18,789,678
=========== ===========
Liabilities And Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 1,345 $ 5,208
Partnership distributions payable 407,801 396,500
----------- -----------
Total liabilities 409,146 401,708
----------- -----------
Partners' capital:
Limited Partners
Class A 2,013,506 units outstanding 16,988,188 16,935,935
Class B 404,511 units outstanding 1,198,307 1,452,035
----------- -----------
Total partners' capital 18,186,495 18,387,970
----------- -----------
Total liabilities and partners' capital $18,595,641 $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
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Equity in income of joint ventures (Note 2) $ 240,775 $ 197,900
Interest income 1,639 3,283
--------- ---------
$ 242,414 $ 201,183
--------- ---------
Expenses:
Legal and accounting $ 5,740 $ 4,771
Partnership administration 21,454 11,201
Amortization of organization costs 1,562 1,562
--------- ---------
28,756 17,534
--------- ---------
Net income $ 213,658 $ 183,649
========= =========
Net income allocated to
Class A Limited Partners $ 454,393 $ 431,890
Net loss allocated to
Class B Limited Partners $(240,735) $(248,241)
Net income per weighted average
Class A Limited Partner Unit $ .23 $ .22
Net loss per weighted average
Class B Limited Partner Unit $ (.60) $ (.56)
Cash distribution per weighted average
Class A Limited Partner Unit $ .21 $ .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, 1997 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998
<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, 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) 0 454,393 0 (240,735) 0 213,658
Partnership distributions 0 (415,133) 0 0 0 (415,133)
Class B conversion elections 3,989 12,993 (3,989) (12,993) 0 0
--------- ----------- ------- ---------- -- -----------
BALANCE,
March 31, 1999 2,013,506 $16,988,188 404,511 $1,198,307 $0 $18,186,495
========= =========== ======= ========== == ===========
</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>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 213,658 $ 183,649
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (240,775) (197,900)
Amortization of organization costs 1,562 1,562
Changes in assets and liabilities:
Prepaids and other assets 1,517 251
Accounts payable (3,863) 2,095
--------- ---------
Total adjustments (241,559) (193,992)
--------- ---------
Net cash used in operating activities (27,901) (10,343)
--------- ---------
Cash flow from investing activities:
Investment in joint ventures 0 (7,258)
Distributions received from joint ventures 414,719 416,360
--------- ---------
Net cash provided by
investing activities 414,719 409,102
Cash flow from financing activities:
Partnership distributions paid (403,832) (404,131)
--------- ---------
Net decrease in cash and cash equivalents (17,014) (5,372)
Cash and cash equivalents, beginning of year 75,740 194,420
--------- ---------
Cash and cash equivalents, end of period $ 58,726 $ 189,048
========= =========
Supplemental disclosure of noncash investing
activities:
Deferred project costs applied to real estate
and joint venture property $ 0 $ 416
========= =========
</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
March 31, 1999
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
------------
Wells Real Estate Fund IV, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The partnership was formed on October 25, 1990, for the
purpose of acquiring, developing, constructing, owning, operating,
improving, leasing and otherwise managing for investment purposes income-
producing commercial properties.
On April 5, 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 equity 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 March 31, 1999, the Partnership owned interest 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
7
<PAGE>
located in Roswell, Georgia ("Holcomb Bridge Road Property"); (v) a retail
center located in Stockbridge, Georgia (the "Hannover Center"); (vi) a
four-story office building located in Jacksonville, Florida (the "BellSouth
Property"); (vii) an office building located in Gainesville, Florida (the
"CH2M Hill at Gainesville Property"); (viii) a retail center located in
Clemmons, 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.
(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, 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 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, 1998.
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 March 31, 1999, the developed properties owned by the Partnership were 96%
occupied. Gross revenues of the Partnership were $242,414 and $201,183 for the
three months ended March 31, 1999 and March 31, 1998, respectively. The
revenues increased in 1999 compared to 1998 due to the increase in income from
the joint ventures. Expenses of the Partnership increased primarily due to
increases in administrative costs.
Net income per weighted average Unit for Class A Limited Partners was $0.23 for
the three months ended March 31, 1999. Net loss per weighted average Unit for
Class B and converted Class A Limited Partners was $0.60 for the three months
ended March 31, 1999.
Cash distributions of $0.21 per weighted average Unit were made to Class A
Limited Partners for the three months ended March 31, 1999 and 1998. 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 $10,343
in 1998 to $27,901 in 1999 due to the decrease in accounts payable and an
increase in administrative expenses. Net cash provided by investing activities
increased from $409,102 in 1998 to $414,719 in 1999 due primarily to the
decrease in investments in 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.
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 by March 31, 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.
Some testing of systems has begun and all testing is expected to be complete by
June 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant. The Partnership's affiliated entities are purchasing the upgrade for
the accounting and property management package system; however, it is not slated
to be available until the end of the second quarter of 1999. At the present
time, it is believed that all major non-information technology systems are Year
2000 compliant. The cost to upgrade any non-compliant systems is believed to be
immaterial.
9
<PAGE>
The Partnership is in the process of confirming with the Partnership's vendors,
including third-party service providers such as banks, that their systems will
be Year 2000 compliant. Based on the information received thus far, the primary
third-party service providers with which the Partnership has relationships have
confirmed their Year 2000 readiness.
The Partnership relies on computers and operating systems provided by equipment
manufacturers, and also on application software designed for use with its
accounting, property management and investment portfolio tracking. The
Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on the future operations or financial
condition of the Partnership. The Partnership will perform due diligence as to
the Year 2000 readiness of each property owned by the Partnership and each
property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e., microcontrollers)
is limited to facilities related matters, such as office security systems and
environmental control systems.
The Partnership is currently formulating contingency plans to cover any areas of
concern. Alternate means of operating the business are being developed in the
unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors. A written plan is being developed for testing and dispensation to each
staff member of the 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>
Property Operations
- -------------------
As of March 31, 1999, the Partnership owned interest in the following
operational properties:
The Marathon Building / Fund V-VI-VII Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $242,754 $242,754
-------- --------
Expenses:
Depreciation 87,646 87,646
Management and leasing expenses 16,244 9,890
Other operating expenses 7,546 3,642
-------- --------
111,436 101,178
-------- --------
Net income $131,318 $141,576
======== ========
Occupied % 100% 100%
Partnership Ownership % 41.7% 41.7%
Cash distributed to the Partnership $ 92,229 $ 96,583
Net income allocated to the Partnership $ 54,773 $ 59,051
</TABLE>
The increase in management and leasing fees in first quarter 1999 over the first
quarter 1998 was due to a under accrual of fees in 1998. The increase in
operating expenses was due primarily to increases in accounting and
administrative fees.
Cash distributions allocated to the Partnership and net income allocated to the
Partnership remained relatively stable for the three months ended March 31, 1999
and 1998.
11
<PAGE>
Stockbridge Village III/Fund VI-Fund VII Joint Venture Three Months Ended
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $80,601 $59,244
Expenses:
Depreciation 22,586 22,714
Management and leasing expenses 5,556 8,231
Other operating expenses 2,967 33,217
------- -------
31,109 64,162
------- -------
Net (loss) income $49,492 $(4,918)
======= =======
Occupied % 100% 82%
Partnership's Ownership % in the
Fund VI-Fund VII Joint Venture 56.3% 57.0%
Cash distributed to the Partnership $37,472 $10,873
Net (loss) income allocated to the Partnership $27,863 $(2,795)
</TABLE>
A net loss is reflected for the first quarter of 1998, as compared to net income
of $49,492, for the same period in 1999. The loss in 1998 was due to a decrease
in rental income and an increase in expenses, which were the result of a bad
debt reserve and the receivable due from this tenant has been turned over to
lawyers for collection. The space is now being leased by RMS/Fazoli's which
signed a 13 year lease that commenced in December, 1998.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 56.3% for 1999, as compared to 57.0% in 1998, due to additional
fundings by Wells Fund VI.
12
<PAGE>
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $78,146 $71,087
------- -------
Expenses:
Depreciation 41,555 34,652
Management and leasing expenses 9,290 9,508
Other operating expenses 4,791 9,521
------- -------
55,636 53,681
------- -------
Net income $22,510 $17,406
======= =======
Occupied % 86% 79%
Partnership's Ownership % in the 56.3% 57.0%
Cash distributed to the Partnership $40,124 $28,606
Net income allocated to the Partnership $12,673 $ 9,940
</TABLE>
Rental income, expenses and net income increased for the first quarter of 1999,
as compared to the same period in 1998, due primarily to lease-up efforts and
increased occupancy at this property. Negotiations are being conducted to lease
the remaining space.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 56.3% for 1999, as compared to 57.0% in 1998, due to additional
fundings by Wells Fund VI.
13
<PAGE>
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $230,063 $213,235
-------- --------
Expenses:
Depreciation 94,129 93,904
Management and leasing expenses 38,874 29,364
Other operating expenses 24,394 23,033
-------- --------
157,397 146,301
-------- --------
Net income $ 72,666 $ 66,934
======== ========
Occupied % 94% 94.1%
Partnership's Ownership % in the
Fund II-III-VI-VII Joint Venture 49.1% 49.1%
Cash distributed to the Partnership $ 72,205 $ 87,737
Net income allocated to the
Partnership $ 35,657 $ 32,806
</TABLE>
While occupancy remained the same at March 31, 1999 and March 31, 1998, rental
income, management and leasing fees and net income have increased as compared to
1998 due primarily to two tenants occupying space at the property late in the
first quarter of 1998.
14
<PAGE>
The Hannover Center/Fund VII-Fund VIII Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $56,147 $26,061
------- -------
Expenses:
Depreciation 10,981 10,981
Management & leasing expenses 7,459 2,661
Other operating expenses 3,417 8,116
------- -------
21,857 21,758
------- -------
Net income $34,290 $ 4,303
======= =======
Occupied % 100% 50%
Partnership's Ownership % in the
Fund VII-Fund VIII Joint Venture 36.6% 37.4%
Cash distribution to Partnership $14,876 $ 5,121
Net income allocated to the Partnership $12,567 $ 1,617
</TABLE>
On April 1, 1996, Fund VII-Fund VIII Joint Venture acquired a 1.01 acre tract of
land and a 12,000 square foot combination retail/office building known as the
Hannover Retail Center (the "Hannover 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 and opened for business on
June 22, 1996. Prudential and Norwest Financial occupied the remaining space in
November 1998 and signed a five year lease.
Rental income, net income and cash distributions increased for the three months
ended March 31, 1999, compared to the same period of 1998, due to increased
occupancy at the property. Expenses remained relatively stable.
The Partnership ownership in the Fund VII-Fund VIII Joint Venture decreased due
to construction funding by Wells Fund VIII, which decreased to Partnership's
ownership in the Fund VII-Fund VIII Joint Venture.
15
<PAGE>
CH2M Hill at Gainesville/Fund VII - Fund VIII Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $143,856 $132,578
-------- --------
Expenses:
Depreciation 68,946 54,545
Management & leasing expenses 26,881 28,121
Other operating expenses 17,352 15,481
-------- --------
113,179 98,147
-------- --------
Net income $ 30,677 $ 34,431
======== ========
Occupied % 100% 100.0%
Partnership's Ownership % in the
Fund VII - VIII Joint Venture 36.6% 37.4%
Cash distribution to Partnership $ 35,587 $ 31,830
Net income allocated to the Partnership $ 11,243 $ 13,006
</TABLE>
Rental income increased from 93% to 100% , due primarily to Affiliated Engineers
signing a five-year lease beginning March 27, 1998, which occupied the remaining
space. Depreciation, management and leasing expenses increased for the first
quarter of 1999 due primarily to increased occupancy. The Partnership ownership
in the Fund VII-VIII Joint Venture decreased due to construction fundings by
Wells Fund VIII.
16
<PAGE>
BellSouth Property/Fund VI-VII-VIII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $380,277 $380,277
Interest income 1,142 2,074
-------- --------
381,419 382,351
-------- --------
Expenses:
Depreciation 111,606 110,889
Management & leasing expenses 47,892 47,815
Other operating expenses 103,784 87,410
-------- --------
263,282 246,114
-------- --------
Net income $118,137 $136,237
======== ========
Occupied % 100% 100%
Partnership's Ownership % in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4%
Cash distribution to Partnership $ 79,509 $ 85,314
Net income allocated to the Partnership $ 39,452 $ 45,497
</TABLE>
Net income has decreased slightly due primarily to increased expenditures in
electricity , HVAC repairs, lighting replacements and various other operating
expenses.
17
<PAGE>
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
Revenues:
<S> <C> <C>
Rental income $193,031 $182,613
Interest income 2,936 5,138
-------- --------
195,967 187,751
-------- --------
Expenses:
Depreciation 61,425 60,427
Management & leasing expense 15,105 14,819
Other operating expenses 19,081 25,102
-------- --------
95,611 100,348
-------- --------
Net income $100,356 $ 87,403
======== ========
Occupied % 91% 87%
Partnership's Ownership % in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4%
Cash distribution to Partnership $ 54,324 $ 48,881
Net income allocated to Partnership $ 33,514 $ 29,188
</TABLE>
Rental income, net income and cash distributions to the Partnership are greater
in 1999 as compared to 1998 primarily to the increased occupancy at the
property.
18
<PAGE>
Cherokee Commons /Fund I, II, II-OW, VI, VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $227,383 $228,977
Interest income 20 22
-------- --------
227,403 228,999
-------- --------
Expenses:
Depreciation 110,112 110,563
Management & leasing expenses 26,135 25,751
Other operating expenses (30,556) 3,131
-------- --------
105,691 139,445
-------- --------
Net income $121,712 $ 89,554
======== ========
Occupied % 96% 91%
Partnership's Ownership % in the
Fund I, II, II-OW, VI, VII Joint Venture 10.7% 10.7%
Cash distribution to Partnership $ 24,360 $ 20,156
Net income allocated to the Partnership $ 13,033 $ 9,589
</TABLE>
Rental income remained relatively stable in 1999 as compared to 1998. The
decrease in operating expenses in 1999, as compared to 1998 are due to increased
CAM billings to tenants that were under accrued in 1998.
19
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the first 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: May 11, 1999 By: /s/Leo F. Wells, III
--------------------
Leo F. Wells, III, as Individual
General Partner and as President,
and Chief Financial Officer of
Wells Capital, Inc., the General
Partner of Wells Partners, L.P.
20
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