<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 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
Item 1. Financial Statements
Balance Sheets -- June 30, 1999
and December 31, 1998............................. 3
Statements of Income for Six Months and Three Months
Ended June 30, 1999 and 1998...................... 4
Statements of Partners' Capital for the Year Ended
December 31, 1998 and the Six Months Ended
June 30, 1999....................................... 5
Statements of Cash Flows for the Six
Months Ended June 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
2
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WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets June 30, 1999 December 31, 1998
------ ------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $17,932,005 $18,368,726
Cash and cash equivalents 66,101 75,740
Due from affiliates 427,780 339,387
Organizational costs,
less accumulated amortization of $32,500 in
1999 and $29,688 in 1998 0 1,562
Prepaid expenses and other assets 2,546 4,263
----------- -----------
Total assets $18,428,432 $18,789,678
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 35 $ 5,208
Partnership distributions payable 433,216 396,500
----------- -----------
Total liabilities 433,251 401,708
----------- -----------
Partners' capital:
Limited partners
Class A -- 2,013,506 Units outstanding 17,034,744 16,935,935
Class B -- 404,511 Units outstanding 960,437 1,452,035
----------- -----------
Total partners' capital 17,995,181 18,387,970
----------- -----------
Total liabilities and partners' capital $18,428,432 $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 Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint
ventures (Note 2) $ 268,409 $ 218,705 $ 509,185 $ 416,605
Interest income (1,493) 2,312 146 5,595
--------- --------- --------- ---------
266,916 221,017 509,331 422,200
Expenses:
Legal and accounting 9,720 10,287 15,460 15,058
Partnership administration 14,535 12,095 35,990 23,296
Amortization of organization cost
costs 1 1,563 1,563 3,125
--------- --------- --------- ---------
24,256 23,945 53,013 41,479
--------- --------- --------- ---------
Net income $ 242,660 $ 197,072 $ 456,318 $ 380,721
========= ========= ========= =========
Net income allocated to Class
A Limited Partners $ 480,530 $ 432,142 $ 934,923 $ 864,032
Net loss allocated to Class B
Limited Partners $(237,870) $(235,069) $(478,605) $(483,311)
Net income per Class A Limited
Partner Unit $ 0.24 $ 0.22 $ 0.47 $ 0.44
Net loss per Class B Limited
Partner Unit $ (0.57) $ (0.56) $ (1.16) $ (1.12)
Cash distribution per Class A
Limited Partner Unit $ 0.22 $ 0.21 $ 0.42 $ 0.42
</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 FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<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) 0 934,923 0 (478,605) 0 456,318
Partnership distributions 0 (849,107) 0 0 0 (849,107)
Class B conversion elections 3,989 12,993 (3,989) (12,993) 0 0
--------- ----------- ------- ---------- -- -----------
BALANCE,
June 30, 1999 2,013,506 $17,034,744 404,511 $ 960,437 0 $17,995,181
========= =========== ======= ========== == ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 456,318 $ 380,721
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (509,185) (416,605)
Amortization of organization costs 1,563 3,127
Changes in assets and liabilities:
Prepaids and other assets 1,717 1,050
Accounts payable (5,173) 1,655
--------- ---------
Total adjustments (511,078) (410,773)
--------- ---------
Net cash used in operating activities (54,760) (30,052)
--------- ---------
Cash flow from investing activities:
Investment in joint ventures 0 (109,765)
Distributions received from joint ventures 857,513 837,326
--------- ---------
Net cash provided by
investing activities 857,513 727,561
--------- ---------
Cash flow from financing activities:
Partnership distributions paid (812,392) (811,541)
--------- ---------
Net cash used in financing
activities (812,392) (811,541)
Net decrease in cash and cash equivalents (9,639) (114,032)
Cash and cash equivalents, beginning of year 75,740 194,420
--------- ---------
Cash and cash equivalents, end of period $ 66,101 $ 80,388
========= =========
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
June 30, 1999
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
------------
Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia public
limited partnership, having Leo F. Wells, III and Wells Partners, L.P., a
Georgia limited partnership, as general partners. The Partnership was
formed on December 1, 1992, for the purpose of acquiring, developing,
owning, operating, improving, leasing, and otherwise managing for
investment purposes income-producing commercial properties.
On April 6, 1994, the Partnership commenced an offering of up to
$25,000,000 of Class A or Class B limited partnership units ($10.00 per
unit) pursuant to a Registration Statement on Form S-11 filed under the
Securities Act of 1933. The Partnership commenced active operations when
it received and accepted subscriptions for a minimum of 125,000 units on
April 26, 1994. The Partnership terminated its offering on January 5,
1995, and received gross proceeds of $24,180,174 representing subscriptions
from 1910 Limited Partners.
The Partnership owns interests in properties through ownership in the
following joint ventures: (i) Fund V, Fund VI, Fund VII Associates, a
joint venture between the Partnership, Wells Real Estate Fund V, L.P., and
Wells Real Estate Fund VI, L.P. ("Fund V-VI-VII Joint Venture"); (ii) Fund
VI and Fund VII Associates a joint venture between the Partnership and
Wells Real Estate Fund VI L.P. ("Fund VI-Fund VII Joint Venture"); (iii)
Fund II, III, VI and VII Associates, a joint venture between the
Partnership, Wells Fund II-III Joint Venture, Wells Real Estate Fund VI,
L.P., and Wells Real Estate Fund VII, L.P. (the "Fund II-III-VI-VII Joint
Venture"); (iv) Fund VII and Fund VIII Associates, a joint venture between
the Partnership and Wells Real Estate Fund VIII, L.P. ("Fund VII-Fund VIII
Joint Venture"); (v) Fund VI, Fund VII and Fund VIII Associates, a joint
venture between the Partnership, Wells Real Estate Fund VI, L.P., and Wells
Real Estate Fund VIII, L.P. (the "Fund VI-VII-VIII Joint Venture"); and
(vi) Fund I, II, II-OW, VI, VII Associates, a joint venture between the
Partnership, Wells Real Estate Fund I, the Fund II and Fund II-OW Joint
Venture and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW, VI,
VII Joint Venture").
As of June 30, 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
7
<PAGE>
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 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.
(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
8
<PAGE>
need to fund tenant improvements or other capital expenditures out of
operating cash flow.
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of June 30, 1999, the developed properties owned by the Partnership were
96% occupied as compared to 93.5% for the same period ended June 30, 1998.
Gross revenues of the Partnership were $509,331 and $422,200 for the six
months ended June 30, 1999 and June 30, 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 an
increase in administrative costs.
Net income per Unit for Class A Limited Partners was $0.24 for the three
months ended June 30, 1999. Net loss per Unit for Class B and converted
Class A Limited Partners was $0.57 for the three months ended June 30,
1999.
Cash distributions of $0.22 per weighted average Unit were made to Class A
Limited Partners for the three months ended June 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
$30,052 in 1998 to $54,760 in 1999 due to the decrease in accounts payable
and an increase in administrative expenses. Net cash provided by investing
activities increased from $727,561 in 1998 to $857,518 in 1998, due
primarily to the increase in distributions received from the joint
ventures.
The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to
meet both operating requirements and distributions to Limited Partners. At
this time, given the nature of the joint ventures in which the Partnership
has invested, there are no known improvements and renovations to the
properties expected to be funded from cash flow from operations.
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 June 30, 1999.
9
<PAGE>
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 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.
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 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 June 30, 1999, the Partnership owned an interest in the following
operational properties:
The Marathon Building/Fund V-VI-VII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $242,754 $243,184 $485,508 $485,938
-------- -------- -------- --------
Expenses:
Depreciation 87,647 87,646 175,293 175,292
Management & leasing expenses 6,443 9,890 22,687 19,780
Other operating expenses 2,865 3,099 10,411 6,741
-------- -------- -------- --------
96,955 100,635 208,391 201,813
-------- -------- -------- --------
Net income $145,799 $142,549 $277,117 $284,125
======== ======== ======== ========
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 Partnership $ 98,270 $ 96,989 $190,499 $193,572
Net income allocated to the
Partnership $ 60,813 $ 59,457 $115,586 $118,508
</TABLE>
The increase in management and leasing fees for the six month period ended June
30, 1999, 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 six months ended June 30, 1999
and 1998.
11
<PAGE>
Stockbridge Village III/Fund VI-Fund VII Joint Venture
- ------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ---------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $76,001 $59,509 $156,602 $118,753
------- ------- -------- --------
Expenses:
Depreciation 22,457 22,778 45,043 45,492
Management & leasing expenses 13,183 8,133 18,739 16,364
Other operating expenses 6,611 36,137 9,578 69,354
------- ------- -------- --------
42,251 67,048 73,360 131,210
------- ------- -------- --------
Net income (loss) $33,750 $(7,539) $ 83,242 $(12,457)
======= ======= ======== ========
Occupied % 100% 82% 100% 82%
Partnership's Ownership % in the
Fund VI-Fund VII Joint Venture 56.3% 56.9% 56.3% 56.9%
Cash distribution to Partnership $31,497 $ 9,362 $ 68,969 $ 20,235
Net income (loss) allocated to the
Partnership $19,001 $(4,293) $ 46,865 $ (7,088)
</TABLE>
Net income increased for the six months ended June 30, 1999 as compared to the
same period in 1998 due to a increase in occupancy and a decrease in the
operating expenses due to a bad debt recorded in 1998 which over inflated 1998's
expenses.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
increased to 43.7% for 1999, as compared to 43.1% in 1998, due to additional
fundings by the Partnership.
12
<PAGE>
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $66,480 $74,595 $144,626 $145,682
------- ------- -------- --------
Expenses:
Depreciation 32,648 35,002 74,203 69,654
Management & leasing expenses 8,437 10,229 17,727 19,737
Other operating expenses (3,805) 4,856 986 14,377
------- ------- -------- --------
37,280 50,087 92,916 103,768
------- ------- -------- --------
Net income $29,200 $24,508 $ 51,710 $ 41,914
======= ======= ======== ========
Occupied % 86% 79% 86% 79%
Partnership Ownership % 56.3% 56.9% 56.3% 56.9%
Cash distributed to the Partnership $43,474 $31,076 $ 83,598 $ 59,682
Net income allocated to the
Partnership $16,439 $13,954 $ 29,112 $ 23,894
</TABLE>
Net income increased for the six months ended June 30, 1999 as compared to the
same period in 1998 due to a increase in occupancy and a decrease in the
operating expenses due to common area maintenance reimbursements being greater
in 1999. Tenants are billed an estimated amount for the current year common
area maintenance which is then reconciled the second quarter of the following
year and the difference billed to the tenant.
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
funding by Wells Fund VI.
13
<PAGE>
880 Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $227,761 $208,645 $457,824 $421,880
-------- -------- -------- --------
Expenses:
Depreciation 94,128 94,129 188,257 188,033
Management & leasing expenses 42,063 29,888 80,937 59,252
Other operating expenses 387 13,797 24,781 36,830
-------- -------- -------- --------
136,578 137,814 293,975 284,115
-------- -------- -------- --------
Net income $ 91,183 $ 70,831 $163,849 $137,765
======== ======== ======== ========
Occupied % 94% 100.0% 94% 100.0%
Partnership Ownership % 49.1% 49.9% 49.1% 49.9%
Cash distributed to the Partnership $ 94,147 $ 86,732 $166,352 $170,469
Net income allocated to the
Partnership $ 44,744 $ 34,984 $ 80,401 $ 67,789
</TABLE>
Rental income has increased for the six months ended June 30, 1999 as compared
to the same period in 1998 due primarily to an underestimate of straight line
adjustments in 1998. Expenses decreased due to common area maintenance
reimbursements. Tenants are billed an estimated amount for the current year
common area maintenance which is then reconciled the second quarter of the
following year and the difference billed to the tenant.
14
<PAGE>
The Hannover Center/Fund VII - Fund VIII Joint Venture
- ------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,346 $26,061 $112,493 $52,122
------- ------- -------- -------
Expenses:
Depreciation 10,982 10,982 21,963 21,963
Management & leasing expenses 5,583 2,661 13,042 5,322
Other operating expenses (499) 6,173 2,918 14,289
------- ------- -------- -------
16,066 19,816 37,923 41,574
------- ------- -------- -------
Net income $40,280 $ 6,245 $ 74,570 $10,548
======= ======= ======== =======
Occupied % 100% 50% 100% 50%
Partnership's Ownership % in the
Fund VII - VIII Joint Venture 36.6% 36.6% 36.6% 36.6%
Cash distribution to Partnership $16,766 $ 5,725 $ 31,643 $10,846
Net income allocated to the
Partnership $14,763 $ 2,301 $ 27,330 $ 3,918
</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 six months
ended June 30, 1999, as compared to the same period of 1998, due to increased
occupancy at the property. Operating expenses decreased due to differences in
the annual adjustments for the prior year common area maintenance. Tenants are
billed an estimated amount for the current year common area maintenance which is
then reconciled the second quarter of the following year and the difference
billed to the tenant.
15
<PAGE>
CH2M Hill/Fund VII - Fund VIII Joint Venture
- --------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- ------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $143,856 $144,440 $287,712 $277,018
-------- -------- -------- --------
Expenses:
Depreciation 67,879 59,346 136,825 113,891
Management & leasing expenses 21,115 22,568 47,996 50,689
Other operating expenses (27,771) 13,584 (10,419) 29,065
-------- -------- -------- --------
61,223 95,498 174,402 193,645
-------- -------- -------- --------
Net income $ 82,633 $ 48,942 $113,310 $ 83,373
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund VII-VIII Joint Venture 36.6% 36.6% 36.6% 36.6%
Cash distribution to Partnership $ 55,954 $ 41,400 $ 91,541 $ 73,230
Net income allocated to the
Partnership $ 30,285 $ 18,061 $ 41,528 $ 31,068
</TABLE>
Expenses of the property decreased for the six months ended June 30, 1999 as
compared to the same period for 1998, due to common area maintenance billings to
tenants that were overestimated in 1998. Tenants are billed an estimated amount
for the current year common area maintenance which is then reconciled the second
quarter of the following year and the difference billed to the tenant.
16
<PAGE>
BellSouth Building/Fund VI - Fund VII - Fund VIII Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- ------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $380,277 $380,277 $760,554 $760,554
Interest income 1,160 2,098 2,302 4,172
-------- -------- -------- --------
381,437 382,375 762,856 764,726
-------- -------- -------- --------
Expenses:
Depreciation 111,606 110,953 223,212 221,842
Management & leasing expenses 49,041 47,381 96,933 95,196
Other operating expenses 106,051 102,655 209,835 190,065
-------- -------- -------- --------
266,698 260,989 529,980 507,103
-------- -------- -------- --------
Net income $114,739 $121,386 $232,876 $257,623
======== ======== ======== ========
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 Partnership $ 78,374 $ 80,376 $157,883 $165,690
Net income allocated to the
Partnership $ 38,317 $ 40,536 $ 77,769 $ 86,033
</TABLE>
Net income has decreased slightly due primarily to increased expenditures in
electricity, HVAC repairs, lightning replacement and various other operating
expenses.
17
<PAGE>
Tanglewood Commons/Fund VI,VII,VIII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $193,288 $182,139 $386,319 $364,752
Interest income 2,353 4,587 5,289 9,725
-------- -------- -------- --------
195,641 186,726 391,608 374,477
-------- -------- -------- --------
Expenses:
Depreciation 64,677 61,059 126,102 121,486
Management & leasing expenses 17,537 15,032 32,642 29,851
Other operating expenses 10,367 (19,872) 29,448 5,230
-------- -------- -------- --------
92,581 56,219 188,192 156,567
-------- -------- -------- --------
Net income $103,060 $130,507 $203,416 $217,910
======== ======== ======== ========
Occupied % 91% 87% 91% 87%
Partnership's Ownership % in the
Fund VI - VII -- Fund VIII Joint
Venture 33.4% 33.4% 33.4% 33.4%
Cash distribution to Partnership $ 56,418 $ 63,926 $110,742 $112,807
Net income allocated to the
Partnership $ 34,417 $ 43,583 $ 67,931 $ 72,771
</TABLE>
Rental income, depreciation expenses and management and leasing expenses have
increases in 1999 as compared to 1998, due to the increased occupancy at the
center. 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 second quarter of the following year
and the difference billed to the tenant.
18
<PAGE>
Cherokee Property - Fund I, II, II-OW, VI, VII Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $237,232 $225,705 $464,615 $454,682
Interest income 19 19 39 41
-------- -------- -------- --------
237,251 225,724 464,654 454,723
-------- -------- -------- --------
Expenses:
Depreciation 111,415 110,564 221,527 221,127
Management & leasing expenses 26,135 18,737 51,129 44,488
Other operating expenses 9,772 1,919 (19,643) 5,050
-------- -------- -------- --------
147,322 131,220 253,013 270,665
-------- -------- -------- --------
Net income $ 89,929 $ 94,504 $211,641 $184,058
======== ======== ======== ========
Occupied % 95.9% 91.0% 95.9% 91.0%
Partnership Ownership % 10.7% 10.7% 10.7% 10.7%
Cash distributed to the Partnership $ 20,320 $ 22,720 $ 44,680 $ 42,876
Net income allocated to the
Partnership $ 9,630 $ 10,120 $ 22,663 $ 19,709
</TABLE>
Rental income increased in 1999 over 1998 due to increased occupancy. The
decrease in operating expense for the six month period ended June 30, 1999, as
compared to the same period in 1998 was due to common area maintenance
reimbursement billings. Tenants are billed an estimated amount for the current
year common area maintenance which is then reconciled the second quarter of the
following year and the difference billed to the tenant. The increase in
operating expenses for the three month period ended June 30, 1998 was due to
increased expenditures for tenant improvements, HVAC repairs and a partial
demolition of a tenant suite.
19
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the second 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: August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 66,101
<SECURITIES> 17,932,005
<RECEIVABLES> 427,780
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,546
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,428,432
<CURRENT-LIABILITIES> 433,251
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,995,181
<TOTAL-LIABILITY-AND-EQUITY> 18,428,432
<SALES> 0
<TOTAL-REVENUES> 507,331
<CGS> 0
<TOTAL-COSTS> 53,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 456,318
<INCOME-TAX> 0
<INCOME-CONTINUING> 456,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456,318
<EPS-BASIC> .47
<EPS-DILUTED> 0
</TABLE>
