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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the fiscal year ended December 31, 1998 or
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[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from ____________________ to _________________________
Commission file number 0-25606
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Wells Real Estate Fund VII, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2022629
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
3885 Holcomb Bridge Road Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
CLASS A UNITS
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(Title of Class)
CLASS B UNITS
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(Title of Class)
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
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Aggregate market value of the voting stock held by non-affiliates: Not
---
Applicable
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PART I
ITEM 1. BUSINESS
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General
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Wells Real Estate Fund VII, L.P. (the "Partnership"), is a Georgia public
limited partnership organized on December 1, 1992, under the laws of the state
of Georgia, having Leo F. Wells, III and Wells Partners, L.P., a Georgia non-
public 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 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 did not commence active operations until 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, composed of
two classes of limited partnership interests, Class A and Class B limited
partnership units.
The Partnership owns interests in properties through ownership in the following
joint ventures: (i) Fund V, Fund VI, Fund VII Associates, a joint venture among
the Partnership, Wells Real Estate Fund V, L.P., and Wells Real Estate Fund VI,
L.P. ("Fund V-VI-VII Joint Venture"); (ii) Fund VI and Fund VII Associates, a
joint venture between the Partnership and Wells Real Estate Fund VI, L.P. ("Fund
VI-Fund VII Joint Venture"); (iii) Fund II, III, VI and VII Associates, a joint
venture among the Partnership, Wells Fund II-III Joint Venture and Wells Real
Estate Fund VI, L.P (the "Fund II-III-VI-VII Joint Venture"); (iv) Fund VII and
Fund VIII Associates, a joint venture between the Partnership and Wells Real
Estate Fund VIII, L.P. ("Fund VII-Fund VIII Joint Venture"); (v) Fund VI, Fund
VII and Fund VIII Associates, a joint venture among the Partnership, Wells Real
Estate Fund VI, L.P., and Wells Real Estate Fund VIII, L.P. (the "Fund VI-VII-
VIII Joint Venture"); and (vi) Fund I, II, II-OW, VI, VII Associates, a joint
venture among the Partnership, Wells Real Estate Fund I, the Fund II and Fund
II-OW Joint Venture and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW,
VI, VII Joint Venture").
As of December 31, 1998, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a three-
story office building located in Appleton, Wisconsin (the "Marathon Building");
(ii) two retail buildings located in Stockbridge, Georgia ("Stockbridge Village
III") and a retail shopping center expansion in Stockbridge, Georgia
("Stockbridge Village I Expansion"); (iii) an office/retail center located in
Roswell, Georgia ("Holcomb Bridge Road"); (iv) a retail center located in
Stockbridge, Georgia ("the Hannover Center"); (v) a four-story office building
located in Jacksonville, Florida ("BellSouth"); (vi) an office building located
in Gainesville, Florida ("CH2M Hill"); (vii) a retail center in Winston-Salem,
North Carolina ("Tanglewood Commons"); and (viii) a retail center located in
Cherokee County, Georgia ("Cherokee Commons").
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Employees
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The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., a General Partner, perform a
full range of real estate services including leasing and property management,
accounting, asset management and investor relations for the Partnership. See
Item 11 - "Compensation of General Partners and Affiliates," for a summary of
the fees paid to the General Partners and their affiliates during the fiscal
year ended December 31, 1998.
Insurance
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Wells Management Company, Inc., an affiliate of the General Partner, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management
of the registrant, the properties are adequately insured.
Competition
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The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the general partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES.
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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. As of December 31, 1998, the
properties had an occupancy rate of 95.65%. As of December 31, 1997, the seven
properties that were in operation had an occupancy rate of 89.2%. As of
December 31, 1996, the four properties that were in operation had an occupancy
rate of 89.2%.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1998, assuming no exercise of renewal options
or termination rights:
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<TABLE>
<CAPTION>
Partnership's Percentage of
Share of Perrcentage Total
Number of Annualized Annualized of Total Annualized
Year of Lease Leases Square Feet Gross Base Gross Base Square Feet Gross Base
Expiration Expiring Expiring Rent (1) Rent Expiring Rent
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<S> <C> <C> <C> <C> <C> <C>
1999 9 14,617 191,338 63,923 4.03% 3.80%
2000 6 11,080 96,757 27,525 3.05% 1.92%
2001 16 51,383 582,946 314,198 14.15% 11.59%
2002 20 43,019 629,252 289,898 11.85% 12.51%
2003 10 18,136 263,430 110,621 5.00% 5.24%
2004 2 6,830 99,111 30,382 1.88% 1.97%
2005 (2) 2 59,023 718,989 300,565 16.26% 14.29%
2006 (3) 5 155,359 2,402,599 916,856 42.79% 47.75%
2007 1 3,600 46,793 5,012 0.99% 0.93%
2008 0 0 0 0 0.00% 0.00%
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71 363,047 $5,031,215 $2,058,982 100.00% 100.00%
</TABLE>
(1) Average monthly gross rent over the life of the lease, annualized.
(2) Primarily expiration of CH2M Hill lease, Gainesville, Florida.
(3) Reflects expirations of Marathon Building, BellSouth, and Bertucci's.
The following describes the properties in which the Partnership owned an
interest as of December 31, 1998:
Fund V-VI-VII Joint Venture
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On September 8, 1994, the Partnership, Wells Real Estate Fund V, L.P. ("Wells
Fund V") and Wells Real Estate Fund VI, L.P. ("Wells Fund VI"), both of which
are Georgia public limited partnerships affiliated with the Partnership through
common general partners, entered into a Joint Venture Agreement known as Fund V,
Fund VI and Fund VII Associates (the "Fund V-VI-VII Joint Venture"). The
investment objectives of Wells Fund V and Wells Fund VI are substantially
identical to those of the Partnership. The Partnership owns a 42% interest in
the following property through the Fund V-VI-VII Joint Venture:
The Marathon Building
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On September 16, 1994, the Fund V-VI-VII Joint Venture purchased a three-story
office building for a purchase price of $8,250,000, excluding acquisition costs,
containing approximately 76,000 rentable square feet, located on approximately
6.2 acres of land in Appleton, Wisconsin (the "Marathon Building"). The funds
used by the Fund V-VI-VII Joint Venture to acquire the Marathon Building were
derived from capital contributions made by the Partnership, Wells Fund V and
Wells Fund VI totaling $3,470,958, $1,337,505, and $3,470,958, respectively, for
total contributions to the Fund V-VI-VII Joint Venture of $8,279,421 including
acquisition costs. The Partnership owns an approximately 42% equity interest in
the Fund V-VI-VII Joint Venture.
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The entire Marathon Building is leased to Jaakko Poyry Fluor Daniel for a period
of twelve years, three and one-half months, with options to renew the lease for
two additional five-year periods. The annual base rent is $910,000. The
current lease expires on December 31, 2006. The lease agreement is a net lease
in that the tenant is responsible for the operational expenses including real
estate taxes.
The occupancy rate at the Marathon Building was 100% for 1998, 1997, and 1996.
The average annual rental per square foot in the Marathon Building was $12.78
for 1998, $12.74 for 1997, and $12.78 for 1996.
Fund VI - Fund VII Joint Venture
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On December 9, 1994, the Partnership and Wells Fund VI entered into a Joint
Venture Agreement known as Fund VI and Fund VII Associates ("Fund VI-Fund VII
Joint Venture"). As of December 31, 1998, the Partnership contributed $3,372,774
and Wells Fund VI had contributed $2,604,916, including its cost to acquire
land, to the Fund VI-Fund VII Joint Venture for the acquisition and development
of the Stockbridge Village III and the Stockbridge Village I Expansion. As of
December 31, 1998, the Partnership's equity interest in the Fund VI-VII Joint
Venture was approximately 56.3%, and Wells Fund VI's equity interest in the Fund
VI-VII Joint Venture was approximately 43.7%. The Partnership owns interests in
the following two properties through the Fund VI-Fund VII Joint Venture:
Stockbridge Village III
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In April 1994, Wells Fund VI purchased 3.27 acres of real property located on
the north side of Georgia State Route 138 at Mt. Zion Road, Clayton County,
Georgia for a cost of $1,015,673. This tract of land is located directly across
Route 138 from the Stockbridge Village Shopping Center which was developed and
is owned by an affiliate of the Partnership. On December 9, 1994, Wells Fund VI
contributed the property as a capital contribution to the Fund VI - Fund VII
Joint Venture.
As of December 31, 1998, the Partnership had contributed $1,917,483, and Wells
Fund VI had contributed $1,033,285 to the Fund VI-Fund VII Joint Venture for the
acquisition and development of the Stockbridge Village III Property.
Kenny Rogers first occupied the 3,200 square foot restaurant, which was
completed in March 1995, at a cost of approximately $400,000 excluding land.
The space is now being leased by RMS / Fazoli's, which signed a 13 year lease
that commenced on December 10, 1998.
Construction began in January, 1995, on a second out-parcel building containing
approximately 15,000 square feet for approximately $1,500,000 excluding land. In
October, 1995, Damon's Clubhouse occupied 6,732 square feet. The term of the
lease is for nine years and eleven months commencing October, 1995. The initial
annual base rent is $102,375 through March, 2001 and $115,375 thereafter.
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The occupancy rate at year end at the Stockbridge Village III Project was 100%
in 1998, and 1997 and 87% in 1996. The average effective annual rental per
square foot at the Stockbridge Village III Project was $13.08 for 1998, $15.67
for 1997 and $14.15 for 1996.
Stockbridge Village I Expansion
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On June 7, 1995, the Fund VI-Fund VII Joint Venture purchased 3.38 acres of real
property located in Clayton County, Georgia for a total price of approximately
$718,000. The Stockbridge Village I Expansion consists of a multi-tenant
shopping center containing approximately 29,200 square feet. Construction was
substantially complete in April, 1996, with Cici's Pizza occupying a 4,000
square foot restaurant. The term of the lease is for 9 years and 11 months
commencing in April, 1996. The initial annual base rent is $48,000. In the
third year, the annual base rent increases to $50,000, in the sixth year to
$52,000, and in the ninth year to $56,000. Eleven additional tenants have
occupied 17,600 square feet at the property in 1996, 1997 and 1998.
Negotiations are being conducted to lease the remaining space.
As of December 31, 1998, the Partnership contributed a total of $1,455,291, and
Wells Fund VI had contributed a total of $1,571,631, for a total contribution of
approximately $3,026,922 toward the development and construction of the
Stockbridge Village I Expansion.
The occupancy rate at the Stockbridge Village 1 Expansion was 81% at year end
1998, 74% for 1997, and 36% for 1996, the first year of occupancy. The average
effective annual rental per square foot was $10.08 for 1998, $6.82 for 1997 and
$2.69 for 1996.
Fund II-III-VI-VII Joint Venture/Holcomb Bridge Road Property
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On January 10, 1995, the Partnership, Fund II-Fund III Joint Venture, and Wells
Fund VI entered into a Joint Venture Agreement known as Fund II, III, VI and VII
Associates ("Fund II-III-VI-VII Joint Venture"). The Fund II-Fund III Joint
Venture is a joint venture between Wells Real Estate Fund III, L.P., a Georgia
public limited partnership having Leo F. Wells, III and Wells Capital, Inc. as
general partners, and an existing joint venture (the "Fund II-Fund II-OW Joint
Venture") formed by Wells Real Estate Fund II ("Wells Fund II"), a Georgia
public limited partnership having Leo F. Wells, III and Wells Capital, Inc. as
general partners, and Wells Real Estate Fund II-OW ("Wells Fund II-OW"), a
Georgia public limited partnership having Leo F. Wells, III and Wells Capital,
Inc. as general partners. The investment objectives of Wells Fund II, Wells
Fund II-OW, Wells Fund III and Wells Fund VI are substantially identical to
those of the Partnership.
In January 1995, the Fund II-Fund III Joint Venture contributed to the Fund II-
III-VI-VII Joint Venture approximately 4.3 acres of land at the intersection of
Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia (the
"Holcomb Bridge Road Property") including land improvements. Development is
substantially complete on two buildings containing a total of approximately
49,500 square feet. Fifteen tenants occupied the Holcomb Bridge Road Property
as of December 31, 1998, for an occupancy rate of 94% in 1997 and 63% in 1996..
The average effective annual rental was $17.41 for 1998, $13.71 for 1997, and
$9.87 per square foot for 1996.
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As of December 31, 1998, Fund II - Fund III Joint Venture had contributed
$1,729,116 in land and improvements for an equity interest of approximately
24.0%, Wells Fund VI had contributed $1,817,179 for an equity interest of
approximately 26.9%, and the Partnership had contributed $3,489,170 for an
equity interest of approximately 49.1%. The total cost to develop the Holcomb
Bridge Road Property is approximately $5,902,000, excluding land.
Fund VII - Fund VIII Joint Venture
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On February 10, 1995, the Partnership and Wells Real Estate Fund VIII, L.P.
("Wells Fund VIII"), a Georgia public limited partnership affiliated with the
Partnership through common general partners, entered into a Joint Venture
Agreement known as Fund VII and Fund VIII Associates (the "Fund VII- Fund VIII
Joint Venture"). The investment objectives of Wells Fund VIII are substantially
identical to those of the Partnership. The Partnership holds an approximate 37%
equity interest and Wells Fund VIII holds an approximate 63% equity interest in
the Fund VII-Fund VIII Joint Venture which owns and operates an office building
and a retail/office building as described below. As of December 31, 1998, the
Partnership had contributed $2,474,725 and Wells Fund VIII had contributed
$4,267,721 for a total cost of $6,742,345 to the Fund VII - Fund VIII Joint
Venture for the acquisition and development of the property.
The Hannover Property
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On April 1, 1996, the Partnership contributed 1.01 acres of land located in
Clayton County, Georgia, and improvements thereon, valued at $512,000, to the
Fund VII-Fund VIII Joint Venture for the development of a 12,040 square foot,
single story combination retail/office building. As of December 31, 1997, the
Partnership had funded approximately $1,437,801 for the development of the
Hannover property, in addition to the cost of the land, and Wells Fund VIII had
contributed $190,311 to the joint venture for the development of the property.
A nine year, eleven month lease has been signed with Moovies, Inc., a video sale
and rental store, to occupy 6,020 square feet. The annual base rent for the
initial term of 36 months is $93,310, for the second term of 36 months,
$102,340, for the third term of 36 months, $111, 370, and the final term of
eleven months, $110,367. The lease provides for two five year extensions at
market rate. The tenant, which provided its own build-out from the existing
shell, moved into the building and opened for business September 22, 1996. The
lease will expire in 2006. Two additional tenants leased the remaining space at
the property.
The average effective annual rental per square foot at the Hannover Property was
$10.05 for 1998, $8.92 for 1997 and $8.14 for 1996, the first year of occupancy.
The occupancy rate for the years ended December 31, 1998 and 1997 was 100%.
CH2M Hill at Gainesville
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The Partnership made an initial contribution to the Fund VII - Fund VIII Joint
Venture of $677,534, which constituted the total purchase price and all other
acquisition and development costs expended by the Fund VII - Fund VIII Joint
Venture for the purchase of a 5.0 acre parcel of land in Gainesville, Alachua
County, Florida. Construction of a 62,975 square foot office building,
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containing 61,468 rentable square feet was completed in December, 1995. The
average effective annual rental per square foot at the Gainesville Property was
$9.19 for 1998, $8.63 for 1997 and $8.69 for 1996. The occupancy rate for 1998
is 100%.
A 9 year, 11 month lease, to occupy 57,457 square feet has been signed with CH2M
Hill, Engineers, Planners, Economists, Scientists, with an option to extend for
an additional five year period. The annual base rent during the initial term is
$530,313 payable in equal monthly installments of $44,193. The annual rent for
the extended term will be at market rate. Assuming no options or termination
rights, the lease with CH2M Hill will expire in the year 2005.
As of December 31, 1998, the Partnership had contributed $1,036,923, and Wells
Fund VIII had contributed $4,077,310 to the Fund VII - Fund VIII Joint Venture
toward the completion of this project.
Fund VI-VII-VIII Joint Venture
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On April 17, 1995, the Partnership, Wells Fund VI and Wells Real Estate Fund
VIII, L.P. ("Wells Fund VIII"), a Georgia public limited partnership affiliated
with the Partnership through common general partners, formed a joint venture
known as the Fund VI, Fund VII, and Fund VIII Associates (the "Fund VI-VII-VIII
Joint Venture"). The investment objectives of Wells Fund VI and Wells Fund VIII
are substantially identical to those of the Partnership. As of December 31,
1998, the Partnership contributed approximately $5,932,312 for an approximately
33.4% equity interest in the Fund VI-VII-VIII Joint Venture, which owns an
office building in Jacksonville, Florida and a multi-tenant retail center under
development in Forsyth County, North Carolina. As of December 31, 1998, Wells
Fund VIII contributed $5,700,000 for an equity interest in the Fund VI-VII-VIII
Joint Venture of approximately 32.3%, and Wells Fund VI contributed
approximately $6,067,688 for an equity interest in the Fund VI-VII-VIII Joint
Venture of approximately 34.3%. The total cost to complete both properties is
approximately $17,700,000
BellSouth Property
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On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased a 5.55 acre
parcel of land in Jacksonville, Florida for a total of $1,245,059 including
closing costs. In May 1996, the 92,964 square foot office building was completed
with BellSouth Advertising and Publishing Corporation, a subsidiary of BellSouth
Company, occupying approximately 66,333 square feet and American Express Travel
Related Services Company, Inc. occupying approximately 22,607 square feet.
BellSouth occupied an additional 3,901 square feet in December, 1996. The land
purchase and construction costs totaling approximately $9,000,000 were funded by
capital contributions of $3,500,000 by the Partnership, $3,500,000 by Wells Fund
VI, and $2,000,000 by Wells Fund VIII.
The BellSouth lease is for a term of nine years and eleven months with an option
to extend for an additional five-year period at market rate. The annual base
rent during the initial term is $1,094,426 during the first five years and
$1,202,034 for the balance of the initial lease term. The American Express
lease is for a term of five years at an annual base rent of $369,851. BellSouth
and American Express are required to pay additional rent equal to their share of
operating expenses during their respective lease terms.
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The average effective annual rental per square foot at the BellSouth Property
was $ 16.36 for 1998, $16.40 for December 31, 1997 and $14.15 for the year ended
December 31, 1996, the first year of occupancy. The occupancy rate was 100% for
1998, 1997 and 1996.
Tanglewood Commons Shopping Center
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On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina. The
Fund VI-VII-VIII Joint Venture is constructing one large strip shopping center
building containing approximately 67,320 gross square feet on a 12.48 acre
tract. The remaining 2.2 acre portion of the property consists of four out-
parcels which have been graded and will be held for future development or
resale. As of December 31, 1998, the Partnership had contributed $2,432,312,
Wells Fund VI had contributed $2,567,688 and Wells Fund VIII had contributed
$3,700,000 for the development of this project.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shopping center
are anticipated to be approximately $8,700,000. Construction of the project
began in March, 1996 and was substantially completed in the first quarter of
1997. As of December 31, 1998, the Joint Venture had $319,000, reserved to fund
remaining tenant improvement cost.
Harris Teeter, Inc., a regional supermarket chain, executed a lease for a
minimum of 45,000 square feet with an initial term of 20 years with extension
options of four successive five year periods with the same terms as the initial
lease. The annual base rent during the initial term is $488,250. In addition,
Harris Teeter has agreed to pay percentage rents equal to one percent of the
amount by which Harris Teeter's gross sales exceed $35,000,000 for any lease
year.
The average effective annual rental per square foot at Tanglewood Commons was
$10.96 for 1998 and $9.12 1997, the first year of occupancy. The occupancy rate
was 91 % for 1998 and 86% for 1997.
Fund I II- OW- VI- VII Joint Venture
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On August 1, 1995, the Partnership, Wells Real Estate Fund I ("Wells Fund I"), a
Georgia public limited partnership, the Fund II-Fund II-OW Joint Venture and
Wells Fund VII, entered into a joint venture known as Fund I, II, II-OW, VI and
VII Associates (the "Fund I-II-II-OW-VI-VII Joint Venture"), which was formed to
own and operated the Cherokee Project described below. Well Fund I is a Georgia
limited partnership having Leo F. Wells, III and Wells Capital, Inc., a general
partners. The investment objectives of Wells Fund I, the Fund II-Fund II-OW
Joint Venture and Wells Fund VII are substantially identical to those of the
Partnerships.
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Cherokee Property/Fund I-II-II-OW-VI-VII Joint Venture
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The Cherokee Property consists of a retail shopping center known as "Cherokee
Commons Shopping Center" located in metropolitan Atlanta, Cherokee County,
Georgia (the "Cherokee Project"). The Cherokee Project has been expanded to
consist of approximately 103,755 net leasable square feet. The Cherokee Project
was initially developed through a joint venture between Wells Fund I and the
Fund II-Fund II-OW Joint Venture, which contributed the Cherokee Project to the
Fund I-II-II-OW-VI-VII Joint Venture on August 1, 1995 to complete the required
funding for the expansion.
As of December 31, 1998, Wells Fund I had contributed property with a book value
of $2,139,900, the Fund II-Fund II-OW Joint Venture had contributed property
with a book value of $4,860,100, Wells Fund VI had contributed cash in the
amount of $953,798 and the Partnership had contributed cash in the amount of
$953,798 to the Fund I-II -II-OW-VI-VII Joint Venture. As of December 31, 1998,
the equity interests in the Fund I-II-II-OW-VI-VII Joint Venture were
approximately as follows: Wells Fund I - 24%, Fund II-Fund II-OW Joint Venture
- - - 54%, Wells Fund VI - 11% and the Partnership - 11%.
The Cherokee Property is anchored by a 67,115 square foot lease with Kroger
Food/Drug which expires in 2011. Kroger's original lease was for 45,528 square
feet. In 1994, Kroger expanded to the current 67,115 square feet which is
approximately 65% of the total rentable square feet in the property. As of
December 31, 1998, the Cherokee Property was approximately 91% occupied by 20
tenants, including Kroger. Kroger, a retail grocery chain, is the only tenant
occupying ten percent or more of the rentable square footage. The other tenants
in the shopping center provide typical retail shopping services.
The Kroger lease provides for an annual rent of $392,915 which increased to
$589,102 on August 16, 1995 due to the expansion from 45,528 square feet to
67,115 square feet. The lease expires March 31, 2011 with Kroger entitled to
five successive renewals each for a term of five years at the same rental rate
as the original lease.
The occupancy rate at the Cherokee Property at year end was 91% in 1998 and 94%
in 1997 and 93% in 1996.
The average effective annual rental per square foot at the Cherokee Property was
$ 8.78 for 1998, $8.49 for 1997, $8.59 and 1996.
ITEM 3. LEGAL PROCEEDINGS
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1998.
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PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
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The offering for sale of Units in the Partnership terminated on January 5, 1995,
at which time the Partnership had 1,678,810 outstanding Class A Units held by a
total of 1,590 Limited Partners and 739,208 outstanding Class B Units held by a
total of 320 Limited Partners. The capital contribution per unit is $10.00.
There is no established public trading market for the Partnership's limited
partnership units, and it is not anticipated that a public trading market for
the units will develop. Under the Partnership Agreement, the General Partners
have the right to prohibit transfers of units.
As of February 28, 1999, the Partnership had 2,009,516 outstanding Class A
Status Units held by a total of 1,648 Limited Partners and 408,500 of Class B
Status held by a total of 259 Limited Partners. There is no established public
trading for the Partnership's limited partnership units, and it is not
anticipated that a public trading market for the units will develop. Under the
Partnership Agreement, the General Partners have the right to prohibit transfers
of units.
The General Partners have estimated the investment value of properties held by
the Partnership as of December 31, 1998 to be $10.72 per A unit and 13.28 per B
Unit based on market conditions existing in early December, 1998. This value
was confirmed as reasonable by an independent MAI appraiser, David L. Beal
Company, although no actual MAI appraisal was performed due to the inordinate
expense involved with such an undertaking. The valuation does not include any
fractional interest valuation.
Cash distribution from Net Cash from Operations are distributed to the Limited
Partners on a quarterly basis unless Limited Partners elect to have their cash
distributions paid monthly. Net Cash from Operations is defined in the
Partnership Agreement as Cash Flow less adequate cash reserves for other
obligations of the Partnership for which there is no provision. Under the
Partnership Agreement, distributions are allocated first to the Limited Partners
holding Class A Units (and limited partners holding Class B Units that have
elected a conversion right that allows them to share in the distribution rights
of limited partners holding Class A Units) until they have received 10% of their
adjusted capital contributions, as defined. Cash available for distribution is
then distributed to the General Partners until they have received an amount
equal to 10% of cash distributions. Any remaining cash available for
distribution is split between the Limited Partners holding Class A Units and the
General Partners in a ratio of 90% and 10% respectively. No distributions will
be made to the Limited Partners holding Class B Units. Holders of Class A Units
will, except in limited circumstances, be allocated none of the Partnership's
Net Loss, depreciation, amortization and cost recovery deductions. These
deductions will be allocated to Class B Units until their Capital account
balances have been reduced to zero.
No distributions have been made to the General Partner as of December 31, 1998.
Cash distributions made to Limited Partners holding Class A Units (and Limited
Partners holding Class B Units that have elected a conversion right) during 1998
and 1997 were as follows:
11
<PAGE>
<TABLE>
<CAPTION>
Per Class A Per Class A Per Class B
Distributions for Total Cash Unit Investment Unit Return Unit Return
Quarter Ended Distributed Income of Capital of Capital
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1998 $407,411 $0.21 $0.00 $0.00
June 30, 1998 $417,733 $0.21 $0.00 $0.00
September 30, 1998 $406,832 $0.20 $0.00 $0.00
December 31, 1998 $397,126 $0.20 $0.00 $0.00
March 31, 1997 $345,613 $0.19 $0.00 $0.00
June 30, 1997 $363,187 $0.19 $0.00 $0.00
September 30, 1997 $374,078 $0.20 $0.00 $0.00
December 31, 1997 $404,130 $0.21 $0.00 $0.00
</TABLE>
The fourth quarter distribution was accrued for accounting purposes in 1998, and
was not actually paid to Limited Partners holding Class A Units until February
1999. The General Partners anticipate that cash distributions to Limited
Partners holding Class A units will continue in 1999 at a level at least
comparable with 1998 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA
- - ---------------------------------
The following sets forth a summary of the selected financial data for the twelve
months ended December 31, 1998, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1998 1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Assets $18,789,678 $19,666,294 $ 20,312 $20,830,683
Total Revenues 846,306 816,237 543,291 925,246
Net Income 754,334 733,149 452,776 804,043
Net Loss Allocated to
General Partners 0 0 0 (280)
Net Income Allocated to
Class A Limited Partners 1,704,213 1,615,965 1,062,605 950,826
Net Loss Allocated to
Class B Limited Partners (949,879) (882,816) (609,829) (146,503)
Net Income per Weighted Average (1)
Class A Limited Partner Unit .85 .86 .62 .57
Net Loss per Weighted Average (1)
Class B Limited Partner Unit (2.24) (1.68) (.98) .20
Cash Distributions per Weighted Average (1)
Class A Limited Partner Unit:
Investment Income .82 .79 .50 .55
Return of Capital .00 .00 00 .00
</TABLE>
12
<PAGE>
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased or
converted by Limited Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- - --------------------------------------------------------------------------
RESULTS RESULTS OF OPERATION
----------------------------
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and 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.
Results of Operations and Changes in Financial Conditions
- - ---------------------------------------------------------
General
- - -------
Gross revenue of the Partnership increased to $846,306 in 1998 from $816,237 in
1997 due primarily to increased income from the joint ventures, primarily due to
increased occupancy at the Holcomb Bridge Road Property, Stockbridge Village III
and Stockbridge Expansion, and Tanglewood Commons.
Net income of the Partnership was $754,344 for the fiscal year ended December
31, 1998, compared to $733,149 in 1997 due primarily to the increase in revenues
discussed above.
The Partnership made cash distributions to the Limited Partners holding Class A
Units of $0.82 per unit for the fiscal year ended December 31, 1998, $0.79 per
unit for fiscal year ended December 31, 1997, and $0.50 per Unit for the fiscal
year ended December 31, 1996. No cash distributions were made to the Limited
Partners holding Class B Units for the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996. Distributions were accrued for the
fourth quarter of 1998 and paid in February, 1999. No distributions were made
to General Partners.
Property Operations
- - -------------------
As of December 31, 1998, the Partnership's percentage ownership in properties
was as follows: 10.7% in the Fund I-II-II-OW-VI-VII Joint Venture, 41.7% in the
Fund V-VI-VII Joint Venture,
13
<PAGE>
56.3% in the Fund VI-Fund VII Joint Venture, 37.9% in the Fund VII-Fund VIII
Joint Venture, 49.1% in the Fund II-III-VI-VII Joint Venture, and 33.4% in the
Fund VI-VII-VIII Joint Venture.
As of December 31, 1998, the Partnership owned interests in the following
operational properties through its ownership of the foregoing joint ventures:
The Marathon Building/Fund V-VI-VII Joint Venture
- - -------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental Income $971,447 $968,219 $971,017
-------- -------- --------
Expenses:
Depreciation 350,585 350,585 350,585
Management and
leasing expenses 34,632 39,671 38,841
Other operating expenses 12,261 11,905 14,636
-------- -------- --------
397,478 402,161 404,062
-------- -------- --------
Net income $573,969 $566,058 $566,955
======== ======== ========
Occupied % 100.00% 100.00% 100.00%
Partnership Ownership % in
the Fund V-VI-VII Joint
Venture 41.7% 41.7% 41.7%
Cash distributed to
the Partnership $388,835 $387,442 $358,274
Net income allocated
the Partnership $239,403 $236,103 $236,477
</TABLE>
Real estate taxes and all operational expenses for the building are the
responsibility of the tenant.
Rental income remained relatively stable in 1998, 1997 and 1996. Operating
expenses increased slightly due to accounting fees and administrative fees
increasing, as compared to 1997.
Cash distribution to the Partnership and net income allocated to Partnership
remained relatively stable for 1998.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, Page 3.
14
<PAGE>
Stockbridge Village III/Fund VI - Fund VII Joint Venture
- - --------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
-------------------------------------
December 31, 1998 December 31, 1997 December 31, 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Revenues:
Rental Income $238,098 $285,256 $257,571
-------- -------- --------
Expenses:
Depreciation 91,053 86,626 84,642
Management and
leasing expenses 32,844 30,722 51,107
Other operating expenses 145,402 22,501 59,168
-------- -------- --------
269,299 139,849 194,917
-------- -------- --------
Net income $(31,206) $145,407 $ 62,654
======== ======== ========
Occupied % 100.0% 100.0% 87.0%
Partnership Ownership % in the
Fund VI -- Fund VII Joint Venture 56.3% 57.5% 42.8%
Cash distributed to
the Partnership $ 36,772 $133,729 $ 62,756
Net income allocated
the Partnership $(17,686) $ 83,256 $ 26,845
</TABLE>
In April 1994, Wells Fund VI purchased 3.27 acres of land located in Clayton
County, Georgia. On December 9, 1994, Fund VI contributed the Stockbridge
Village III property ("Stockbridge Village III") as a capital contribution to
the Fund VI - Fund VII Joint Venture.
A net loss is reflected for December 31, 1998, as compared to net income of
$145,407 for December 31, 1997. The net loss was due to increase in rental
income an increase other operating expense which was due to Kenny Rogers
Roasters, which vacated in the first quarter of 1998. A bad debt reserved is
being recorded in other operating expenses. The space is now being leased by
RMS / Fazoli's, which signed a 13 year lease that commenced December 14, 1998.
The second multi-tenant retail building containing approximately 15,000 square
feet was completed in October, 1995. Damon's Clubhouse, a restaurant, occupied
approximately 6,732 square feet beginning in October. The Damon's lease is for
a term of nine years and eleven months with initial base rent of $102,375 for
five years and increases to $115,375 for the remainder of the lease. The
remaining 8,268 square feet were fully occupied by December 31, 1997.
The Stockbridge Village III Project incurred property taxes of $25,248 for 1998,
$25,009 for 1997 and $23,026 for 1996.
15
<PAGE>
The Partnership has an equity interest of 56.3% in the Stockbridge Village III
Property through its ownership in the Fund VI Fund VII Joint Venture.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
Stockbridge Village I Expansion/Fund VI - Fund VII Joint Venture
- - ----------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $294,318 $199,090 $ 59,006
-------- -------- --------
Expenses:
Depreciation 141,843 111,990 52,780
Management & leasing expenses 443,398 25,268 3,238
Other operating expenses 18,181 38,757 28,810
-------- -------- --------
204,422 176,015 84,828
-------- -------- --------
Net income (loss) $ 89,896 $ 23,075 $(25,822)
======== ======== ========
Occupied % 80.82% 74.0% 36.0%
Partnership's Ownership % in the
Fund VI - VII Joint Venture 56.3% 57.5% 57.2%
Cash distribution to Partnership $127,292 $ 65,574 $ 0
Net income (loss) allocated to the
Partnership $ 51,067 $ 13,243 $ 11,070
</TABLE>
On June 7, 1995, the Fund VI - Fund VII Joint Venture purchased 3.38 acres of
real property located in Clayton County, Georgia. The Stockbridge Village I
Expansion consists of a multi-tenant shopping center containing approximately
29,000 square feet. The majority of construction was completed in April, 1996
with Cici's Pizza tenants occupying a 4,000 square foot restaurant. The term of
the lease is for nine years and eleven months commencing April, 1996. The
initial base rent is $48,000. In the third year, annual base rent increases to
$50,000, in the sixth year to $52,000, and in the ninth year to $56,000. Eleven
additional tenants have occupied 17,600 square feet at the property as of
December 31, 1998. Negotiations are being conducted to lease the remaining
space.
Rental income, net income and cash distributions have increased due primarily to
increase occupancy. The Stockbridge Village I Expansion incurred $22,565 for
1998, $25,608 for 1997 and $9,182 for 1996 property taxes.
16
<PAGE>
It is projected that no additional funding will be required to complete tenant
build-out by the Partnership or Wells Fund VI.
For comments on the general competitive condition to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
- - -------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Revenues:
Rental income $862,360 $679,268 $255,062
Expenses:
Depreciation 376,390 325,974 181,798
Management & leasing expenses 97,701 48,962 28,832
Other operating expenses 60,799 195,567 101,600
-------- -------- --------
534,790 570,503 312,230
-------- -------- --------
Net income (loss) $327,570 $108,765 $(57,168)
======== ======== ========
Occupied % 94.1% 94% 63%
Partnership's Ownership % in the
Fund II, III, VI, VII Joint 49% 48.9% 48.8%
Venture
Cash distribution to the Partnership $365,964 $214,414 $ 37,237
Net income (loss) allocated to the
Partnership $160,864 $ 53,143 $(27,597)
</TABLE>
Since the Holcomb Bridge Road Property was under construction and not occupied
until first quarter 1996, comparative income and expense figures for the years
ending December 31, 1997 and 1996 are not available.
In January, 1995, the Fund II - Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road to the Fund II-III-VI-VII
Joint Venture. Development has been substantially completed on two buildings
with a total of approximately 49,500 square feet. As of December 31, 1998,
fifteen tenants occupied approximately 49,530 square feet of space in the
retail/office building under leases of varying lengths.
Income, depreciation, management and leasing expenses increased compared to
1997, due primarily to occupancy late in the fourth quarter. Since the Holcomb
Bridge Road property was under construction and not occupied until the first
quarter 1996, 12-month income and expenses figures are not available.
17
<PAGE>
Real estate taxes were $ 52,162 for 1998, $85,230 for 1997 and $37,191 for 1996.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
The Hannover Center/Fund VII - Fund VIII Joint Venture
- - -----------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------------ ---------------------- ------------------------
<S> <C> <C> <C>
Revenues:
Rental income $121,056 $107,379 $ 48,988
-------- -------- --------
Expenses:
Depreciation 43,925 43,925 31,391
Management & leasing expenses 11,487 11,237 4,424
Other operating expenses 20,482 25,813 28,812
-------- -------- --------
75,894 80,975 64,627
-------- -------- --------
Net income (loss) $ 45,162 $ 26,404 $(15,639)
======== ======== ========
Occupied 50.00% 50.00% 50.00%
Partnership's Ownership % in the
Fund VII - VIII Joint Venture 36.65% 37.95% 37.95%
Cash distribution to Partnership $ 16,607 $ 23,178 $ 3,520
Net income (loss) allocated to the $ 6,962 $ 10,022 $ (5,936)
Partnership
</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.
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. Accordingly, no comparative financial data is available for
1996. As of September 30, 1998 the remaining 6,060 square feet was leased to
Norwest Financial and Prudential Realty, which commenced in October 1998.
Distributions decreased in 1998 due to the 44,000 construction being funded by
operating cash flow in 1998.
Real estate taxes were $12,668 for 1998, 12,219 for 1997 and $9,650 for 1996.
For comments on the general competitive condition to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
18
<PAGE>
CH2M Hill at Gainesville/Fund VII-Fund VIII Joint Venture
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Nine Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
---------------------- ---------------------- -----------------------
<S> <C> <C> <C>
Revenues:
Rental Income $564,683 $530,493 $534,276
-------- -------- --------
Expenses:
Depreciation 251,783 218,181 222,328
Management & leasing expenses 82,031 78,850 80,258
Other operating expenses 49,250 (66,963) (1,380)
-------- -------- --------
383,064 230,068 301,206
-------- -------- --------
Net income $181,619 $300,425 $233,070
======== ======== ========
Occupied % 100.0% 94.0% 94.0%
Partnership's Ownership % in the Fund
VII - VIII Joint Venture 36.65% 37.95% 37.95%
Cash Distribution to Partnership $161,604 $198,523 $142,394
Net Income Allocated to the Partnership $ 67,105 $114,023 $ 76,702
</TABLE>
In February, 1995, the Fund VII - Fund VIII Joint Venture acquired a 5.0 acre of
land located in Gainesville, Alachua County, Florida for the purpose of
constructing a 62,975 square foot (61,468 rentable square feet) office building.
A 9 year, 11 month lease to occupy 57,457 square feet was signed by CH2M Hill.
The annual base rent is $530,313 payable in equal monthly installments of
$44,193. CH2M Hill occupied their portion of the building in mid-December, 1995.
Affiliated Engineers signed a five-year lease beginning March 27, 1998, which
occupied the remaining space. Depreciation, management and leasing expenses
increased compared to 1997 due primarily to occupancy.
Operating expense increased for 1998 due primarily to a refund to the tenant of
property taxes overpaid in 1997. Income and distribution to the partnership
decreased due to refund of property taxes over paid to tenant.
Real estate taxes were $79,235 for 1996, $79,428 for 1997 and $79,407 for 1998.
For comments on the general competitive condition to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
19
<PAGE>
BellSouth Property/Fund VI-VII-VIII Joint Venture
- - -------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Eight Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------------ ------------------------- ---------------------------
<S> <C> <C> <C>
Revenues:
Rental income $1,521,109 $1,524,708 $876,711
Interest income 7,086 8,188 60,092
Other income 9,373 360 150
---------- ---------- --------
1,538,288 1,532,896 936,803
---------- ---------- --------
Expenses:
Depreciation 444,448 443,544 290,407
Management & leasing expenses 190,025 191,176 99,330
---------- ---------- --------
Other operating expenses 436,403 414,754 288,665
---------- ---------- --------
1,070,876 1,049,474 678,402
---------- ---------- --------
Net income $ 467,412 $ 483,422 $258,401
========== ========== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund VI- VII - VIII Joint 33.4% 33.4% 35.5%
Venture
Cash distribution to Partnership $ 315,661 $ 327,460 $170,963
Net income allocated to the $ 156,093 $ 166,136 $ 98,142
Partnership
</TABLE>
On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased 5.55 acres of
land located in Jacksonville, Florida. In May, 1996, the 92,964 square foot
office building was completed, with BellSouth Advertising and Publishing
Corporation occupying approximately 66,333 square feet and American Express
occupying approximately 22,607 square feet. Approximately 2,900 square feet of
additional space was occupied by BellSouth commencing in December, 1996,
bringing occupancy to 100%.
Net income has decreased in 1998 as compared to 1997 due primarily to increased
costs for HVAC repairs and various other building expenses. Cash distribution
and net income allocated to be Partnership decreased in 1998 over 1997 levels
due primarily to additional funding by Wells Fund VIII in early 1997, which
decreased to Partnership ownership in the Fund VI-VII-VIII Joint Venture.
Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts. Since the building
opened in May 1996, comparative income and expense figures for 1996 are not
available.
The BellSouth Property incurred property taxes of $171,629 for 1998, $164,400
for 1997 and $23,234 for 1996, the first year of occupancy.
20
<PAGE>
For comments on the general competitive condition to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
Tanglewood Commons/Fund VI - VII - VIII Joint Venture
- - -----------------------------------------------------
<TABLE>
<CAPTION>
For Year Ended Eleven Months Ended
December 31, 1998 December 31, 1997
-------------------------- ---------------------------------
<S> <C> <C>
Revenues:
Rental income $737,862 $562,880
Interest income 17,610 11,276
-------- --------
755,472 574,156
-------- --------
Expenses:
Depreciation 244,311 191,155
Management & leasing expense 61,562 41,589
Other operating expenses 49,338 88,873
-------- --------
355,211 321,617
-------- --------
Net income $400,261 $252,539
-------- --------
Occupied % 91% 86%
Partnership's Ownership % in the 33.4% 33.4%
Fund VI - Fund VII - Fund VIII Joint Venture
Cash distribution to Partnership $212,954 $129,340
Net income allocated to Partnership $133,667 $ 85,540
</TABLE>
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina. The
land purchase costs were funded by a capital contribution made by Wells Fund VI.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shopping center
were approximately $8,700,000. A strip shopping center containing approximately
67,320 gross square feet opened on the site on February 26, 1997.
In February 1997, Harris Teeter, Inc., a regional supermarket chain, occupied
its leased space of 46,120 square feet with an initial term of 20 years. The
annual base rent during the initial term is $488,250. In addition, Harris
Teeter has agreed to pay percentage rents equal to one percent of the amount by
which Harris Teeter's gross sales exceed $35,000,000 for any lease year.
Tanglewood Commons incurred property taxes of $35,542 for 1998 and $58,466 for
1997, the first year of occupancy. Since this property commenced operations in
February 1997, comparable income and expense figures for prior year are not
available.
21
<PAGE>
Cherokee Commons Shopping Center/Fund I-II-II-OW-VI and VII Joint Venture
- - -------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
----------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental Income $ 909,831 $ 880,652 $ 890,951
Interest Income 84 67 73
---------- ---------- ----------
909,915 880,719 891,024
------- ------- -------
Expenses:
Depreciation 444,660 $440,882 429,419
Management and
Leasing Expenses 82,517 78,046 48,882
Other Operating Expenses 84,676 138,294 180,841
------- ------- -------
611,853 657,222 659,142
------- -------- --------
Net Income $ 298,062 $ 223,497 $ 231,882
========== ========== ==========
Occupied % 91.32% 94.41% 93.00%
Partnership Ownership % 10.7% 10.70% 10.70%
Cash distributed to the
Partnership $ 79,238 $ 65,047 $ 72,510
Net income allocated
to the Partnership $ 31,916 $ 23,932 $ 24,830
</TABLE>
Rental income increased in 1998 over 1997 due primarily to a one time adjustment
made to the straight line rent schedule. Rental income decreased in 1997
compared to 1996 due to decreased occupancy at the property for the first three
quarters of 1997. The increase in occupancy in the fourth quarter of 1997 is
due to a new 1,200 square foot lease executed in 1997. Operating expenses of
the property decreased to $84,676 in 1998 from $138,294 in 1997, and decreased
from $180,841 in 1996. The decrease in operating expense in 1998 as compared to
1997 is due to decreased expenditures for tenant improvements, common area
expenses and legal fees. The decrease in operating expenses in 1997 as compared
to 1996 is due to a change in estimate in billing of common and maintenance
charges and property taxes which was partially offset by increases in plumbing
repairs and contract labor expenses. Net income of the property increased to
$298,062 in 1998 and decreased to $223,497 in 1997 from $231,882 in 1996, due to
the reasons discussed above.
Real estate taxes were $ 77,311 for 1998, $67,259 for 1997 and $63,696 for 1996.
For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 2. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.
22
<PAGE>
Liquidity and Capital Resources
- - -------------------------------
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
offering was terminated on January 5, 1995, at which time the Partnership had
sold 1,678,810 Class A Units and 739,208 Class B Units, held by a total of 1,591
and 319 Limited Partners respectively, for total Limited Partner capital
contributions of $24,180,174. After payment of $846,306 in acquisition and
expense fees, payment of $3,627,026 in selling commissions and organization and
offering expenses and the investment of the Partnership of $3,356,278 in the
Fund VI-Fund VII Joint Venture, $3,470,958 in the Fund V-VI-VII Joint Venture,
$2,448,923 in the Fund VII-Fund VIII Joint Venture, 5,932,312 in the Fund VI-
VII-VIII Joint Venture, $953,798 in the Fund I-II-II-OW-VI-VII Joint Venture,
$3,300,225 in the Fund II-III-VI-VII Joint Venture, $2,547 in other acquisition
expenses, and $55,772 of amounts previously being held as working capital
reserves, the Partnership is holding a balance of $186,030 as working reserves.
Of the original working capital reserves of $241,802, the Partnership has
contributed $11,205 to the Fund VI - Fund VII Joint Venture and $44,567 to the
Fund II-III-VI-VII Joint Venture leaving the $186,030 balance shown above. It
is anticipated that the remaining cost to complete the Holcomb Bridge Road
Project of approximately $66,000 will be funded from reserves of the Partnership
and Wells Fund VI.
Pursuant to the terms of the Partnership Agreement, the Partnership is required
to maintain working capital reserves in an amount equal to the cash operating
expenses required to operate the Partnership for a six-month period not to be
reduced below 1% of Limited Partners' capital contributions. As set forth
above, in order to fund a portion of Holcomb Bridge Road Property and
Stockbridge Village III Project, the General Partners have used a portion of the
Partnership's working capital reserves to reduce the balance below this minimum
amount, rather than funding the tenant improvements out of operating cash flow,
which would have the effect of reducing cash flow distributions to Limited
Partners.
Net cash provided by operating activities in the amount of approximately $43,000
in 1997 decreased in 1998 to approximately $72,194 used in operating activities
due primarily to the decrease in interest income which resulted from expending
remaining funds on joint ventures as discussed above.
Net cash provided by investing activities increased in 1998 compared to 1997 due
primarily to the increase in the distributions from joint ventures coupled with
the decrease in investments in joint ventures. The increase in net cash used in
financing activities in 1998 compared to 1997 is the result of the increase in
distributions to partners. Cash and cash equivalents have decreased from
$366,301 in 1997 to $194,420 in 1998, and from $1,114,066 in 1996 to $366,301 in
1997 due primarily to investments made in joint ventures in 1996 and 1997.
The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to meet
both operating requirements and distributions to limited partners. At this
time, given the nature of the joint ventures in which the Partnership has
invested, there are
23
<PAGE>
no known improvements and renovations to the properties expected to be funded
from cash flow from operations.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Cash distributions of $0.82 per weighted average Unit were made to Class A
Limited Partners for the year ended December 31, 1998. The Partnership's
distributions for the fourth quarter of 1998 will be paid in February 1999 from
Net Cash from Operations. The Partnership anticipates that distributions will
continue to be paid on a quarterly basis from such sources on a level at least
consistent with 1998.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required for the normal operations of its
properties that will result in the Partnership's liquidity increasing or
decreasing in any material way. The Partnership intends to fund any cash
requirements through operating cash flow.
Inflation
- - ---------
Real estate has not been affected significantly by inflation in the past three
years due to the relatively low inflation rate. It is common practice for the
Partnership to execute provisions in the majority of tenant leases to protect
the Partnership from the impact of inflation. These leases contain common area
maintenance charges (CAM charges), real estate tax and insurance reimbursements
on a per square foot basis, or in some cases, annual reimbursement of operating
expenses above a certain per square foot allowance. These provisions should
reduce the Partnership's exposure to increases in costs and operating expenses
resulting from inflation. In addition, a number of the Partnership's leases are
for terms of less than five years which may permit the Partnership to replace
existing leases with new leases at higher base rental rates if the existing
leases are below market rate. There is no assurance, however, that the
Partnership would be able to replace existing leases with new leases at higher
base rentals.
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 is expected
to be completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted as the assessment progresses. 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 first quarter of 1999. At the present
time, it is believed that all major
24
<PAGE>
non-information technology systems are Year 2000 compliant. The cost to upgrade
any non-compliant systems is believed to be immaterial.
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 Advisor 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - -----------------------------------------------------
The Financial Statements of the Registrant and supplementary data are detailed
under Item 14(a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- - -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There were no disagreements with the Partnership's accountants or other
reportable events during 1998.
25
<PAGE>
PART III
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP
- - ----------------------------------------------
Wells Partners, L.P. Wells Partners, L.P. is a private Georgia limited
- - --------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., ("Capital") a Georgia corporation. The
executive offices of Wells Capital, Inc. are located at 3885 Holcomb Bridge
Road, Norcross, Georgia 30092.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 54 years of
- - -----------------
age and holds a Bachelor of Business Administration Degree in Economics from the
University of Georgia. Mr. Wells is the President and sole Director of Capital.
Mr. Wells is the President of Wells & Associates, Inc., a real estate brokerage
and investment company formed in 1976 and incorporated in 1978, for which he
serves as principal broker. Mr. Wells is also currently the sole Director and
President of Wells Management Company, Inc., a property management company he
founded in 1983. In addition, Mr. Wells is the President and Chairman of the
Board of Wells Investment Securities, Inc., Wells & Associates, Inc., Wells
Management Company, Inc. and Wells Investment Securities, Inc. which are
affiliates of the General Partners. From 1980 to February 1985, Mr. Wells
served as Vice-President of Hill-Johnson, Inc., a Georgia corporation engaged in
the construction business. From 1973 to 1976, he was associated with Sax Gaskin
Real Estate Company and from 1970 to 1973, he was a real estate salesman and
property manager for Roy D. Warren & Company, an Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES
- - ----------------------------------------------------------
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 1998:
<TABLE>
<CAPTION>
( A ) ( B ) ( C )
Name of Individual or Number in Capacities in which served Form
Group of Compensation Cash Compensation
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Leo F. Wells, III General Partner $ 0.00
Wells Management Company, Inc. Property Manager - $144,379 (1)
Management & Leasing Fees
</TABLE>
(1) The majority of these fees are not paid directly by the Partnership but are
paid by the joint venture entities which own properties for which the
property management and leasing services relate and include management and
leasing fees which were accrued for accounting purposes in 1998 but not
actually paid until January, 1999.
26
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - -------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 28, 1999.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- - ---------------------- ----------------------- ------------------------- ----------------------
<S> <C> <C> <C>
Class A Units Leo F. Wells, III 69.322 Units Less than 1%
(IRA, 401 (k) Plan)
</TABLE>
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - ---------------------------------------------------------
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sale Proceeds
- - -------------------------------------------------------
The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow from operations after the Limited
Partners holding Class A Units have received preferential distributions equal to
10% of their adjusted capital contribution. The General Partners will also
receive a subordinated participation in net sale proceeds and net financing
proceeds equal to 20% of residual proceeds available for distribution after the
Limited Partners holding Class B Units have received a return of their adjusted
capital contribution plus a 15% cumulative return on their adjusted capital
contribution; however, that in no event shall the General Partners receive in
the aggregate in excess of 15% of net sale proceeds and net financing proceeds
remaining after payments to Limited Partners from such proceeds of amounts equal
to the sum of their adjusted capital contributions plus a 6% cumulative return
on their adjusted capital contributions. The General Partners did not receive
any distributions from net cash flow from operations or net sale proceeds for
the year ended December 31, 1998.
Property Management and Leasing Fees
- - ------------------------------------
Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lesser of: (A)(i) 3% of the gross revenues for leasing
(aggregate maximum of 6%) plus a separate one-time fee for initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in
27
<PAGE>
arm's-length transactions by others rendering similar services in the same
geographic area for similar properties; and (ii) in the cash of industrial and
commercial properties which are leased on a long-term basis (ten or more years),
1% of the gross revenues except for initial leasing fees equal to 3% of the
gross revenues over the first five years of the lease term; or (B) the amounts
charged by unaffiliated persons rendering comparable services in the same
geographic area. Wells Management Company, Inc. received $144,379 in property
management and leasing fees relating to the Partnership in 1998.
Real Estate Commissions
- - -----------------------
In connection with the sale of Partnership properties, the General Partners or
their affiliates may receive commissions not exceeding the lesser of (A) 50% of
the commissions customarily charged by other brokers in arm's-length
transactions involving comparable properties in the same geographic area or (B)
3% of the gross sales price of the property, and provided that payments of such
commissions will be made only after Limited Partners have received prior
distributions totaling 100% of their capital contributions plus a 6% cumulative
return on their adjusted capital contributions. No real estate commissions were
paid to the General Partners or affiliates for the year ended December 31, 1998.
28
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- - ---------------------------------------------------------------------------
(a)1. The Financial Statements are contained on Pages F-2 through F-41 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated by
reference.
(a)2. Financial Statement Schedule III
Information with respect to this Item begins on Page S-1 of this Annual
Report on Form 10-K.
(a)3. The Exhibits filed in response to Item 601 of Regulation S-K are listed on
the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1998.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed on
the Exhibit Index attached hereto.
(d) See (a)2 above.
29
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 26th day of March,
1999.
Wells Real Estate Fund VII, L.P.
(Registrant)
By: /s/Leo F. Wells, III
--------------------
Leo F. Wells, III
Individual General Partner and as President
and Chief Financial Officer of Wells
Capital, Inc., the General Partner of Wells
Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature Title
- - --------- -----
/s/Leo F. Wells, III Individual General Partner, March 26, 1999
- - ------------------------------ President and Sole Director
Leo F. Wells, III of Wells Capital, Inc., the
General Partner of Wells
Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
30
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
Financial Statements Page
- - -------------------- ----
<S> <C>
Independent Auditors' Reports F2
Balance Sheets as of December 31, 1998 and 1997 F3
Statements of Income for the Years Ended December 31, 1998, 1997,
and 1996 F4
Statements of Partners' Capital for the Years Ended
December 31, 1998, 1997, and 1996 F5
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996 F6
Notes to Financial Statements for December 31, 1998, 1997 and 1996 F7-F41
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund VII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VII,
L.P. (a Georgia public limited partnership) as of December 31, 1998 and 1997 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund VII,
L.P. as of December 31, 1998 and 1997 and the results of its operations and its
cash flows each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III--Real Estate Investments
and Accumulated Depreciation as of December 31, 1998 is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INVESTMENT IN JOINT VENTURES $18,368,726 $19,039,835
CASH AND CASH EQUIVALENTS 75,740 194,420
DUE FROM AFFILIATES 339,387 416,360
DEFERRED PROJECT COSTS 0 4,070
ORGANIZATIONAL COSTS, less accumulated
amortization of $29,688 in 1998 and $23,438 in
1997 1,562 7,812
PREPAID EXPENSES AND OTHER ASSETS 4,263 3,797
----------- -----------
Total assets $18,789,678 $19,666,294
=========== ===========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 5,208 $ 0
Partnership distributions payable 396,500 404,129
----------- -----------
Total liabilities 401,708 404,129
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A 16,935,935 16,701,193
Class B 1,452,035 2,560,972
----------- -----------
Total partners' capital 18,387,970 19,262,165
----------- -----------
Total liabilities and partners' capital $18,789,678 $19,666,294
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Equity in income of joint ventures $ 839,037 $ 785,398 $ 457,144
Interest income 7,269 30,839 86,147
---------- ---------- ----------
846,306 816,237 543,291
--------- ---------- ----------
EXPENSES:
Partnership administration 66,168 54,435 55,688
Legal and accounting 19,554 22,403 28,577
Amortization of organization costs 6,250 6,250 6,250
---------- ---------- ----------
91,972 83,088 90,515
---------- ---------- ----------
NET INCOME $ 754,334 $ 733,149 $ 452,776
========== ========== ==========
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $1,704,213 $1,615,965 $1,062,605
========== ========== ==========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ (949,879) $ (882,816) $ (609,829)
========== =========== ===========
NET INCOME PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT $ 0.85 $ 0.86 $ 0.62
========== ========== ==========
NET LOSS PER WEIGHTED AVERAGE CLASS B
LIMITED PARTNER UNIT $ (2.24) $ (1.68) $ (0.98)
========== ========== ==========
CASH DISTRIBUTION PER WEIGHTED AVERAGE
CLASS A LIMITED PARTNER UNIT $ 0.82 $ 0.79 $ 0.50
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Limited Partners
---------------------------------------------------
Class A Class B Total
--------------------- ---------------------- Partners'
Units Amount Units Amount Capital
--------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 1,692,327 $14,457,205 725,690 $ 6,003,507 $20,460,712
Net income (loss) 0 1,062,605 0 (609,829) 452,776
Partnership distributions 0 (897,464) 0 0 (897,464)
Class B conversion elections 134,503 1,076,554 (134,503) (1,076,554) 0
--------- ----------- ---------- ----------- ----------
BALANCE, December 31, 1996 1,826,830 15,698,900 591,187 4,317,124 20,016,024
Net income (loss) 0 1,615,965 0 (882,816) 733,149
Partnership distributions 0 (1,487,008) 0 0 (1,487,008)
Class B conversion elections 144,569 873,336 (144,569) (873,336) 0
--------- ----------- ---------- ----------- ----------
BALANCE, December 31, 1997 1,971,399 16,701,193 446,618 2,560,972 19,262,165
Net income (loss) 0 1,704,213 0 (949,879) 754,334
Partnership distributions 0 (1,628,529) 0 0 (1,628,529)
Class B conversion elections 38,118 159,058 (38,118) (159,058) 0
--------- ----------- ---------- ----------- ----------
BALANCE, December 31, 1998 2,009,517 $16,935,935 408,500 $ 1,452,035 $18,387,970
========= =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 754,334 $ 733,149 $ 452,776
----------- ----------- -----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Equity in income of joint ventures (839,037) (785,398) (457,144)
Amortization of organization costs 6,250 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets 1,051 2,749 23,001
Accounts payable and accrued expenses 5,208 0 (4,000)
----------- ----------- -----------
Total adjustments (826,528) (776,399) (431,893)
----------- ----------- -----------
Net cash (used in) provided by operating activities
(72,194) (43,250) 20,883
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 1,770,742 1,420,126 760,628
Investment in joint ventures (181,070) (169,172) (1,062,547)
Return of contributions in joint venture 0 0 500,000
Decrease in construction payables 0 0 (174,413)
----------- ----------- -----------
Net cash provided by investing
activities 1,589,672 1,250,954 23,668
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated
earnings (1,636,158) (1,379,585) (792,316)
----------- ----------- -----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (118,680) (171,881) (747,765)
CASH AND CASH EQUIVALENTS, beginning of
year 194,420 366,301 1,114,066
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 75,740 $ 194,420 $ 366,301
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Deferred project costs contributed to joint
ventures $ 4,070 $ 4,932 $ 117,611
=========== =========== ===========
Contribution of real estate assets to joint venture $ 0 $ 0 $ 1,371,913
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund VII, L.P. (the "Partnership") is a public limited
partnership organized on April 5, 1994 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners, L.P.
("Wells Partners"), a Georgia nonpublic limited partnership. The Partnership
has two classes of limited partnership interests, Class A and Class B units.
Limited partners shall have the right to change their prior elections to have
some or all of their units treated as Class A units or Class B units one time
during each quarterly accounting period. Limited partners may vote to, among
other things, (a) amend the partnership agreement, subject to certain
limitations, (b) change the business purpose or investment objectives of the
Partnership, and (c) remove a general partner. A majority vote on any of the
above described matters will bind the Partnership, without the concurrence of
the general partners. Each limited partnership unit has equal voting rights,
regardless of class.
The Partnership was formed to acquire and operate commercial real properties,
including properties which are either to be developed, currently under
development or construction, newly constructed, or have operating histories.
The Partnership owns an interest in the following properties through joint
ventures between the Partnership and other Wells Real Estate Funds: (i) a
shopping center located in Cherokee County, Georgia, the Cherokee Commons
Shopping Center ("Cherokee Commons"); (ii) an office/retail center in
Roswell, Georgia; (iii) the Marathon Building, a three-story office building
located in Appleton, Wisconsin; (iv) the Stockbridge Village III Retail
Center, two retail buildings located in Stockbridge, Georgia; (v) a retail
center expansion in Stockbridge, Georgia; (vi) a four-story office building
located in Jacksonville, Florida ("the BellSouth property"); (vii) a retail
shopping center in Clemmon, Forsyth County, North Carolina; (viii) an office
building located in Gainesville, Florida; and (ix) a retail office building
in Stockbridge, Georgia.
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>
The carrying values of the real estate assets are based on management's
current intent to hold the real estate assets as long-term investments. The
success of the Partnership's future operations and the ability to realize the
investment in its assets will be dependent on the Partnership's ability to
maintain rental rates, occupancy, and an appropriate level of operating
expenses in future years. Management believes that the steps it is taking
will enable the Partnership to realize its investment in its assets.
Income Taxes
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares of
profits and losses in their individual income tax returns.
Distribution of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement, is
distributed to the limited partners quarterly. In accordance with the
partnership agreement, distributions are paid first to limited partners
holding Class A units until they have received a 10% per annum return on
their adjusted capital contributions, as defined. Cash available for
distribution is then paid to the general partners until they have received an
amount equal to 10% of distributions. Any remaining cash available for
distribution is split between the limited partners holding Class A units and
the general partners on a basis of 90% and 10%, respectively. No
distributions will be made to the limited partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds are distributed in the
following order:
. To limited partners, on a per unit basis, until all limited
partners have received 100% of their adjusted capital
contributions, as defined
. To limited partners holding Class B units until they receive an
amount equal to the net cash available for distribution received by
the limited partners holding Class A units
. To all limited partners until they receive a cumulative 10% per
annum return on their adjusted capital contributions, as defined
. To all limited partners until they receive an amount equal to their
respective cumulative distributions, as defined
. To the general partners until they have received 100% of their
capital contributions, as defined
. Thereafter, 80% to the limited partners and 20% to the general
partners
F-8
<PAGE>
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. Net income, as defined, of the
Partnership will be allocated each year in the same proportions that net cash
from operations is distributed to the partners. To the extent the
Partnership's net income in any year exceeds net cash from operations, it
will be allocated 99% to the limited partners holding Class A units and 1% to
the general partners.
Net loss, depreciation, and amortization deductions for each fiscal year will
be allocated as follows: (a) 99% to the limited partners holding Class B
units and 1% to the general partners until their capital accounts are reduced
to zero, (b) then to any partner having a positive balance in his capital
account in an amount not to exceed such positive balance, and (c) thereafter
to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to a qualified income offset
provision in the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, (c) allocations to Class B limited partners in amounts
equal to deductions for depreciation and amortization previously allocated to
them with respect to the specific partnership property sold, but not in
excess of the amount of gain on sale recognized by the Partnership with
respect to the sale of such property, and (d) allocations to Class A limited
partners and general partners in amounts equal to the deductions for
depreciation and amortization previously allocated to them with respect to
the specific partnership property sold, but not in excess of the amount of
gain on sale recognized by the Partnership with respect to the sale of such
property.
Investment in Joint Ventures
Basis of Presentation. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investments in joint ventures are recorded using the
equity method of accounting.
Real Estate Assets. Real estate assets held by the joint ventures are stated
at cost less accumulated depreciation. Major improvements and betterments
are capitalized when they extend the useful life of the related asset. All
repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of real estate assets held by the
Partnership or its affiliated joint ventures as of December 31, 1998.
F-9
<PAGE>
Depreciation for buildings and improvements is calculated using the straight-
line method over 25 years.
Revenue Recognition. All leases on real estate assets held by the joint
ventures are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective leases.
Partners' Distributions and Allocations of Profit and Loss. Cash available
for distribution and allocations of profit and loss to the Partnership by the
joint ventures are made in accordance with the terms of the individual joint
venture agreements. Generally, these items are allocated in proportion to
the partners' respective ownership interests. Cash is paid from the joint
ventures to the Partnership quarterly.
Deferred Lease Acquisition Costs. Costs incurred to procure operating leases
are capitalized and amortized on a straight-line basis over the terms of the
related leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market accounts.
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 1998, 1997, and 1996 is computed based on the weighted
average number of units outstanding during the period.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year financial statement presentation.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells Partners, for
acquisition and advisory services. These payments, as stipulated by the
partnership agreement, can be up to 6% of the limited partner contributions,
subject to certain overall limitations contained in the partnership
agreement. Aggregate fees paid through December 31, 1998 were $1,358,722 and
amounted to 3.5% of the limited partners' contributions received. These fees
are allocated to specific properties, as they are purchased or developed and
are included in capitalized assets of the joint ventures. All deferred
project costs were applied to properties at December 31, 1998.
F-10
<PAGE>
3. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1998 and 1997 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarters of 1998 and 1997, respectively, as
follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Fund I, II, II-OW, VI, and VII
Associates--Cherokee $ (6,707) $ 20,408
Fund II, III, VI, VII Associates 102,908 64,466
Fund V, VI, and VII Associates 98,432 96,447
Fund VI and VII Associates 38,270 52,503
Fund VI, VII, and VIII Associates 90,130 129,035
Fund VII and VIII Associates 16,354 53,501
-------- --------
$339,387 $416,360
======== ========
</TABLE>
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells Management
management and leasing fees equal to (a) 3% of the gross revenues for
management and 3% of the gross revenues for leasing (aggregate maximum of 6%)
plus a separate fee for the one-time initial lease-up of newly constructed
properties in an amount not to exceed the fee customarily charged in arm's-
length transactions by others rendering similar services in the same
geographic area for similar properties or (b) in the case of commercial
properties, which are leased on a long-term net basis (ten or more years), 1%
of the gross revenues except for initial leasing fees equal to 3% of the
gross revenues over the first five years of the lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $144,379, $211,201, and $103,785 for
the years ended December 31, 1998, 1997, and 1996, respectively, which were
paid to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate Funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
F-11
<PAGE>
4. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Amount Percent Amount Percent
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fund I, II, II-OW, VI, and VII
Associates--Cherokee $ 841,460 11% $ 888,782 11%
Fund II, III, VI, and VII
Associates 3,201,805 50 3,252,856 49
Fund V, VI, and VII Associates 3,104,872 42 3,254,304 42
Fund VI and VII Associates 3,234,873 56 3,360,265 57
Fund VI, VII, and VIII Associates 5,667,955 34 5,906,810 34
Fund VII and VIII Associates 2,317,761 37 2,376,818 38
----------- -----------
$18,368,726 $19,039,835
=========== ===========
</TABLE>
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Investment in joint ventures, beginning of year $19,039,835 $19,625,041
Equity in income of joint ventures 839,037 785,398
Contributions to joint ventures 185,140 174,104
Distributions from joint ventures (1,695,286) (1,544,708)
------------ ------------
Investment in joint ventures, end of year $18,368,726 $19,039,835
============ ============
</TABLE>
Fund I, II, II-OW, VI, and VII Associates--Cherokee
In August 1995, the Partnership entered into a joint venture agreement with
Wells Real Estate Fund I, Fund II and II-OW (a joint venture between Wells
Real Estate Fund II and Wells Real Estate Fund II-OW), and Wells Real Estate
Fund VI, L.P. ("Fund VI"). The joint venture, Fund I, II, II-OW, VI, and VII
Associates--Cherokee, was formed for the purpose of owning and operating
Cherokee Commons, a retail shopping center containing approximately 103,755
square feet located in Cherokee County, Georgia. Until the formation of this
joint venture, Cherokee Commons was part of the Fund I and II Tucker--
Cherokee joint venture. Concurrent with the formation of the Fund I, II, II-
OW, VI, and VII Associates--Cherokee joint venture, Cherokee Commons was
transferred from the Fund I and II Tucker--Cherokee joint venture.
Percentage ownership interests in Fund I, II, II-OW, VI, and VII Associates--
Cherokee were determined at the time of formation based on contributions.
Under the terms of the joint venture agreement, Fund VI and Fund VII each
contributed approximately $1 million to the new joint venture in return for a
10.7% ownership interest. Fund I's ownership interest in the Cherokee joint
venture changed from 30.6% to 24%, and Fund II and II-OW joint venture's
ownership interest changed from 69.4% to 54.6%. The $2 million in cash
contributed to Cherokee was used to fund an expansion of the property for an
existing tenant.
F-12
<PAGE>
Following are the financial statements for Fund I, II, II-OW, VI, and VII
Associates--Cherokee:
Fund I, II, II-OW, VI, and VII Associates--Cherokee
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,219,704 $1,219,704
Building and improvements, less accumulated
depreciation of $2,717,809 in 1998 and
$2,273,149 in 1997 6,500,995 6,939,884
---------- ----------
Total real estate assets 7,720,699 8,159,588
Cash and cash equivalents 222,814 153,159
Accounts receivable 35,517 92,516
Prepaid expenses and other assets 90,979 99,869
---------- ----------
Total assets $8,070,009 $8,505,132
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 107,129 $ 36,851
Partnership distributions payable 130,838 194,123
Due to affiliates 109,267 93,940
---------- ----------
Total liabilities 347,234 324,914
---------- ----------
Partners' capital:
Wells Real Estate Fund I 1,741,492 1,863,173
Fund II and II-OW 4,295,663 4,536,781
Wells Real Estate Fund VI 844,160 891,482
Wells Real Estate Fund VII 841,460 888,782
---------- ----------
Total partners' capital 7,722,775 8,180,218
---------- ----------
Total liabilities and partners' capital $8,070,009 $8,505,132
========== ==========
</TABLE>
F-13
<PAGE>
Fund I, II, II-OW, VI and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Rental income $909,831 $880,652 $890,951
Interest income 84 67 73
-------- -------- --------
909,915 880,719 891,024
-------- -------- --------
Expenses:
Depreciation 444,660 440,882 429,419
Operating costs, net of reimbursements 35,715 70,017 126,367
Property administration 22,934 26,260 42,868
Management and leasing fees 82,517 78,046 48,882
Legal and accounting 7,363 9,385 8,362
Computer costs 0 0 3,244
Bad debt expense 18,664 0 0
Loss on real estate assets 0 32,632 0
-------- -------- --------
611,853 657,222 659,142
-------- -------- --------
Net income $298,062 $223,497 $231,882
======== ======== ========
Net income allocated to Wells Real Estate
Fund I $ 71,604 $ 53,691 $ 55,705
======== ======== ========
Net income allocated to Fund II and II-OW $162,626 $121,942 $126,517
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $ 31,916 $ 23,932 $ 24,830
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $ 31,916 $ 23,932 $ 24,830
======== ======== ========
</TABLE>
F-14
<PAGE>
Fund I, II, II-OW, VI and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Wells Real Fund II Wells Real Wells Real Total
Estate and Estate Estate Partners'
Fund I II-OW Fund VI Fund VII Capital
---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $2,103,666 $5,028,796 $980,277 $977,577 $9,090,316
Net income 55,705 126,517 24,830 24,830 231,882
Partnership distributions (189,008) (409,039) (72,510) (72,510) (743,067)
---------- ---------- -------- -------- ----------
Balance, December 31, 1996 1,970,363 4,746,274 932,597 929,897 8,579,131
Net income 53,691 121,942 23,932 23,932 223,497
Partnership distributions (160,881) (331,435) (65,047) (65,047) (622,410)
---------- ---------- -------- -------- ----------
Balance, December 31, 1997 1,863,173 4,536,781 891,482 888,782 8,180,218
Net income 71,604 162,626 31,916 31,916 298,062
Partnership distributions (193,285) (403,744) (79,238) (79,238) (755,505)
---------- ---------- -------- -------- ----------
Balance, December 31, 1998 $1,741,492 $4,295,663 $844,160 $841,460 $7,722,775
========== ========== ======== ======== ==========
</TABLE>
Fund I, II, II-OW, VI, and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 298,062 $ 223,497 $ 231,882
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 444,660 440,882 429,419
Loss on real estate assets 0 32,632 0
Changes in assets and liabilities:
Accounts receivable 56,999 1,386 43,062
Prepaid expenses and other assets 8,890 (21,342) 14,106
Accounts payable and accrued expenses 70,278 13,721 (4,624)
Due to affiliates 15,327 15,565 9,613
---------- ---------- ----------
Total adjustments 596,154 482,844 491,576
---------- ---------- ----------
Net cash provided by operating
activities 894,216 706,341 723,458
---------- ---------- ----------
Cash flows from investing activities:
Investment in real estate (5,771) (83,424) (28,231)
---------- ---------- ----------
Cash flows from financing activities:
Distributions to joint venture partners (818,790) (541,104) (834,237)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 69,655 81,813 (139,010)
Cash and cash equivalents, beginning of year 153,159 71,346 210,356
---------- ---------- ----------
Cash and cash equivalents, end of year $ 222,814 $ 153,159 $ 71,346
========== ========== ==========
</TABLE>
F-15
<PAGE>
Fund II, III, VI, and VII Associates
On January 1, 1995, the Partnership entered into a joint venture agreement
with Fund II and III Associates and Fund VI. The joint venture, Fund II,
III, VI, and VII Associates, was formed for the purpose of acquiring,
developing, operating, and selling real properties. During 1995, Fund II and
III Associates contributed a 4.3-acre tract of land from its 880 Property--
Brookwood Grill to the Fund II, III, VI, and VII Associates joint venture.
During 1996, 1997, and 1998, the Partnership and Fund VI made contributions
to the joint venture. Ownership percentage interests were recomputed
accordingly. Development was substantially completed in 1996 on two
buildings containing a total of approximately 49,500 square feet.
F-16
<PAGE>
The following are the financial statements for Fund II, III, VI, and VII
Associates:
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,325,242 $1,325,242
Building and improvements, less accumulated
depreciation of $884,062 in 1998 and $507,772 in
1997 4,773,062 5,025,276
Construction in progress 41,263 59,564
---------- ----------
Total real estate assets 6,139,567 6,410,082
Cash and cash equivalents 308,788 219,391
Accounts receivable 111,460 54,524
Prepaid expenses and other assets 233,965 269,568
---------- ----------
Total assets $6,793,780 $6,953,565
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 192,072 $ 170,776
Partnership distributions payable 209,716 131,907
---------- ----------
401,788 302,683
---------- ----------
Partners' capital:
Fund II and III Associates 1,507,807 1,608,215
Wells Real Estate Fund VI 1,682,380 1,789,811
Wells Real Estate Fund VII 3,201,805 3,252,856
---------- ----------
Total partners' capital 6,391,992 6,650,882
---------- ----------
Total liabilities and partners' capital $6,793,780 $6,953,565
========== ==========
</TABLE>
F-17
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $872,978 $679,268 $255,062
Other income 36,000 0 0
--------- --------- ---------
908,978 679,268 255,062
--------- --------- ---------
Expenses:
Depreciation 376,290 325,974 181,798
Operating costs, net of reimbursements 85,983 122,261 75,018
Management and leasing fees 97,701 99,834 28,832
Legal and accounting 6,509 4,885 14,928
Property administration 14,926 17,321 10,286
Computer costs 0 228 1,368
--------- --------- ---------
581,409 570,503 312,230
--------- -------- ---------
Net income (loss) $327,569 $108,765 $(57,168)
========= ========= =========
Net income (loss) allocated to Fund II
and III Associates $ 78,791 $ 27,213 $(19,378)
========= ========= =========
Net income (loss) allocated to Wells Real
Estate Fund VI $ 87,914 $ 28,409 $(10,193)
========= ========= =========
Net income (loss) allocated to Wells Real
Estate Fund VII $160,864 $ 53,143 $(27,597)
========= ========= =========
</TABLE>
F-18
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Fund II Wells Wells Real Total
and III Real Estate Estate Partners'
Associates Fund VI Fund VII Capital
---------- -------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $1,729,116 $1,028,210 $2,521,739 $5,279,065
Partnership contributions 0 761,259 835,646 1,596,905
Partnership distributions (19,494) (19,329) (37,237) (76,060)
Net loss (19,378) (10,193) (27,597) (57,168)
----------- ----------- ----------- -----------
Balance, December 31, 1996 1,690,244 1,759,947 3,292,551 6,742,742
Partnership contributions 0 116,675 121,576 238,251
Partnership distributions (109,242) (115,220) (214,414) (438,876)
Net income 27,213 28,409 53,143 108,765
----------- ----------- ----------- -----------
Balance, December 31, 1997 1,608,215 1,789,811 3,252,856 6,650,882
Partnership contributions 0 4,600 154,049 158,649
Partnership distributions (179,199) (199,945) (365,964) (745,108)
Net income 78,791 87,914 160,864 327,569
----------- ----------- ----------- -----------
Balance, December 31, 1998 $1,507,807 $1,682,380 $3,201,805 $6,391,992
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 327,569 $ 108,765 $ (57,168)
--------- --------- ------------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 376,290 325,974 181,798
Changes in assets and liabilities:
Accounts receivable (56,936) 12,810 (67,334)
Prepaid expenses and other assets 35,603 (123,748) (104,792)
Accounts payable and accrued expenses 21,296 (34,194) 88,532
--------- --------- ------------
Total adjustments 376,253 180,842 98,204
--------- --------- ------------
Net cash provided by operating
activities 703,822 289,607 41,036
--------- --------- ------------
Cash flows from investing activities:
Decrease in construction payables 0 0 (358,467)
Investment in real estate (102,122) (620,059) (1,736,082)
--------- --------- ------------
Net cash used in investing activities (102,122) (620,059) (2,094,549)
--------- --------- ------------
Cash flows from financing activities:
Contributions from joint venture partners 154,996 230,699 1,434,308
Distributions to joint venture partners (667,299) (356,559) (26,470)
--------- --------- ------------
Net cash (used in) provided by
financing activities (512,303) (125,860) 1,407,838
--------- --------- ------------
Net increase (decrease) in cash and cash equivalents 89,397 (456,312) (645,675)
Cash and cash equivalents, beginning of year 219,391 675,703 1,321,378
---------- ---------- ------------
Cash and cash equivalents, end of year $ 308,788 $ 219,391 $ 675,703
========== ========== ============
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 3,653 $ 7,552 $ 162,597
========== ========== ============
</TABLE>
Fund V, VI, and VII Associates
On September 8, 1994, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund V, L.P. ("Fund V") and Fund VI. The joint
venture, Fund V, VI, and VII Associates, was formed for the purpose of
investing in commercial real properties. In September 1994, Fund V, VI, and
VII Associates purchased a 75,000-square-foot, three-story office building
known as the Marathon Building in Appleton, Wisconsin.
F-20
<PAGE>
Following are the financial statements for Fund V, VI, and VII Associates:
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Real estate assets, at cost:
Land $ 314,591 $ 314,591
Building and improvements, less accumulated
depreciation of $1,356,199 in 1998 and $1,005,614 in
1997 7,011,705 7,362,290
---------- ----------
Total real estate assets 7,326,296 7,676,881
Cash and cash equivalents 235,991 231,232
Accounts receivable 121,594 130,577
---------- ----------
Total assets $7,683,881 $8,038,690
========== ==========
<CAPTION>
Liabilities and Partners' Capital
<S> <C> <C>
Liabilities:
Partnership distributions payable $ 235,990 $ 231,232
Due to affiliates 4,864 6,166
---------- ----------
Total liabilities 240,854 237,398
---------- ----------
Partners' capital:
Wells Real Estate Fund V 1,224,896 1,283,867
Wells Real Estate Fund VI 3,113,259 3,263,121
Wells Real Estate Fund VII 3,104,872 3,254,304
---------- ----------
Total partners' capital 7,443,027 7,801,292
---------- ----------
Total liabilities and partners' capital $7,683,881 $8,038,690
========== ==========
</TABLE>
F-21
<PAGE>
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $971,447 $968,219 $971,017
-------- -------- --------
Expenses:
Depreciation 350,585 350,585 350,585
Management and leasing fees 34,632 39,671 38,841
Legal and accounting 3,450 5,690 7,331
Property administration 7,439 3,878 4,641
Computer costs 0 107 1,410
Operating costs 1,372 2,230 1,254
-------- -------- --------
397,478 402,161 404,062
-------- -------- --------
Net income $573,969 $566,058 $566,955
======== ======== ========
Net income allocated to Wells Real Estate
Fund V $ 94,475 $ 93,173 $ 93,321
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $240,091 $236,782 $237,157
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $239,403 $236,103 $236,477
======== ======== ========
</TABLE>
F-22
<PAGE>
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund V Fund VI Fund VII Capital
------ ------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $1,391,654 $3,537,044 $3,527,440 $8,456,138
Net income 93,321 237,157 236,477 566,955
Partnership distributions (141,385) (359,305) (358,274) (858,964)
---------- ---------- ---------- ----------
Balance, December 31, 1996 1,343,590 3,414,896 3,405,643 8,164,129
Net income 93,173 236,782 236,103 566,058
Partnership distributions (152,896) (388,557) (387,442) (928,895)
---------- ---------- ---------- ----------
Balance, December 31, 1997 1,283,867 3,263,121 3,254,304 7,801,292
Net income 94,475 240,091 239,403 573,969
Partnership distributions (153,446) (389,953) (388,835) (932,234)
---------- ---------- ---------- ----------
Balance, December 31, 1998 $1,224,896 $3,113,259 $3,104,872 $7,443,027
========== ========== ========== ==========
</TABLE>
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 573,969 $ 566,058 $ 566,955
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 350,585 350,585 350,585
Changes in assets and liabilities:
Accounts receivable 8,983 11,781 (61,017)
Due to affiliates (1,302) 471 2,441
---------- ---------- ----------
Total adjustments 358,266 362,837 292,009
---------- ---------- ----------
Net cash provided by operating
activities 932,235 928,895 858,964
Cash flows from financing activities:
Distributions to joint venture partners (927,476) (911,808) (853,946)
---------- ---------- ----------
Net increase in cash and cash equivalents 4,759 17,087 5,018
Cash and cash equivalents, beginning of year 231,232 214,145 209,127
---------- ---------- ----------
Cash and cash equivalents, end of year $ 235,991 $ 231,232 $ 214,145
========== ========== ==========
</TABLE>
F-23
<PAGE>
Fund VI and VII Associates
On December 9, 1994, the Partnership entered into a joint venture agreement
with Fund VI. The joint venture, Fund VI and VII Associates, was formed for
the purpose of investing in commercial properties. In December 1994, the
Partnership contributed its interest in a parcel of land, the Stockbridge
Village III Retail Center property, located in Stockbridge, Georgia, to the
joint venture. The Stockbridge Village III Retail Center property is
comprised of two separate outparcel buildings totaling approximately 18,500
square feet. One of the outparcel buildings began operations during 1995.
The other outparcel began operations during 1996. On June 7, 1995, Fund VI
and VII Associates purchased 3.38 acres of real property located in
Stockbridge, Georgia. The retail center expansion consists of a multi-tenant
shopping center containing approximately 29,000 square feet.
During 1997 and 1998, both the Partnership and Fund VI made contributions to
Fund VI and VII Associates, and during 1996, the Partnership made additional
contributions to the joint venture. Ownership percentage interests were
recomputed accordingly.
F-24
<PAGE>
Following are the financial statements for Fund VI and VII Associates:
Fund VI and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Real estate assets, at cost:
Land $1,812,447 $1,812,447
Building and improvements, less accumulated
depreciation of $597,207 in 1998 and $364,311
in 1997 3,720,105 3,834,375
Construction in progress 0 34,669
---------- ----------
Total real estate assets 5,532,552 5,681,491
Cash and cash equivalents 60,259 33,921
Accounts receivable 133,134 191,854
Prepaid expenses and other assets 130,683 131,527
---------- ----------
Total assets $5,856,628 $6,038,793
========== ==========
<CAPTION>
Liabilities and Partners' Capital
<S> <C> <C>
Liabilities:
Accounts payable $ 37,400 $ 95,044
Partnership distributions payable 67,943 91,435
Due to affiliates 5,338 4,606
---------- ----------
Total liabilities 110,681 191,085
---------- ----------
Partners' capital:
Wells Real Estate Fund VI 2,511,074 2,487,443
Wells Real Estate Fund VII 3,234,873 3,360,265
---------- ----------
Total partners' capital 5,745,947 5,847,708
---------- ----------
Total liabilities and partners' capital $5,856,628 $6,038,793
========== ==========
</TABLE>
F-25
<PAGE>
Fund VI and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $532,410 $485,346 $316,487
-------- -------- --------
Expenses:
Depreciation 232,896 198,616 137,422
Operating costs, net of reimbursements 36,099 19,833 50,299
Management and leasing fees 77,242 55,990 54,345
Property administration 22,119 20,803 19,123
Legal and accounting 26,676 21,622 14,277
Computer costs 0 0 4,188
Bad debt expense 78,689 0 0
-------- -------- --------
473,721 316,864 279,654
-------- -------- --------
Net income $ 58,689 $168,482 $ 36,833
======== ======== ========
Net income allocated to Wells Real Estate
Fund VI $ 25,308 $ 71,983 $ 15,775
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $ 33,381 $ 96,499 $ 21,058
======== ======== ========
</TABLE>
F-26
<PAGE>
Fund VI and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund VI Fund VII Capital
------- -------- -------
<S> <C> <C> <C>
Balance, December 31, 1995 $2,590,820 $3,315,395 $5,906,215
Net income 15,775 21,058 36,833
Partnership contributions 0 151,306 151,306
Partnership distributions (57,896) (77,217) (135,113)
----------- ----------- -----------
Balance, December 31, 1996 2,548,699 3,410,542 5,959,241
Net income 71,983 96,499 168,482
Partnership contributions 15,378 52,528 67,906
Partnership distributions (148,617) (199,304) (347,921)
----------- ----------- -----------
Balance, December 31, 1997 2,487,443 3,360,265 5,847,708
Net income 25,308 33,381 58,689
Partnership contributions 123,018 5,291 128,309
Partnership distributions (124,695) (164,064) (288,759)
----------- ----------- -----------
Balance, December 31, 1998 $2,511,074 $3,234,873 $5,745,947
=========== =========== ===========
</TABLE>
F-27
<PAGE>
Funds VI and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 58,689 $ 168,482 $ 36,833
--------- --------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 232,896 198,616 137,422
Changes in assets and liabilities:
Accounts receivable 58,720 (98,688) (59,241)
Prepaid expenses and other assets 844 (48,821) (13,757)
Accounts payable (27,644) 26,509 21,049
Due to affiliates 732 2,194 (4,485)
--------- --------- -----------
Total adjustments 265,548 79,810 80,988
--------- --------- -----------
Net cash provided by operating
activities 324,237 248,292 117,821
--------- --------- -----------
Cash flows from investing activities:
Decrease in construction payables (30,000) (35,000) (14,116)
Investment in real estate (83,957) (455,042) (1,060,466)
--------- --------- -----------
Net cash used in investing activities (113,957) (490,042) (1,074,582)
--------- --------- -----------
Cash flows from financing activities:
Contributions from joint venture partners 128,309 67,906 145,002
Distributions to joint venture partners (312,251) (297,959) (79,332)
--------- --------- ----------
Net cash (used in) provided by
financing activities (183,942) (230,053) 65,670
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents 26,338 (471,803) (891,091)
Cash and cash equivalents, beginning of year 33,921 505,724 1,396,815
--------- --------- -----------
Cash and cash equivalents, end of year $ 60,259 $ 33,921 $ 505,724
========= ========= ===========
Supplemental disclosure of noncash items:
Deferred project costs contributed $ 0 $ 0 $ 6,304
========= ========= ===========
</TABLE>
Fund VI, VII, and VIII Associates
On April 17, 1995, the Partnership entered into a joint venture with Fund VI
and Wells Real Estate Fund VIII, L.P. ("Fund VIII"). The joint venture, Fund
VI, VII, and VIII Associates, was formed to acquire, develop, operate, and
sell real properties. On April 25, 1995, the joint venture purchased a 5.55-
acre parcel of land in Jacksonville, Florida. A 92,964-square-foot office
building, known as the BellSouth property, was completed and commenced
operations in 1996. On May 31, 1995, the joint venture purchased a 14.683-
acre parcel of land located in Clemmons, Forsyth County, North Carolina. A
retail shopping center was developed and was substantially complete at
December 31, 1997.
During 1996, Fund VI and the Partnership each withdrew $500,000 from the
joint venture in order to contribute needed funds to Fund II, III, VI, and
VII Associates. In addition, deferred project costs related to Fund VI and
the Partnership of $23,160 and $21,739, respectively, were unapplied when the
contributions were withdrawn. During 1996,
F-28
<PAGE>
Fund VIII made an additional contribution of $2,815,965, which included
$115,965 of deferred project costs that were applied. Ownership percentage
interests were recomputed accordingly.
Following are the financial statements for Fund VI, VII, and VIII Associates:
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Real estate assets, at cost:
Land $ 4,461,819 $ 4,461,819
Building and improvements, less accumulated
depreciation of $1,613,865 in 1998 and $925,106
in 1997 11,276,322 11,747,642
Construction in progress 17,866 94,715
----------- -----------
Total real estate assets 15,756,007 16,304,176
Cash and cash equivalents 800,321 1,059,001
Accounts receivable 183,952 104,021
Prepaid expenses and other assets 633,589 712,814
----------- -----------
Total assets $17,373,869 $18,180,012
=========== ===========
<CAPTION>
Liabilities and Partners' Capital
<S> <C> <C>
Liabilities:
Accounts payable $ 52,026 $ 100,792
Partnership distributions payable 339,696 386,390
Due to affiliates 9,735 5,177
----------- -----------
Total liabilities 401,457 492,359
----------- -----------
Partners' capital:
Wells Real Estate Fund VI 5,813,110 6,058,082
Wells Real Estate Fund VII 5,667,955 5,906,810
Wells Real Estate Fund VIII 5,491,347 5,722,761
----------- -----------
Total partners' capital 16,972,412 17,687,653
----------- -----------
Total liabilities and partners' capital $17,373,869 $18,180,012
=========== ===========
</TABLE>
F-29
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $2,258,971 $2,087,588 $ 876,711
Interest income 25,416 19,464 147,581
Other income 9,373 360 150
---------- ---------- ----------
2,293,760 2,107,412 1,024,442
---------- ---------- ----------
Expenses:
Depreciation 688,759 634,699 290,407
Operating costs, net of
reimbursements 451,299 460,873 262,090
Management and leasing fees 251,587 232,765 99,330
Legal and accounting 9,205 15,934 17,251
Property administration 25,109 27,180 15,975
Computer costs 128 0 642
---------- ---------- ----------
1,426,087 1,371,451 685,695
---------- ---------- ----------
Net income $ 867,673 $ 735,961 $ 338,747
========== ========== ==========
Net income allocated to Wells Real Estate
Fund VI $ 297,181 $ 258,122 $ 134,875
========== ========== ==========
Net income allocated to Wells Real Estate
Fund VII $ 289,760 $ 251,676 $ 131,609
========== ========== ==========
Net income allocated to Wells Real Estate
Fund VIII $ 280,732 $ 226,163 $ 72,263
========== ========== ==========
</TABLE>
F-30
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund VI Fund VII Fund VIII Capital
------- -------- --------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $6,866,299 $6,706,493 $2,084,185 $15,656,977
Net income 134,875 131,609 72,263 338,747
Partnership contributions 0 0 2,815,965 2,815,965
Partnership distributions (209,556) (204,429) (123,033) (537,018)
Return of contributions (523,160) (521,739) 0 (1,044,899)
---------- ---------- ---------- -----------
Balance, December 31, 1996 6,268,458 6,111,934 4,849,380 17,229,772
Net income 258,122 251,676 226,163 735,961
Partnership contributions 0 0 1,055,900 1,055,900
Partnership distributions (468,498) (456,800) (408,682) (1,333,980)
---------- ---------- ---------- -----------
Balance, December 31, 1997 6,058,082 5,906,810 5,722,761 17,687,653
Net income 297,181 289,760 280,732 867,673
Partnership distributions (542,153) (528,615) (512,146) (1,582,914)
---------- ---------- ---------- -----------
Balance, December 31, 1998 $5,813,110 $5,667,955 $5,491,347 $16,972,412
========== ========== ========== ===========
</TABLE>
F-31
<PAGE>
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 867,673 $ 735,961 $ 338,747
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 688,759 634,699 290,407
Changes in assets and liabilities:
Accounts receivable (79,931) (76,170) 5,149
Prepaid expenses and other assets 79,225 (21,073) (427,363)
Accounts payable 6,234 8,312 37,480
Due to affiliates 4,558 3,622 1,555
----------- ----------- -----------
Total adjustments 698,845 549,390 (92,772)
----------- ----------- -----------
Net cash provided by operating activities 1,566,518 1,285,351 245,975
----------- ----------- -----------
Cash flows from investing activities:
Decrease in construction payables (55,000) (110,795) (607,204)
Investment in real estate (140,590) (828,992) (7,381,063)
----------- ----------- -----------
Net cash used in investing activities (195,590) (939,787) (7,988,267)
----------- ----------- -----------
Cash flows from financing activities:
Contributions received from joint venture partners 0 1,000,000 2,700,000
Return of contributions from joint venture partners 0 0 (1,000,000)
Distributions to joint venture partners (1,629,608) (1,216,246) (375,952)
----------- ----------- -----------
Net cash (used in) provided by financing
activities (1,629,608) (216,246) 1,324,048
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (258,680) 129,318 (6,418,244)
Cash and cash equivalents, beginning of year 1,059,001 929,683 7,347,927
----------- ----------- -----------
Cash and cash equivalents, end of year $ 800,321 $ 1,059,001 $ 929,683
=========== =========== ===========
Supplemental disclosure of noncash items:
Deferred project costs contributed $ 0 $ 55,900 $ 71,066
=========== =========== ===========
</TABLE>
Fund VII and VIII Associates
On February 10, 1995, the Partnership entered into a joint venture agreement
with Fund VIII. The joint venture, Fund VII and VIII Associates, was formed
to acquire, develop, operate, and sell real properties. During 1995, the
joint venture purchased a five-acre parcel of land in Gainesville, Alachua
County, Florida. A 62,975-square-foot office building was constructed and
began operations during 1995. In April 1996, the Partnership contributed
1.01 acres of land located in Stockbridge, Georgia, and improvements thereon
to the joint venture for the development of a 12,000-square-foot, single-
story combination retail/office building. The building was completed and
commenced operations in 1996.
F-32
<PAGE>
Fund VII and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Real estate assets, at cost:
Land $ 882,320 $ 822,320
Building and improvements, less accumulated
depreciation of $735,803 in 1998 and $467,401 in
1997 5,119,836 5,020,941
Personal property, less accumulated depreciation of
$89,365 in 1998 and $62,059 in 1997 208,518 235,824
Construction in progress 0 9,002
---------- ----------
Total real estate assets 6,210,674 6,088,087
Cash and cash equivalents 124,696 238,222
Accounts receivable 48,581 14,398
Prepaid expenses and other assets 104,269 77,894
---------- ----------
Total assets $6,488,220 $6,418,601
========== ==========
<CAPTION>
Liabilities and Partners' Capital
<S> <C> <C>
Liabilities:
Accounts payable $ 24,468 $ 26,953
Due to affiliates 1,500 844
Partnership distributions payable 136,377 140,964
---------- ----------
Total liabilities 162,345 168,761
---------- ----------
Partners' capital:
Wells Real Estate Fund VII 2,317,761 2,376,818
Wells Real Estate Fund VIII 4,008,114 3,873,022
---------- ----------
Total partners' capital 6,325,875 6,249,840
---------- ----------
Total liabilities and partners' capital $6,488,220 $6,418,601
========== ==========
</TABLE>
F-33
<PAGE>
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $685,637 $637,692 $583,264
Other income 0 180 320
-------- -------- --------
685,637 637,872 583,584
-------- -------- --------
Expenses:
Depreciation 295,708 262,106 249,262
Management and leasing fees 93,519 90,087 88,650
Legal and accounting 9,450 9,973 23,554
Property administration 26,095 24,830 17,202
Computer costs 0 107 2,073
Operating costs, net of reimbursements 34,084 (76,060) (14,588)
-------- -------- --------
458,856 311,043 366,153
-------- -------- --------
Net income $226,781 $326,829 $217,431
======== ======== ========
Net income allocated to Wells Real Estate
Fund VII $ 83,713 $124,045 $ 70,767
======== ======== ========
Net income allocated to Wells Real Estate
Fund VIII $143,068 $202,784 $146,664
======== ======== ========
</TABLE>
F-34
<PAGE>
Fund VII And VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund VII Fund VIII Capital
-------- --------- -------
<S> <C> <C> <C>
Balance, December 31, 1995 $1,062,320 $3,702,179 $4,764,499
Net income 70,767 146,664 217,431
Partnership contributions 1,487,301 458,393 1,945,694
Partnership distributions (145,914) (274,567) (420,481)
---------- ---------- ----------
Balance, December 31, 1996 2,474,474 4,032,669 6,507,143
Net income 124,045 202,784 326,829
Partnership distributions (221,701) (362,431) (584,132)
---------- ---------- ----------
Balance, December 31, 1997 2,376,818 3,873,022 6,249,840
Net income 83,713 143,068 226,781
Partnership contributions 25,800 279,626 305,426
Partnership distributions (168,570) (287,602) (456,172)
---------- ---------- ----------
Balance, December 31, 1998 $2,317,761 $4,008,114 $6,325,875
========== ========== ==========
</TABLE>
F-35
<PAGE>
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 226,781 $ 326,829 $ 217,431
--------- --------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 295,708 262,106 249,262
Changes in assets and liabilities:
Accounts receivable (34,183) (14,398) 15,995
Prepaid expenses and other assets (26,375) (5,931) (71,963)
Accounts payable (2,485) (24,340) 51,293
Due to affiliates 656 844 (960)
--------- --------- ----------
Total adjustments 233,321 218,281 243,627
--------- --------- ----------
Net cash provided by operating
activities 460,102 545,110 461,058
--------- --------- ----------
Cash flows from investing activities:
Decrease in construction payables 0 0 (285,787)
Investment in real estate (406,380) (6,016) (136,623)
Contributions from partners 293,511 0 536,394
--------- --------- ----------
Net cash (used in) provided by
investing activities (112,869) (6,016) 113,984
--------- --------- ----------
Cash flows from financing activities:
Distributions to joint venture partners (460,759) (549,304) (326,610)
--------- --------- ----------
Net (decrease) increase in cash and cash equivalents (113,526) (10,210) 248,432
Cash and cash equivalents, beginning of year 238,222 248,432 0
--------- --------- ----------
Cash and cash equivalents, end of year $ 124,696 $ 238,222 $ 248,432
========= ========= ==========
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 11,915 $ 0 $ 37,387
========= ========= ==========
Contribution of real estate assets $ 0 $ 0 $1,371,913
========= ========= ==========
</TABLE>
F-36
<PAGE>
5. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1998, 1997, and 1996 is calculated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Financial statement net income $ 754,334 $ 733,149 $452,776
Increase (decrease) in net income resulting
from:
Depreciation expense for financial
reporting purposes in excess of
amounts for income tax purposes 394,084 338,997 228,415
Expenses deducted for financial
reporting purposes, capitalized for
income tax purposes 3,315 4,018 5,143
Rental income accrued for financial
reporting purposes in excess of
amounts for income tax purposes (42,637) (67,796) (28,891)
---------- ---------- --------
Income tax basis net income $1,109,096 $1,008,368 $657,443
========== ========== ========
</TABLE>
The Partnership's income tax basis partners' capital at December 31, 1998 is
computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Financial statement partners' capital $18,387,970 $19,262,165 $20,016,024
Increase (decrease) in partners' capital
resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 987,631 593,547 254,550
Joint venture change in ownership 7,814 7,814 7,814
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of
capital for financial reporting purposes 3,595,776 3,595,776 3,595,776
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (184,152) (141,515) (73,719)
Accumulated expenses deducted for financial
reporting purposes, capitalized for income tax
purposes 23,519 20,204 16,186
Partnership's distributions payable 396,500 404,129 296,706
----------- ----------- -----------
Income tax basis partners' capital $23,215,058 $23,742,120 $24,113,337
=========== =========== ===========
</TABLE>
6. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interests in joint ventures under noncancelable operating leases at
December 31, 1998 is as follows:
F-37
<PAGE>
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 2,209,789
2000 2,171,247
2001 2,058,838
2002 1,797,654
2003 1,579,413
Thereafter 5,884,534
-----------
$15,701,475
===========
</TABLE>
Two significant tenants contributed approximately 29% and 16% of rental income,
which is included in equity in income of joint ventures, for the year ended
December 31, 1998. In addition, three significant tenants will contribute
approximately 21%, 21%, and 17% of future minimum rental income.
The future minimum rental income due Fund I, II, II-OW, VI, and VII
Associates--Cherokee under noncancelable operating leases at December 31,
1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 883,301
2000 824,544
2001 737,386
2002 694,469
2003 636,952
Thereafter 4,424,471
----------
$8,201,123
==========
</TABLE>
One significant tenant contributed approximately 65% of rental income for the
year ended December 31, 1998 and will contribute approximately 88% of future
minimum rental income.
The future minimum rental income due Fund II, III, VI, and VII Associates
under noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 733,044
2000 701,474
2002 654,767
2002 335,261
2003 121,668
Thereafter 263,613
----------
$2,809,826
==========
</TABLE>
Four significant tenants contributed approximately 15%, 14%, 13%, and 12% of
rental income for the year ended December 31, 1998. In addition, two
significant tenants will contribute approximately 31% and 14% of future minimum
rental income.
F-38
<PAGE>
The future minimum rental income due Fund V, VI, and VII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 980,000
2000 980,000
2001 980,000
2002 990,000
2003 990,000
Thereafter 2,970,000
----------
$7,890,000
==========
</TABLE>
One tenant contributed 100% of rental income for the year ended December 31,
1998 and will contribute 100% of future minimum rental income.
The future minimum rental income due Fund VI and VII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 573,902
2000 531,420
2001 452,507
2002 354,843
2003 238,208
Thereafter 523,375
----------
$2,674,255
==========
</TABLE>
One significant tenant contributed approximately 19% of rental income for the
year ended December 31, 1998. In addition, three significant tenants will
contribute approximately 29%, 18%, and 15% of future minimum rental income.
The future minimum rental income due Fund VI, VII, and VIII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 2,209,325
2000 2,222,645
2001 2,110,978
2002 1,955,979
2003 1,895,574
Thereafter 9,893,439
-----------
$20,287,940
===========
</TABLE>
Three significant tenants contributed approximately 46%, 24%, and 16% of rental
income for the year ended December 31, 1998. In addition, two significant
tenants will contribute approximately 48% and 40% of future minimum rental
income.
F-39
<PAGE>
The future minimum rental income due Fund VII and VIII Associates under
noncancelable operating leases at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 773,137
2000 780,472
2001 784,716
2002 792,225
2003 734,230
Thereafter 1,200,032
----------
$5,064,812
==========
</TABLE>
Two significant tenants contributed approximately 77% and 15% of rental
income for the year ended December 31, 1998. In addition, two significant
tenants will contribute approximately 70% and 16% of future minimum rental
income.
7. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 Quarters Ended
-------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 201,183 $ 221,017 $ 208,604 $ 215,502
Net income 183,649 197,072 188,219 185,394
Net income allocated to Class A limited
partners 431,890 432,142 426,322 413,859
Net loss allocated to Class B limited partners (248,241) (235,069) (238,103) (228,466)
Net income per weighted average Class A
limited partner unit (a) $0.22 $0.22 $0.22 $0.21
Net loss per weighted average Class B
limited partner unit (a) (0.56) (0.56) (0.50) (0.56)
Cash distribution per weighted
average Class A limited partner unit 0.21 0.21 0.20 0.20
</TABLE>
(a) The totals of the four quarterly amounts for the year ended December
31, 1998 do not equal the totals for the year. This difference
results from the use of a weighted average to compute the number of
units outstanding for each quarter and the year.
F-40
<PAGE>
<TABLE>
<CAPTION>
1997 Quarters Ended
--------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 191,776 $ 210,706 $ 213,191 $ 200,564
Net income 165,215 185,256 199,810 182,868
Net income allocated to Class A limited
partners 363,044 393,903 437,946 421,072
Net loss allocated to Class B limited partners (197,829) (208,647) (238,136) (238,204)
Net income per weighted average Class A
limited partner unit $0.20 $0.21 $0.23 $0.22
Net loss per weighted average Class B
limited partner unit (0.34) (0.38) (0.43) (0.53)
Cash distribution per weighted average
Class A limited partner unit 0.19 0.19 0.20 0.21
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-41
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Initial Cost Cost of
------------------------------ Buildings and Capitalized
Description Encumbrances Land Improvements Improvements
- - ------------------------------------ ----------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
MARATHON BUILDING (a) None $ 314,591 $ 8,367,904 $ 0
STOCKBRIDGE VILLAGE III (b) None 1,015,674 0 1,994,828
STOCKBRIDGE VILLAGE I EXPANSION (c)
None 712,234 0 2,405,136
880 PROPERTY (D) None 1,325,242 0 5,698,385
BELLSOUTH PROPERTY (e) None 1,244,256 0 7,425,154
TANGLEWOOD COMMONS (f) None 3,020,040 0 5,680,422
CHEROKEE COMMONS (g) None 1,142,663 6,462,837 2,833,007
HANNOVER PROPERTY (H) None 512,001 869,037 337,752
GAINESVILLE PROPERTY (i) None 222,627 0 5,094,425
---------- ----------- -----------
Total $9,509,328 $15,699,778 $31,469,109
<CAPTION>
Gross Amount at Which Carried at December 31, 1997
-----------------------------------------------------------
Buildings and Construction Accumulated
Description Land Improvements in Progress Total Depreciation
- - ------------------------------------ ------------ ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
MARATHON BUILDING (a) $ 314,591 $ 8,367,904 $ 0 $ 8,682,495 $1,356,199
STOCKBRIDGE VILLAGE III (b) 1,062,720 1,947,782 0 3,010,502 209,594
STOCKBRIDGE VILLAGE I EXPANSION (c) 749,727 2,367,643 0
880 PROPERTY (D) 1,325,242 5,657,122 41,263 7,023,627 884,062
BELLSOUTH PROPERTY (e) 1,301,890 7,367,520 0 8,669,410 1,178,399
TANGLEWOOD COMMONS (f) 3,159,928 5,522,668 17,866 8,700,462 435,466
CHEROKEE COMMONS (g) 1,219,704 9,218,803 0 10,438,507 2,717,803
HANNOVER PROPERTY (H) 534,262 1,184,528 0 1,718,790 119,241
GAINESVILLE PROPERTY (i) 288,058 5,028,994 0 5,317,052 705,927
---------- ----------- ------- ----------- ----------
Total $9,956,122 $46,662,964 $59,129 $56,678,215 $7,913,304
<CAPTION>
Date of Date Depreciation
Description Construction Acquired Is Computed (j)
- - ------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
MARATHON BUILDING (a) 1991 09/16/94 20 to 25 years
STOCKBRIDGE VILLAGE III (b) 1995 04/07/94 20 to 25 years
STOCKBRIDGE VILLAGE I EXPANSION (c)
880 PROPERTY (D) 1996 01/31/90 20 to 25 years
BELLSOUTH PROPERTY (e) 1996 04/25/95 20 to 25 years
TANGLEWOOD COMMONS (f) 1997 05/31/95 20 to 25 years
CHEROKEE COMMONS (g) 1986 06/09/87 20 to 25 years
HANNOVER PROPERTY (H) 1996 01/16/95 20 to 25 years
GAINESVILLE PROPERTY (i) 1995 01/20/95 20 to 25 years
</TABLE>
(a) The Marathon Building is a three-story, 75,000-square-foot building located
in Appleton, Wisconsin. It is owned by Fund V, VI, and VII Associates. The
Partnership owned a 42% interest in Fund V, VI, and VII Associates as of
December 31, 1998.
(b) Stockbridge Village III consists of two retail buildings located in
Stockbridge, Georgia. It is owned by Fund VI and VII Associates. The
Partnership owned a 56% interest in Fund VI and VII Associates as of
December 31, 1998.
(c) Stockbridge Village I Expansion is a 3.38-acre tract of real property under
development located in Clayton County, Georgia. It is owned by Fund VI and
VII Associates. The Partnership owned a 56% interest in Fund VI and VII
Associates as of December 31, 1998.
(d) The 880 Property is a 4.3-acre tract of real property under development in
Roswell, Georgia. It is owned by Fund II, III, VI, and VII Associates. The
Partnership owned a 50% interest in Fund II, III, VI, and VII Associates as
of December 31, 1998.
(e) The BellSouth Property is a four story, 92,964 square foot building located
in Jacksonville, Florida. It is owned by Fund VI, VII, and VIII Associates.
The Partnership owned a 34% interest in Fund VI, VII, and VIII Associates as
of December 31, 1998.
(f) Tanglewood Commons is a 14.68-acre tract of real property under construction
in Clemmons, Forsyth County, North Carolina. It is owned by Fund VI, VII,
and VIII Associates. The Partnership owned a 34% interest in Fund VI, VII,
and VIII Associates as of December 31, 1998.
(g) Cherokee Commons is a retail shopping center located in Cherokee County,
Georgia. It is owned by Fund I, II, II-OW, VI, and VII Associates--Cherokee.
The Partnership owned an 11% interest in Fund I, II, II-OW, VI, and VII
Associates--Cherokee at December 31, 1998.
(h) The Hannover Property consists of a one-story building located in
Stockbridge, Georgia. It is owned by Fund VII and VIII Associates. The
Partnership owned a 37% interest in Fund VII and VIII Associates as of
December 31, 1998.
(i) The Gainesville Property consists of a two-story building located in
Gainesville, Florida. It is owned by Fund VII and VIII Associates. The
Partnership owned a 37% interest in Fund VII and VIII Associates as of
December 31, 1998.
(j) Depreciation lives used for buildings were 40 years through September 30,
1995, changed to 25 years thereafter. Depreciation lives used for land
improvements are 20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
----------- ------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1996 $53,916,571 $3,407,758
1997 additions 2,056,986 2,212,812
1997 deductions (47,840) (15,208)
---------- ---------
BALANCE AT DECEMBER 31, 1997 55,925,717 5,605,362
1998 additions 752,498 2,307,942
BALANCE AT DECEMBER 31, 1998 $56,678,215 $7,913,304
=========== ==========
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund VII, L.P.)
The following documents are filed as exhibits to this report. Those
exhibits previously filed and incorporated herein by reference are identified
below by an asterisk. For each such asterisked exhibit, there is shown below the
description of the previous filing. Exhibits which are not required for this
report are omitted.
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*3(a) Certificate of Limited Partnership of Wells Real Estate N/A
Fund VII, L.P. (Exhibit 3(d) to Form S-11 Registration
Statement of Wells Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No. 33-55908)
*4(a) Agreement of Limited Partnership of Wells Real Estate N/A
Fund VII, L.P. dated April 5, 1994 (Exhibit to Form 10-K
of Wells Real Estate Fund VII, L.P. for the fiscal year
ended December 31, 1994, File No. 0-25606)
*4(b) First Amendment to Agreement of Limited Partnership of N/A
Wells Real Estate Fund VII, L.P. dated April 5, 1994
(Exhibit to Form 10-K of Wells Real Estate Fund VII,
L.P. for the fiscal year ended December 31, 1994, File
No. 0-25606)
*10(a) Management Agreement dated April 5, 1994, between Wells N/A
Real Estate Fund VII, L.P. and Wells Management Company,
Inc. (Exhibit to Form 10-K of Wells Real Estate Fund
VII, L.P. for the fiscal year ended December 31, 1994,
File No. 0-25606)
*10(b) Leasing and Tenant Coordinating Agreement dated April 5, N/A
1994, between Wells Real Estate Fund VII, L.P. and Wells
Management Company, Inc. (Exhibit to Form 10-K of Wells
Real Estate Fund VII, L.P. for the fiscal year ended
December 31, 1994, File No. 0-25606)
*10(c) Custodial Agency Agreement dated April 1, 1994, between N/A
Wells Real Estate Fund VII, L.P. and NationsBank of
Georgia, N.A. (Exhibit 10(f) to Post-Effective Amendment
No. 5 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P., File No. 33-55908)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(d) Joint Venture Agreement of Fund V, Fund VI and Fund VII N/A
Associates dated September 8, 1994, among Wells Real
Estate Fund V, L.P., Wells Real Estate Fund VI, L.P. and
Wells Real Estate Fund VII, L.P. (Exhibit 10(j) to
Post-Effective Amendment No. 6 to Form S-11 Registration
Statement of Wells Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No. 33-55908)
*10(e) Agreement for the Purchase and Sale of Property dated N/A
August 24, 1994, between Interglobia Inc. - Appleton and
NationsBank of Georgia, N.A., as Agent for Fund V and
Fund VI Associates (Exhibit 10(k) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of
Wells Real Estate Fund VI, L.P. and Wells Real Estate
Fund VII, L.P., File No. 33-55908)
*10(f) Assignment and Assumption of Agreement for the Purchase N/A
and Sale of Real Property dated
September 9, 1994, between NationsBank of Georgia, N.A.,
as Agent for Fund V and
Fund VI Associates, and NationsBank of Georgia, N.A., as
Agent for Fund V, Fund VI
and Fund VII Associates (Exhibit 10(l) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of
Wells Real Estate Fund VI, L.P. and Wells Real Estate
Fund VII, L.P., File No. 33-55908)
*10(g) Building Lease dated February 14, 1991, between N/A
Interglobia Inc. - Appleton and Marathon
Engineers/Architects/Planners, Inc. (included as part of
Exhibit D to Exhibit 10(k) to Post-Effective Amendment
No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P., File No. 33-55908)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(h) Limited Guaranty of Lease dated January 1, 1993, by J. N/A
P. Finance OY and Fluor Daniel, Inc. for the benefit of
Interglobia Inc. - Appleton (included as Exhibit B to
Assignment, Assumption and Amendment of Lease referred
to as Exhibit 10(i) below, which is included as part of
Exhibit D to Exhibit 10(k) to Post-Effective Amendment
No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P., File No. 33-55908)
*10(i) Assignment, Assumption and Amendment of Lease dated N/A
January 1, 1993, among Interglobia Inc. - Appleton,
Marathon Engineers/Architects/Planners, Inc. and Jaakko
Poyry Fluor Daniel (included as part of Exhibit D to
Exhibit 10(k) to Post-Effective Amendment No. 6 to Form
S-11 Registration Statement of Wells Real Estate Fund
VI, L.P. and Wells Real Estate Fund VII, L.P., File No.
33-55908)
*10(j) Second Amendment to Building lease dated August 15, N/A
1994, between Interglobia Inc. - Appleton and Jaakko
Poyry Fluor Daniel (successor-in-interest to Marathon
Engineers/Architects/Planners, Inc.) (included as
Exhibit D-1 to Exhibit 10(k) to Post-Effective Amendment
No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P., File No. 33-55908)
*10(k) Assignment and Assumption of Lease dated September 6, N/A
1994, between Interglobia Inc. - Appleton and
NationsBank of Georgia, N.A., as Agent for Fund V, Fund
VI and Fund VII Associates (Exhibit 10(q) to
Post-Effective Amendment No. 6 to Form S-11 Registration
Statement of Wells Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No. 33-55908)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(l) Agreement for the Purchase and Sale of Real Property N/A
dated April 7, 1994, between 138 Industrial Ltd. and
NationsBank of Georgia, N.A., as Agent for Wells Real
Estate Fund VI, L.P. (Exhibit 10(s) to Form 10-K of
Wells Real Estate Fund VI, L.P. for the fiscal year
ended December 31, 1994, File No. 0-23656)
*10(m) Land and Building Lease Agreement dated August 22, 1994, N/A
between KRR Stockbridge, Inc. d/b/a Kenny Rogers
Roasters and NationsBank of Georgia, N.A., as Agent for
Wells Real Estate Fund VI, L.P. (Exhibit 10(t) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal
year ended December 31, 1994, File No. 0-23656)
*10(n) Joint Venture Agreement of Fund VI and Fund VII N/A
Associates dated December 9, 1994 (Exhibit 10(u) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal
year ended December 31, 1994, File No. 0-23656)
*10(o) Building Lease Agreement dated December 19, 1994, N/A
between Damon's of Stockbridge, LLC d/b/a Damon's
Clubhouse and NationsBank of Georgia, N.A., as Agent for
Fund VI and Fund VII Associates, (Exhibit 10(v) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal
year ended December 31, 1994, File No. 0-23656)
*10(p) Joint Venture Agreement of Fund II, III, VI and VII N/A
Associates dated January 10, 1995 (Exhibit 10(w) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal
year ended December 31, 1995, File No. 0-23606)
*10(q) Fund VII and Fund VIII Associates Joint Venture N/A
Agreement dated February 10, 1995 (Exhibit 10(g) to
Post-Effective Amendment No. 1 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No. 33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(r) Agreement for the Purchase and Sale of Real Property N/A
dated March 31, 1994 (Exhibit 10(h) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(s) Letter Agreement amending Agreement for the Purchase and N/A
Sale of Real Property dated July 27, 1994 (Exhibit 10(i)
to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(t) Letter Agreement amending Agreement for the Purchase and N/A
Sale of Real Property dated October 27, 1994 (Exhibit
10(j) to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(u) Letter Agreement between NationsBank of Georgia, N.A., N/A
as Agent for Wells Real Estate Fund VII, L.P., as
Landlord, and CH2M Hill, Inc., as Tenant (Exhibit 10(k)
to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(v) First Amendment to Lease Agreement between NationsBank N/A
of Georgia, N.A., as Agent for Wells Real Estate Fund
VII, L.P., as Landlord, and CH2M Hill, Inc., as Tenant
(Exhibit 10(l) to Post-Effective Amendment No. 1 to Form
S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(w) Second Amendment to Lease Agreement between NationsBank N/A
of Georgia, N.A., as Agent for Wells Real Estate Fund
VII, L.P., as Landlord, and CH2M Hill, Inc, as Tenant
(Exhibit 10(m) to Post-Effective Amendment No. 1 to Form
S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(x) Development Agreement between Wells Real Estate Fund N/A
VII, L.P. and ADEVCO Corporation (Exhibit 10(n) to
Post-Effective Amendment No. 1 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No. 33-83852)
*10(y) Owner-Contractor Agreement between Wells Real Estate N/A
Fund VII, L.P., as Owner, and Integra Construction,
Inc., as Contractor (Exhibit 10(o) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(z) Architect's Agreement between Wells Real Estate Fund N/A
VII, L.P., as Owner, and Smallwood, Reynolds, Stewart,
Stewart & Associates, Inc., as Architect (Exhibit 10(p)
to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(aa) Joint Venture Agreement of Fund VI, Fund VII and Fund N/A
VIII Associates dated April 17, 1995 (Exhibit 10(q) to
Post-Effective Amendment No. 3 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No. 33-83852)
*10(bb) Agreement for the Purchase and Sale of Real Property N/A
dated February 13, 1995, between G.L. National, Inc. and
Wells Capital, Inc. (Exhibit 10(r) to Post-Effective
Amendment No. 3 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(cc) Agreement to Lease dated February 15, 1995, between N/A
NationsBank of Georgia, N.A., as Agent for Wells Real
Estate Fund VII, L.P., and BellSouth Advertising &
Publishing Corporation (Exhibit 10(s) to Post-Effective
Amendment No. 3 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(dd) Development Agreement dated April 25, 1995, between Fund N/A
VI, Fund VII and Fund VIII Associates and ADEVCO
Corporation (Exhibit 10(t) to Post-Effective Amendment
No. 3 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(ee) Owner-Contractor Agreement dated April 24, 1995, between N/A
Fund VI, Fund VII and Fund VIII Associates, as Owner,
and McDevitt Street Bovis, Inc., as Contractor (Exhibit
10(u) to Post-Effective Amendment No. 3 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(ff) Architect's Agreement dated February 15, 1995, between N/A
Wells Real Estate Fund VII, L.P., as Owner, and Mayes,
Suddereth & Etheredge, Inc., as Architect (Exhibit 10(v)
to Post-Effective Amendment No. 3 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(gg) First Amendment to Joint Venture Agreement of Fund VI N/A
and Fund VII Associates (Exhibit 10(dd) to Form 10-K of
Wells Real Estate Fund VI, L.P. for the fiscal year
ended December 31, 1995, File No. 0-23656)
*10(hh) First Amendment to Joint Venture Agreement of Fund VI, N/A
Fund VII and Fund VIII Associates dated May 30, 1995
(Exhibit 10(w) to Post-Effective Amendment No. 4 to Form
S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(ii) Real Estate Purchase Agreement dated April 13, 1995 N/A
(Exhibit 10(x) to Post-Effective Amendment No. 4 to Form
S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page Number
- - ------ ----------------------- -----------
<S> <C> <C>
*10(jj) Lease Agreement dated February 27, 1995, between N/A
NationsBank of Georgia, N.A., as Agent for Wells Real
Estate Fund VII, L.P., and Harris Teeter, Inc. (Exhibit
10(y) to Post-Effective Amendment No. 4 to Form S-11
Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(kk) Development Agreement dated May 31, 1995, between Fund N/A
VI, Fund VII and Fund VIII Associates and Norcom
Development, Inc. (Exhibit 10(z) to Post- Effective
Amendment No. 4 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(ll) Joint Venture Agreement of Fund I, II, II-OW, VI and VII N/A
Associates dated August 1, 1995 (Exhibit 10(ii) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal
year ended December 31, 1995, File No. 0-23656)
*10(mm) Lease Modification Agreement No. 3 with The Kroger Co. N/A
dated December 31, 1993 (Exhibit 10(k) to Form 10-K of
Wells Real Estate Fund I for the fiscal year ended
December 31, 1993, File No. 0-14463)
*10(nn) First Amendment to Joint Venture Agreement of Fund VII N/A
and Fund VIII Associates dated April 1, 1996, (Exhibit
10 (nn) to form 10-K of Wells Real Estate Fund VII, L.P.
for the fiscal year ended December 31, 1996, File No.
0-25606)
*10(oo) Lease Agreement with Moovies, Inc. dated May 20, 1996, N/A
(Exhibit 10 (oo) to Form 10-K of Wells Real Estate Fund
VII, L.P. for the fiscal year ended December 31, 1996,
File No. 0-25606)
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> ^^??[BLANK]
<CASH> 75,740
<SECURITIES> 18,368,726
<RECEIVABLES> 339,387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,263
<PP&E> 1,562
<DEPRECIATION> ^^??0
<TOTAL-ASSETS> 18,789,678
<CURRENT-LIABILITIES> 401,708
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,387,970
<TOTAL-LIABILITY-AND-EQUITY> 18,789,678
<SALES> ^^??
<TOTAL-REVENUES> 846,306
<CGS> 0
<TOTAL-COSTS> 91,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 754,331
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 754,334
<EPS-PRIMARY> .85
<EPS-DILUTED> 0
</TABLE>
