<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000 or
--------------------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ To ______________________
Commission file number 0-27888
--------------------------------------------------------
WELLS REAL ESTATE FUND VII, L.P.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2022629
----------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6200 The Corners Pkwy., Norcross, Georgia 30092
----------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (770) 449-7800
------------------------------------
-------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_________
------
<PAGE>
FORM 10-Q
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--September 30, 2000 and December 31, 1999 3
Statements of Income for the Three Months and Nine Months Ended September 30,
2000 and 1999 4
Statements of Partners' Capital for the Year Ended December 31, 1999
and the Nine Months Ended September 30, 2000 5
Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 6
Condensed Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION 19
</TABLE>
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<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2000 1999
------------- ------------
ASSETS:
Investment in joint ventures (Note 2) $16,729,788 $17,446,299
Due from affiliates 426,574 465,908
Cash and cash equivalents 97,732 81,697
------------- ------------
Total assets $17,254,094 $17,993,904
============= ============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable $ 2,829 $ 1,929
Partnership distributions payable 471,947 458,148
------------- ------------
Total liabilities 474,776 460,077
------------- ------------
Partners' capital:
Limited partners:
Class A--2,041,243 units and 2,036,267 units as 16,779,318 17,125,194
of September 30, 2000 and December 31, 1999,
respectively
Class B--376,774 units and 381,750 units as of
September 30, 2000 and December 31, 1999,
respectively 0 408,633
------------- ------------
Total partners' capital 16,779,318 17,533,827
------------- ------------
Total liabilities and partners' capital $17,254,094 $17,993,904
============= ============
See accompanying condensed notes to financial statements.
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<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Equity in income of joint ventures (Note 2) $217,092 $ 235,835 $ 724,019 $ 745,020
Interest income 10,716 537 11,863 683
------------- ------------- ------------- -------------
227,808 236,372 735,882 745,703
------------- ------------- ------------- -------------
EXPENSES:
Legal and accounting 300 200 15,825 15,660
Partnership administration 10,544 14,370 45,528 50,360
Amortization of organization costs 0 0 0 1,563
------------- ------------- ------------- -------------
10,844 14,570 61,353 67,583
------------- ------------- ------------- -------------
NET INCOME $216,964 $ 221,802 $ 674,529 $ 678,120
============= ============= ============= =============
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $216,964 $ 468,238 $1,077,708 $1,403,161
============= ============= ============= =============
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0 $(246,436) $ (403,179) $ (725,041)
============= ============= ============= =============
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 0.11 $ 0.23 $ 0.53 $ 0.69
============= ============= ============= =============
NET LOSS PER CLASS B LIMITED PARTNER UNIT $ 0.00 $ (0.62) $ (1.07) $ (1.78)
============= ============= ============= =============
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 0.23 $ 0.22 $ 0.70 $ 0.64
============= ============= ============= =============
</TABLE>
See accompanying condensed notes to financial statements.
-4-
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Limited Partners
---------------------------------------------
Class A Class B Total
--------------------------------------------- Partners'
Units Amounts Units Amounts Capital
--------- ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 2,009,517 $16,935,935 408,500 $1,452,035 $18,387,970
Net income (loss) 0 1,879,410 0 (983,615) 895,795
Partnership distributions 0 (1,749,938) 0 0 (1,749,938)
Class B conversion elections 26,750 59,787 (26,750) (59,787) 0
--------- ----------- ------- ---------- -----------
BALANCE, December 31, 1999 2,036,267 17,125,194 381,750 408,633 17,533,827
Net income (loss) 0 1,077,708 0 (403,179) 674,529
Partnership distributions 0 (1,429,038) 0 0 (1,429,038)
Class B conversion elections 4,976 5,454 (4,976) (5,454) 0
--------- ----------- ------- ---------- -----------
BALANCE, September 30, 2000 2,041,243 $16,779,318 376,774 $ 0 $16,779,318
========= =========== ======= ========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
-5-
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
Nine Months Ended
---------------------------
September 30, September 30,
2000 1999
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 674,529 $ 678,120
------------- ------------
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in income of joint ventures (724,019) (745,020)
Amortization of organization costs 0 1,563
Changes in assets and liabilities:
Prepaids and other assets 0 1,717
Accounts payable 900 (4,226)
------------- ------------
Total adjustments (723,119) (745,966)
------------- ------------
Net cash used in operating activities (48,590) (67,846)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 1,479,864 1,353,928
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership distributions paid (1,415,239) (1,245,612)
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 16,035 40,470
CASH AND CASH EQUIVALENTS, beginning of year 81,697 75,740
------------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 97,732 $ 116,210
============= ============
See accompanying condensed notes to financial statements.
-6-
<PAGE>
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General
Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia public
limited partnership, having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The Partnership was formed on December 1, 1992, for the
purpose of acquiring, developing, owning, operating, improving, leasing,
and otherwise managing for investment purposes income-producing commercial
properties.
On April 6, 1994, the Partnership commenced an offering of up to
$25,000,000 of Class A or Class B limited partnership units ($10 per unit)
pursuant to a Registration Statement on Form S-11 filed under the
Securities Act of 1933. The Partnership commenced active operations when it
received and accepted subscriptions for a minimum of 125,000 units on April
26, 1994. The Partnership terminated its offering on January 5, 1995, and
received gross proceeds of $24,180,174 representing subscriptions from
1,910 Limited Partners.
The Partnership owns equity interests in properties through ownership in
the following joint ventures: (i) Fund V, Fund VI, and Fund VII Associates,
a joint venture between the Partnership, Wells Real Estate Fund V, L.P.,
and Wells Real Estate Fund VI, L.P. (the "Fund V-VI-VII Joint Venture");
(ii) Fund VI and Fund VII Associates, a joint venture between the
Partnership and Wells Real Estate Fund VI, L.P. (the "Fund VI-Fund VII
Joint Venture"); (iii) Fund II, III, VI, and VII Associates, a joint
venture 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. (the "Fund VII-Fund VIII Joint
Venture"); (v) Fund VI, Fund VII, and Fund VIII Associates, a joint venture
between the Partnership, Wells Real Estate Fund VI, L.P., and Wells Real
Estate Fund VIII, L.P. (the "Fund VI-VII-VIII Joint Venture"); and (vi)
Fund I, II, II-OW, VI, and VII Associates, a joint venture between the
Partnership, Wells Real Estate Fund I, the Fund II and Fund II-OW Joint
Venture, and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW, VI,
and VII Joint Venture").
As of September 30, 2000, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
three-story office building located in Appleton, Wisconsin (the "Marathon
Building"); (ii) two retail buildings located in Stockbridge, Georgia
("Stockbridge Village III"); (iii) a retail shopping center expansion in
Stockbridge, Georgia ("Stockbridge Village I Expansion"); (iv) an
office/retail center located in Roswell, Georgia ("Holcomb Bridge Road
Property"); (v) a retail center located in Stockbridge, Georgia (the
"Hannover Center"); (vi) a four-story office building located in
Jacksonville, Florida (the "BellSouth Property"); (vii) an office building
located in Gainesville, Florida ("CH2M Hill at Gainesville Property");
(viii) a retail center in Clemmons, North Carolina ("Tanglewood Commons");
and (ix) a retail center located in Cherokee County, Georgia ("Cherokee
Commons").
-7-
<PAGE>
(b) Basis of Presentation
The consolidated financial statements of the Partnership have been prepared
in accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These quarterly statements
have not been examined by independent accountants, but in the opinion of
the General Partners, the statements for the unaudited interim periods
presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for such
periods. For further information, refer to the financial statements and
footnotes included in the Partnership's Form 10-K for the year ended
December 31, 1999.
2. INVESTMENT IN JOINT VENTURES
The Partnership owns interests in nine properties through its ownership in
joint ventures of which three are office buildings and nine are retail
centers. The Partnership does not have control over the operations of the
joint ventures; however, it does exercise significant influence.
Accordingly, investment in joint ventures is recorded on the equity method.
For a description of the joint ventures and properties owned by the
Partnership, please refer to the Partnership's Form 10-K for the year ended
December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes thereto.
This Report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future, and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially from any forward-looking
statement made in this Report, which include construction costs which may
exceed estimates, construction delays, lease-up risks, inability to obtain
new tenants upon the expiration of existing leases, and the potential need
to fund tenant improvements or other capital expenditures out of operating
cash flow.
1. RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS
General
As of September 30, 2000, the developed properties owned by the Partnership
were 96.4% occupied, as compared to 96.5% occupied as of September 30,
1999.
Gross revenues of the Partnership decreased for the nine months ended
September 30, 2000, as compared to the same period in 1999, due to a
decrease in occupancy at the Hannover Center offset partially by increases
in common area maintenance billings to tenants in CH2M Hill Property and
Tanglewood Commons. Total expenses decreased slightly for the nine month
period due to decreases in administrative salary.
-8-
<PAGE>
Cash distributions per weighted average Unit for Class A Limited Partners were
$0.23 and $0.22 for the three months ended September 30, 2000 and 1999,
respectively. No cash distributions were made by the Partnership to the Limited
Partners holding Class B units or to the General Partner. The Partnership
anticipates that distributions will continue to be paid on a quarterly basis on
a level at least consistent with 1999.
The Partnership's net cash provided by investing activities and net cash used in
financing activities increased in 2000, compared to 1999, due to increases in
distributions from joint ventures as occupancy increased.
The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to meet
both operating requirements and distributions to limited partners. At this time,
given the nature of the joint ventures in which the Partnership has invested,
there are no known improvements and renovations to the properties expected to be
funded from cash flow from operations.
At this time, two properties are being marketed for sale. CB Richard Ellis is
marketing the sale of 880 Holcomb Bridge and Cherokee Commons. The marketing
piece is being broadly distributed to investors throughout the country. To
maximize the disposition value, the management team is separating the retail and
creating a condominium for the office buildings. The legal and site work should
be complete so that the management team can market this property to investors in
early fall. The Partnership's goal is to have these properties sold by the end
of 2002. As the properties are sold, all proceeds will be returned to the
Limited Partners in accordance with the Partnership's prospectus. Management
estimates that the fair market value of each of the properties exceeds the
carrying value of the corresponding real estate assets; consequently, no
impairment loss has been recorded. In the event that the net sales proceeds are
less than the carrying value of the property sold, the Partnership would
recognize a loss on the sale. Management is not contractually or financially
obligated to sell any of its properties, and it is management's current intent
to fully realize the Partnership's investment in real estate. The success of the
Partnership's future operations and the ability to realize 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 that it is taking will enable the Partnership
to realize its investment in its assets.
-9-
<PAGE>
2. PROPERTY OPERATIONS
As of September 30, 2000, the Partnership owned interest in the following
operational properties:
The Marathon Building/Fund V-VI-VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 242,763 $ 243,182 $ 728,288 $ 728,690
---------------- -------------- ------------- --------------
Expenses:
Depreciation 87,646 87,646 262,939 262,939
Management and leasing expenses 2,361 14,627 7,082 37,314
Other operating expenses 3,555 4,181 14,984 14,592
---------------- -------------- ------------- --------------
93,562 106,454 285,005 314,845
---------------- -------------- ------------- --------------
Net income $ 149,201 $ 136,728 $ 443,283 $ 413,845
================ ============== ============= ==============
Occupied percentage 100% 100% 100% 100%
================ ============== ============= ==============
Partnership's ownership percentage in the
Fund V-VI-VII Joint Venture 41.7% 41.7% 41.7% 41.7%
================ ============== ============= ==============
Cash distribution to the Partnership $ 99,685 $ 94,315 $ 297,253 $ 284,813
================ ============== ============= ==============
Net income allocated to the Partnership $ 62,232 $ 57,029 $ 184,893 $ 172,615
================ ============== ============= ==============
</TABLE>
Rental income remained relatively stable for the nine months and three months
ended September 30, 2000 as compared to the nine months and three months ended
September 30, 1999.
Management and leasing fees decreased for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999 due to a lower rate
charged starting in October 1999. The management and leasing agreement reduces
fees to 1% after five years on triple-net leases of ten years or more. As a
result, net income and cash distribution to the Partnership increased.
-10-
<PAGE>
Stockbridge Village III/Fund VI-Fund VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $77,651 $76,916 $231,384 $233,518
-------------- ------------ ------------- --------------
Expenses:
Depreciation 21,409 20,711 64,225 65,754
Management and leasing expenses 9,268 9,260 28,046 27,999
Other operating expenses 3,783 10,105 6,391 19,683
-------------- ------------ ------------- --------------
34,460 40,076 98,662 113,436
-------------- ------------ ------------- --------------
Net income $43,191 $36,840 $132,722 $120,082
============== ============ ============= ==============
Occupied percentage 100% 100% 100% 100%
============== ============ ============= ==============
Partnership's ownership percentage in the
Fund VI-Fund VII Joint Venture 55.7% 56.3% 55.7% 56.3%
============== ============ ============= ==============
Cash distribution to the Partnership $36,833 $35,266 $113,604 $104,235
============== ============ ============= ==============
Net income allocated to the Partnership $24,140 $20,740 $ 74,535 $ 67,604
============== ============ ============= ==============
</TABLE>
Rental income remained relatively stable for the three months and nine months
ended September 30, 2000, as compared to the same periods in 1999.
Net income and cash distributions have increased for the three months and nine
months ended September 30, 2000 as compared to the same periods in 1999 due
primarily to decreased expenses for legal fees, accounting fees and
administrative salary.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 55.7%, as compared to 56.3% in September 30, 1999, due to
additional fundings by Wells Fund VI, which decreased the Partnership's
ownership in the Fund VI-Fund VII Joint Venture.
-11-
<PAGE>
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $88,046 $67,729 $253,854 $212,355
-------------- ------------ ------------- --------------
Expenses:
Depreciation 38,690 37,350 112,992 111,553
Management and leasing expenses 11,628 14,104 34,348 31,831
Other operating expenses 10,192 3,811 29,979 4,797
-------------- ------------ ------------- --------------
60,510 55,265 177,319 148,181
-------------- ------------ ------------- --------------
Net income $27,536 $12,464 $ 76,535 $ 64,174
============== ============ ============= ==============
Occupied percentage 93% 86% 93% 86%
============== ============ ============= ==============
Partnership's ownership percentage in the
Fund VI-Fund VII Joint Venture 55.7% 56.3% 55.7% 56.3%
============== ============ ============= ==============
Cash distributed to the Partnership $33,786 $35,985 $110,961 $119,583
============== ============ ============= ==============
Net income allocated to the Partnership $15,390 $ 7,017 $ 42,972 $ 36,129
============== ============ ============= ==============
</TABLE>
Rental income increased for the three months and nine months ended September 30,
2000, as compared to the same period in 1999 due to increased rental renewal
rates this year and increased occupancy in the third quarter of 2000.
Other operating expenses increased due to increased legal fees and decreases in
common area maintenance billing to tenants. In 1999, monthly common area
maintenance billing to tenants were increased to offset 1998 underpayments.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the following year and the difference
billed to the tenant.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 55.7%, as compared to 56.3% in September 30, 1999, due to
additional funding by Wells Fund VI, which decreased the Partnership's ownership
in the Fund VI-Fund VII Joint Venture.
-12-
<PAGE>
Holcomb Bridge Road /Fund II, III, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 214,051 $ 213,028 $658,907 $670,852
--------------- ------------- ------------ -------------
Expenses:
Depreciation 104,129 79,605 312,389 277,862
Management and leasing expenses 28,099 22,263 85,165 93,200
Other operating expenses 29,194 14,889 70,302 39,670
--------------- ------------- ------------ -------------
161,422 116,757 467,856 410,732
--------------- ------------- ------------ -------------
Net income $ 52,629 $ 96,271 $191,051 $260,120
--------------- ------------- ------------ -------------
Occupied percentage 92% 94% 92% 94%
=============== ============= ============= =============
Partnership's ownership percentage in the
Fund III, III, VI, and VII Joint
Venture 49.1% 49.1% 49.1% 49.1%
=============== ============= ============= =============
Cash distributed to the Partnership $ 84,696 $ 83,775 $271,040 $250,127
=============== ============= ============= =============
Net income allocated to the Partnership $ 25,825 $ 47,240 $ 93,749 $127,641
=============== ============= ============= =============
</TABLE>
Rental income decreased for the nine months ended September 30, 2000, as
compared to the same period in 1999, due to decreased occupancy. Other operating
expenses increased for the three month and nine month periods ended September
30, 2000, as compared to the same periods in 1999, due to appraisal fees for
this property which is currently being marketed for sale and a decrease in
common area maintenance reimbursements from tenants. Monthly common area
maintenance billings were increased in 1999 to offset 1998 underpayment. Tenants
are billed an estimated amount for the current year common area maintenance
which is then reconciled the following year and the difference billed to the
tenant.
Cash distributions to the Partnership increased for the three months and nine
months ended September 30, 2000, as compared to the same periods in 1999, even
though there is a decrease in net income this year due to lease acquisition fees
and procurement fees paid in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-13-
<PAGE>
The Hannover Center/Fund VII-Fund VIII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 26,672 $53,354 $ 80,014 $165,847
-------------- ------------ ------------- -------------
Expenses:
Depreciation 21,655 10,981 64,513 32,944
Management and leasing expenses 4,289 3,746 12,931 16,788
Other operating expenses 11,156 3,683 35,117 6,601
-------------- ------------ ------------- -------------
37,100 18,410 112,561 56,333
-------------- ------------ ------------- -------------
Net (loss) income $(10,428) $34,944 $ (32,547) $109,514
============== ============ ============= =============
Occupied percentage 50% 100% 50% 100%
============== ============ ============= =============
Partnership's ownership percentage in the
Fund VII-Fund VIII Joint Venture 36.6% 36.6% 36.6% 36.6%
============== ============ ============= =============
Cash distribution to the Partnership $ 4,365 $16,731 $ 8,840 $ 48,374
============== ============ ============= =============
Net (loss) income allocated to the
Partnership $ (3,821) $12,807 $ (11,928) $ 40,137
============== ============ ============= =============
</TABLE>
Rental income, net income, and cash distributions to the Partnership decreased
for the three months and nine months ended September 30, 2000, as compared to
the same periods in 1999, due to one tenant defaulted on the lease and moved out
at the end of 1999. The management team is currently taking legal action against
that tenant.
Depreciation expense increased for the three month and nine month periods, as
compared to 1999, due to additional capitalized tenant improvements. Operation
expense increased due to increases in landscaping supplies, sign maintenance,
and legal fees and decreases in common area maintenance billings to tenants in
2000 which is because of decreased occupancy.
-14-
<PAGE>
CH2M Hill/Fund VII-Fund VIII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------- ---------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 144,034 $ 144,035 $432,104 $431,747
------------- ------------ ------------- -------------
Expenses:
Depreciation 65,941 66,077 197,822 202,902
Management and leasing expenses 26,197 17,890 73,099 65,886
Other operating expenses (2,159) 16,225 (31,842) 5,806
------------- ------------ ------------- -------------
89,979 100,192 239,079 274,594
------------- ------------ ------------- -------------
Net income $ 54,055 $ 43,843 $193,025 $157,153
============= ============ ============= =============
Occupied percentage 100% 100% 100% 100%
============= ============ ============= =============
Partnership's ownership percentage in the
Fund VII-Fund VIII Joint Venture 36.6% 36.6% 36.6% 36.6%
============= ============ ============= =============
Cash distribution to the Partnership $ 44,736 $ 41,057 $145,525 $132,598
============= ============ ============= =============
Net income allocated to the Partnership $ 19,812 $ 16,069 $ 70,744 $ 57,597
============= ============ ============= =============
</TABLE>
Rental income remained stable for three months and nine months ended September
30, 2000 as compared to the same period in 1999. Net income and cash
distributions to the Partnership increased for the three month and nine month
periods, as compared to 1999, due to an increase in common area maintenance
billings to the tenants in 2000. Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the following year
and the difference billed to the tenant. Management and leasing fees
reimbursement were included in other operating expenses.
-15-
<PAGE>
BellSouth Building/Fund VI-VII-VIII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 380,278 $ 380,278 $ 1,140,832 $ 1,140,832
Interest income 240 1,159 1,745 3,461
------------- ------------- -------------- --------------
386,518 381,437 1,142,577 1,144,293
------------- ------------- -------------- --------------
Expenses:
Depreciation 111,606 111,606 334,818 334,818
Management and leasing expenses 48,166 47,891 145,306 144,824
Other operating expenses 129,132 111,440 354,742 321,275
------------- ------------- -------------- --------------
288,904 270,937 834,866 800,917
------------- ------------- -------------- --------------
Net income $ 91,614 $ 110,500 $ 307,711 $ 343,376
============= ============= ============== ==============
Occupied percentage 100% 100% 100% 100%
============= ============= ============== ==============
Partnership's ownership percentage in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4% 33.4% 33.4%
============= ============= ============== ==============
Cash distribution to the Partnership $ 70,651 $ 76,959 $ 222,931 $ 234,842
============= ============= ============== ==============
Net income allocated to the Partnership $ 30,594 $ 36,902 $ 102,760 $ 114,671
============= ============= ============== ==============
</TABLE>
Net income and cash distributions have decreased for the three months and nine
months ended September 30, 2000, as compared to the same periods in 1999, due
primarily to increased janitorial expenses and expenses for an application of
water repellent on the building.
-16-
<PAGE>
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 210,475 $ 192,850 $626,366 $579,169
Interest income 0 2,374 1,988 7,663
------------- ------------- ------------- -------------
210,475 195,224 628,354 586,832
------------- ------------- ------------- -------------
Expenses:
Depreciation 67,554 64,677 200,204 190,779
Management and leasing expenses 19,389 16,639 60,466 49,281
Other operating expenses 13,699 18,093 (32,553) 47,541
------------- ------------- ------------- -------------
100,642 99,409 228,117 287,601
------------- ------------- ------------- -------------
Net income $ 109,833 $ 95,815 $400,237 $299,231
------------- ------------- ------------- -------------
Occupied percentage 97% 91% 97% 91%
============= ============= ============= =============
Partnership's ownership percentage in the
Fund VI-VII-VIII Joint Venture 33.4% 33.4% 33.4% 33.4%
============= ============= ============= =============
Cash distribution to the Partnership $ 59,325 $ 53,999 $201,966 $164,741
============= ============== =============== =============
Net income allocated to the Partnership $ 36,679 $ 31,997 $133,660 $ 99,928
============= ============= ============= =============
</TABLE>
Rental income, net income, depreciation expenses, and management and leasing
fees have increased in 2000, as compared to 1999, due to increased occupancy at
the property.
Other operating expenses decreased due to monthly common area maintenance
billings to the tenants were increased in 2000 to offset 1999 underpayment.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the following year and the difference
billed to the tenant.
-17-
<PAGE>
Cherokee Commons/Fund I, II, II-OW, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $249,102 $238,923 $713,717 $703,538
Interest income 32 8 71 47
------------- ------------- ------------ -------------
249,134 238,931 713,788 703,585
------------- ------------- ------------ -------------
Expenses:
Depreciation 110,562 111,379 331,687 332,906
Management and leasing expenses 10,360 22,863 46,653 73,992
Other operating expenses 51,473 48,342 30,688 28,699
------------- ------------- ------------ -------------
172,395 182,584 409,028 435,597
------------- ------------- ------------ -------------
Net income $ 76,739 $ 56,347 $304,760 $267,988
============= ============= ============ =============
Occupied percentage 97% 97% 97% 97%
============= ============= ============ =============
Partnership's ownership percentage 10.7% 10.7% 10.7% 10.7%
============= ============= ============ =============
Cash distribution to the Partnership $ 17,492 $ 18,629 $ 68,335 $ 63,310
============= ============= ============ =============
Net income allocated to the Partnership $ 6,242 $ 6,034 $ 32,634 $ 28,696
============= ============= ============ =============
</TABLE>
Rental income increased in 2000, as compared to 1999, due to increased rental
renewal rates. Management and leasing expenses decreased in 2000, as compared to
1999, due to increased leasing commissions for 1999 and a catch-up of 1998
management fees in 1999. Other operating expenses remained relatively stable for
the nine months ended September 30, 2000, as compared to the same period in
1999. Net income increased for the three months and nine months ended September
30, 2000, as compared to the same period in 1999, due to the lower management
and leasing expenses.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.) No reports on Form 8-K were filed during the third quarter of 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND VII, L.P.
(Registrant)
Dated: November 10, 2000 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner, and as President,
Sole Director, and Chief Financial
Officer of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
-19-
