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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 20, 1997
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Wells Real Estate Fund VIII, L.P.
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(Exact name of registrant as specified in its charter)
Georgia
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(State or other jurisdiction of incorporation)
0-27888 58-2126618
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(Commission File Number) (IRS Employer Identification No.)
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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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OF ASSETS.
On February 20, 1997, Fund VIII and Fund IX Associates (the "Fund VIII/IX
Joint Venture") acquired an approximately 4.26 acre tract of real property in
Broomfield, Colorado, located in Boulder County in the Denver/Boulder
metropolitan area (the "Denver Property"). A two-story office building
containing approximately 49,460 rentable square feet is currently being
developed and constructed on the Denver Property (the "Project"). The Denver
Property is part of the Interlocken Business Park, a 963-acre business
development for advanced technology and research/development oriented companies.
The Fund VIII/IX Joint Venture is a joint venture formed on June 10, 1996,
between Wells Real Estate Fund VIII, L.P. (the "Registrant") and Wells Real
Estate Fund IX, L.P. ("Wells Fund IX") for the purpose of the acquisition,
ownership, development, leasing, operation, sale and management of real
properties. The investment objectives of Wells Fund IX are substantially
identical to those of the Registrant. All income, loss, profit, net cash flow,
resale gain, resale loss and sale proceeds of the Fund VIII/IX Joint Venture are
allocated and distributed between Wells Fund IX and the Registrant based upon
their respective capital contributions to the Joint Venture.
The Fund VIII/IX Joint Venture purchased the Denver Property from ORIX
Prime West Broomfield II Venture (the "Seller"), a Colorado general partnership.
None of the Fund VIII/IX Joint Venture, Wells Fund IX, the Registrant or their
General Partners are affiliated with the Seller. The purchase price paid to the
Seller for the Denver Property was $7,029,000. Pursuant to the Agreement for
the Purchase and Sale of Property dated February 20, 1997, between the Seller
and the Fund VIII/IX Joint Venture, this purchase price shall be reduced and the
reduction will be refunded to the Joint Venture out of the escrow account
hereinafter described if either (i) the Project is not substantially completed
by April 1, 1997 or (ii) the base annual rent payable under the Lease (hereafter
defined) is less than $644,000 over the first five years of the lease term. The
Fund VIII/IX Joint Venture deposited $2,418,453 of the purchase price in escrow
at closing with Security Title Guaranty Company (the "Escrow Agent"). The
Escrow Agent is required to make disbursements periodically to pay the costs and
expenses of completing the construction of the Project. The amount in escrow is
equal to or greater than the sum of the amount of Project costs for work
performed but not yet paid plus 120% of the amount of costs and expenses
reasonably expected to be incurred in order to complete the Project. Prior to
closing, the Fund VIII/IX Joint Venture received an independent appraisal of the
Denver Property from Joseph Farber and Company, Inc. dated February 3, 1997,
estimating the fair market value of the leased fee interest in the Denver
Property subject to the terms of the Lease (described below) to be $7,100,000,
as of March 15, 1997, based on market conditions existing as of January 30,
1997. The appraisal assumes the Project will be completed in accordance with
plans and specifications and that the Lease is in place at the estimated rental
rate. In accordance with the terms of the Custodial Agency Agreement of the
Registrant dated November 15, 1994, as amended, and the Amended and Restated
Custodial Agency Agreement of Wells Fund IX dated November 30, 1995, as amended,
legal title to the Denver Property is being held by The Bank of New York (as
successor-in-interest to NationsBank of Georgia, N.A.), as Agent for the Fund
VIII/IX Joint Venture. The Fund VIII/IX Joint Venture incurred additional
acquisition expenses in connection with the purchase of the Denver Property,
including without limitation, appraisal expenses, attorneys' fees, title
insurance charges, recording fees, escrow charges and other closing costs of
approximately $43,000.
Construction of the Project is scheduled to be substantially completed by
April 1, 1997. DSP Builders, Inc. (the "Contractor") is serving as general
contractor for the construction of the Project pursuant to an Owner-Contractor
Agreement entered into with the Seller (the "Construction Contract"), and
Intergroup, Inc. (the "Architect") is serving as the architect for the Project
pursuant to an Architect's Agreement entered into with the Seller. At closing,
the Seller assigned its interest in the Construction Contract and the
Architect's Agreement to the Fund VIII/IX Joint Venture. The Contractor and the
Architect each provided to the Fund VIII/IX Joint Venture at closing a
certification and agreement to continue work, certifying that the respective
agreements are valid and enforceable, consenting to the assignment by the Seller
to the Fund VIII/IX Joint Venture of such contracts, acknowledging the amounts
which Seller has paid prior to closing under such contracts, and agreeing to
continue performance thereunder. Neither the Contractor nor the Architect are
affiliated with the the Fund VIII/IX Joint Venture, Wells Fund IX, the
Registrant or their General Partners.
Cirrus Logic, Inc., a California corporation ("Cirrus Logic"), has agreed
to lease the entire rentable area of the Project upon completion under a Lease
dated as of July 5, 1995, as amended October 4, 1996, February 4,
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1997 and February 18, 1997 (as amended, the "Lease"), which Lease was assigned
to the Fund VIII/IX Joint Venture at the closing. Cirrus Logic is a Nasdaq-
listed corporation with net revenues for the fiscal year ending March 30, 1996
in excess of $1.1 billion, and will use the leased premises as office space for
employees who design computer chips for the company's mass storage division.
The Lease, as well as Cirrus Logic's obligation to pay rent, shall commence on
the earlier of (a) the date upon which Cirrus Logic takes occupancy of the
building and (b) the day after the date upon which both a certificate of
occupancy and certificate of substantial completion have been issued for the
building. The Lease provides for a term of 15 years from the commencement date.
Cirrus Logic has the option to renew the Lease for two additional terms of five
years each. The base rental payable during any such extended term would be 95%
of the market rental rate for comparable office buildings in the Boulder County
area.
The base annual rent payable by Cirrus Logic under the Lease will be equal
to 10.29% of the costs related to acquiring the Denver Property and constructing
the Project. The base annual rent derived from this formula will be increased
by 10% beginning with the sixth year of the Lease and will be increased another
10% beginning with the eleventh year of the Lease. It is estimated that the
initial base annual rent will equate to approximately $13.50 per square foot of
leasable space, however, in no event shall the initial base annual rent exceed
$13.81 per square foot of leasable space. Under this estimate, Cirrus Logic
will pay approximately $667,755 per year in base rent pursuant to the Lease.
Rent is to be paid in monthly installments, payable in advance on the first of
each month. Cirrus Logic has prepaid $78,397 in rent which the Fund VIII/IX
Joint Venture is holding to apply against the obligation to pay the first
month's rent under the Lease.
The Lease provides that Cirrus Logic has an option to expand the leased
premises by providing written notice to the Fund VIII/IX Joint Venture to
request that the Fund VIII/IX Joint Venture acquire real property adjacent to
the Denver Property and build certain improvements thereon. At closing, the
Seller assigned to the Fund VIII/IX Joint Venture its option to purchase the
real property contemplated by the expansion option. The Fund VIII/IX Joint
Venture shall have 30 days after receipt of Cirrus Logic's notice to exercise
the expansion option within which to elect to acquire the expansion land and
build the expansion premises. If the Fund VIII/IX Joint Venture declines to
develop the expansion premises, Cirrus Logic's sole remedy would be to obtain an
assignment from the Fund VIII/IX Joint Venture of the option to purchase the
expansion land. If the Fund VIII/IX Joint Venture does acquire the expansion
land and develops the expansion premises, the expansion would be included in the
Lease upon completion of the improvements and the base rental rate for the
expansion premises would be calculated in the same manner as the base rental
rate for the premises initially leased pursuant to the Lease.
Under the Lease, Cirrus Logic is responsible for all utilities, cleaning,
taxes and other operating expenses with respect to the Denver Property during
the term of the Lease, and the Fund VIII/IX Joint Venture, as landlord, is
responsible for maintenance and repair of the exterior structure of the
building, including the roof and structural portions. Cirrus Logic shall be
responsible for maintaining property and liability insurance on the Denver
Property and its use of the leased premises for the benefit of Cirrus Logic and
the Fund VIII/IX Joint Venture, and the Fund VIII/IX Joint Venture shall
maintain for its own benefit liability insurance for the Denver Property as well
as insurance for fire, vandalism and malicious mischief.
The funds used by the Fund VIII/IX Joint Venture to acquire the Denver
Property were derived entirely from capital contributions made to the Fund
VIII/IX Joint Venture by the Registrant and Wells Fund IX. Each of the
Registrant and Wells Fund IX made capital contributions of approximately
$3,535,761 to fund the purchase of the Denver Property, for total capital
contributions to the Fund VIII/IX Joint Venture with respect to the Denver
Property of approximately $7,071,522.
In addition to owning the Denver Property, the Fund VIII/IX Joint Venture
also owns (i) a four-story office building under development located in Madison,
Wisconsin (the "Madison Project"), which Westel-Milwaukee Company, Inc. d/b/a
Cellular One has agreed to lease upon completion (anticipated to occur on or
before June 15, 1997), (ii) a single-story office building located in Farmers
Branch, Dallas County, Texas, which is leased to TCI Central, Inc, and (iii) a
two-story office building located in Irvine, Orange County, California, which is
leased to Matsushita Avionics Systems Corporation. Through February 20, 1997,
Wells Fund IX had contributed a total of approximately $13,390,665 and the
Registrant had contributed a total of approximately $13,388,305 to the Fund
VIII/IX Joint Venture with respect to these four properties. Accordingly, Wells
Fund IX currently holds an
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approximate 50% equity interest in the Fund VIII/IX Joint Venture, and the
Registrant currently holds an approximate 50% equity interest in the Fund
VIII/IX Joint Venture. It is anticipated that an additional approximate
$5,500,000 will be required to be expended to complete the Madison Project,
which funds are anticipated to be contributed to the Fund VIII/IX Joint Venture
by the Registrant and Wells Fund IX in equal shares. Accordingly, upon
completion of the Madison Project, it is anticipated that Wells Fund IX will own
an approximate 50% equity interest in the Fund VIII/IX Joint Venture and the
Registrant will own an approximate 50% equity interest in the Fund VIII/IX Joint
Venture.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Because there are no prior operations and the Registrant will not
operate the Denver Property until construction is completed, no historical
financial information relating to the Denver Property is available, and
accordingly, no financial statements relating to the Denver Property are
provided.
(b) See paragraph (a) above.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLS REAL ESTATE FUND VIII, L.P.
Registrant
By: /s/ Leo F. Wells, III
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Leo F. Wells, III, as General Partner
and as President and sole Director of
Wells Capital, Inc., the General
Partner of Wells Partners, L.P.,
General Partner
Date: March 5, 1997
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