<PAGE>
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, 1996 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 0-27888
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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 58-2126618
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3885 Holcomb Bridge Road
Norcross, Georgia 30092
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including (770) 449-7800
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area code 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:
NONE
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(Title of Class)
NONE
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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___
---
Aggregate market value of the voting stock held by
non-affiliates: Not Applicable
--------------------------
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PART I
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ITEM 1. BUSINESS
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GENERAL
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Wells Real Estate Fund VIII, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia
non-public partnership, as General Partners. The Partnership was formed on
August 15, 1994, for the purpose of acquiring, developing, constructing, owning,
operating, improving, leasing and otherwise managing for investment purposes
income-producing commercial or industrial properties.
On January 6, 1995, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations on February 24, 1995, when it received
and accepted subscriptions for 125,000 units. The offering was terminated on
January 5, 1996, at which time the Partnership had sold 2,613,534 Class A Status
Units, and 590,735 Class B Status Units, held by a total of 1,939 and 302
Limited Partners respectively, for total Limited Partner capital contributions
of $32,042,689.
As of December 31, 1996, the Partnership owned interest in the following
properties through ownership in joint ventures: (i) an office building in
Gainesville, Florida, (ii) an office building in Jacksonville, Florida, (iii) a
retail shopping center under construction in Clemmons, North Carolina (iv) a
combined retail/office building in Stockbridge, Georgia, (v) an office building
under construction in Madison, Wisconsin, and (vi) and office building located
in Farmer's Branch, Texas. All of the foregoing properties were acquired on an
all cash basis and are described in more detail in Item 2 below.
EMPLOYEES
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., a General Partner of the
Partnership, 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, 1996.
INSURANCE
Wells Management Company, Inc., an affiliate of the General Partners, 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.
2
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COMPETITION
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 six properties through its investment in joint
ventures of which four are office buildings and two are retail buildings. 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, 1996, these
properties were 93% occupied, down from 94% at December 31, 1995.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1996, assuming no exercise of renewal options
or termination rights:
<TABLE>
<CAPTION>
Number of Annualized Partnership's Percentage of Percentage of
Year of Lease Leases Square Gross Base Share of Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent (1) Gross Base Rent(1) Feet Expiring Base Rent
- ------------- ------------ ---------------- -------------- ---------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
2000 - - - - - - -
2001 - - - - - - -
2002 - - - - - - -
2003 - - - - - - -
2004
2005 (2) 1 57,547 $ 530,313 $ 329,059 43.3% 29.8%
2006 (3) 2 75,444 1,251,473 423,640 56.7% 70.2%
- ------- - ------- ---------- --------- ----- -----
3 132,991 $1,781,786 $ 752,699 100.0% 100.0%
- ------- ---------- --------- ----- -----
</TABLE>
(1) Average monthly gross rent over the life of the lease, annualized.
(2) Expiration of CH2M Hill lease, Gainesville, Florida.
(3) Expiration of 69,424 square feet BellSouth lease, Jacksonville, Florida.
The following describes the properties in which the Partnership owns an interest
as of December 31, 1996:
3
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FUND VII - FUND VIII JOINT VENTURE
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On February 10, 1995, the Partnership and Wells Real Estate Fund VII, L.P.
("Wells Fund VII"), 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 VII are substantially
identical to those of the Partnership. The Partnership holds an approximate
62.1% equity interest and Wells Fund VII holds an approximate 37.9% 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, 1996, the Partnership had contributed $4,002,732 and Wells Fund VII had
contributed $2,448,924 for a total cost of $6,451,656 to the Fund VII -Fund VIII
Joint Venture for the acquisition and development of the property. Although the
ultimate percentages of ownership has not yet been finalized, it is currently
anticipated that the remaining costs of approximately $128,000 in the
Gainesville Property and $76,000 in the Hannover Property will be contributed by
the Partnership, in which event, upon completion, the Partnership will own an
approximately 64% equity interest in the Fund VII - Fund VIII Joint Venture.
The Partnership has reserved sufficient funds from Limited Partners'
contributions for this purpose.
The Hannover Property
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On April 1, 1996, Wells Fund VII 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, 1996, Wells
Fund VII had funded approximately $1,412,001 for the development of the Hannover
property, in addition to the cost of the land, and the Partnership had
contributed $150,000 to the joint venture for the development of the property.
The total cost to develop this property, including land, is estimated to be
approximately $1,638,000 and the Partnership has reserved approximately $76,000
to complete the remaining development.
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: (1) for
the initial term of 36 months is $93,310; (2) for the second term of 36 months
is $102,340; (3) for the third term of 36 months is $111,370, and (4) for the
final term of eleven months is $110,367. Moovies, Inc. has the option to extend
its lease for two five year terms at market rate. The tenant, which provided
its own build-out from the existing shell, moved into the building and opened
for business June 22, 1996. The lease will expire in 2006.
The average effective annual rental per square foot at the Hannover Property was
$8.14 for 1996, the first year of occupancy. The occupancy rate for 1996 was
50%.
Gainesville Property
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Wells Fund VII 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
4
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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, containing 61,468 rentable square feet was
completed in December, 1995. It is anticipated that the total cost of the
building will be approximately $5,017,000 after the remaining unoccupied tenant
space is completed. The average effective annual rental per square foot at the
Gainesville Property was $8.69 for 1996 and $8.63 for 1995. Occupancy rate for
1996 and 1995 was 93.5%
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
from 1996 thru 1997 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, 1996, the Partnership had contributed $3,852,732 and Wells
Fund VII had contributed $1,036,923 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 VII and Wells Real Estate Fund
VI, L.P. ("Wells Fund VI") 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 are substantially
identical to those of the Partnership. As of December 31, 1996, the Partnership
had contributed approximately $4,700,000 for an approximately 28% 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
Clemmons, North Carolina. As of December 31, 1996, Wells Fund VI had
contributed $6,067,688 for an equity interest in the Fund VI-VII-VIII Joint
Venture of approximately 36%, and Wells Fund VII contributed approximately
$5,932,312 for an equity interest in the Fund VI-VII-VIII Joint Venture of
approximately 36%. The total cost to complete both properties is anticipated to
be approximately $17,700,000. Although the ultimate percentages of equity
interest in the Fund VI-VII-VIII Joint Venture have not yet been finally
determined, it is anticipated that the Partnership will contribute the remaining
cost of approximately $1,000,000 needed to complete construction of both
projects, in which event the ultimate equity interests in the Fund VI-VII-VIII
Joint Venture of the Partnership, Wells Fund VI and Wells Fund VII would be
approximately 32%, 34% and 34% respectively.
BellSouth Property
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On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased a 5.55 acre of
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
5
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square feet. BellSouth occupied an additional 2,900 square feet in December,
1996. The land purchase and future construction costs, totaling approximately $9
million, were funded by capital contributions of $2,000,000 by the Partnership,
$3,500,000 by Wells Fund VI and $3,500,000 by Wells Fund VII.
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 shares of
operating expenses during their respective lease terms.
The average effective annual rental per square foot at the BellSouth property
was $14.15 for 1996, the first year of occupancy. The occupancy rate was 100%
for 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
land purchase costs were funded by a capital contribution made by Wells Fund VI.
As of December 31, 1996, Fund VI had contributed $2,567,688, and Fund VII had
contributed $2,432,312 and the Partnership had contributed $2,700,000 for the
development of this project.
The Fund VI-VII-VIII Joint Venture is constructing one large strip shopping
center building containing approximately 81,000 gross square feet on a 12.48
acre tract. The remaining 2.2 acre portion of the property consists of four
outparcels which have been graded and will hold for future development.
Total costs 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 total approximately $8,700,000. Norcom Development,
Inc. is supervising managing and coordinating design and construction of the
property. Shook Design Group, Inc. is the architect, and John S. Clark and
Company is the general contractor. Construction of the project began in March,
1996, and is scheduled to be substantially completed in the first quarter of
1997.
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 as percentage rents equal to one percent of the
amount by which Harris Teeters gross sales exceed $35,000,000 for any lease
year.
FUND VIII - FUND IX JOINT VENTURE
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On June 10, 1996, the Partnership and Wells Real Estate Fund IX, L.P. ("Wells
Fund IX"), a Georgia public limited partnership, affiliated with the Partnership
through common general partners, formed a joint venture known as Fund VIII and
Fund IX Associates (the "Fund VIII - Fund IX Joint Venture"). The investment
objectives of Wells Fund IX are substantially identical to those of the
Partnership. As of December 31, 1996, the Partnership had contributed
$4,725,614 for an approximately 50% equity interest, and Wells Fund IX had
contributed $4,748,974 for an approximately 50% equity interest in the Fund
VIII-
6
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Fund IX Joint Venture which owns an office building in Farmer's Branch, Texas,
and an office building, under development, in Madison, Wisconsin. The total
cost to complete the Cellular One property is anticipated to be approximately
$10,500,000. Although the ultimate percentages of ownership in the Fund VIII -
Fund IX Joint Venture have not yet been finally determined, it is anticipated
that the Partnership and Wells Fund IX will contribute equally the remaining
cost of approximately $5,500,000 for an approximately 50% equity interest each.
Cellular One Property
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On June 17, 1996, the Fund VIII - Fund IX Joint Venture purchased a 7.09 acre
tract of real property in Madison, Dane County, Wisconsin for a total cost of
$859,255 including closing costs. A four-story office building containing
approximately 96,750 rentable square feet is under construction on the site. An
agreement was signed with ADEVCO Corporation to supervise, manage and coordinate
the planning, design, construction and completion of the property. Kraemer
Brothers, Inc. is acting as the general contractor and Strang, Inc. as the
architect.
Cellular One, a subsidiary of BellSouth Corporation, has executed a lease for
75,000 rentable square feet comprising approximately 78% of the building. The
initial term of the lease will be 9 years and 11 months beginning in June 1997,
with the option to extend the initial term of the lease for two consecutive five
year periods. The annual base rent payable during the initial term is $862,500
payable in equal monthly installments of $71,875 during the first five years and
$975,000 payable in equal monthly installments of $81,250 during the last four
years and 11 months of the initial term. The annual base rent for each
extended term will be at market rental rate.
The land purchase and construction costs, to date, have been funded by capital
contributions of $2,487,444 by the Partnership and $2,512,444 by Wells Fund IX.
It is anticipated that the total cost to complete the property, which is
estimated to be approximately $10,500,000, will be contributed equally by the
Partnership and Wells Fund IX. The Partnership has reserved sufficient funds
for this purpose. For further information regarding the Cellular One Property,
refer to Supplement No. 2 dated June 28, 1996, to the Prospectus of Wells Real
Estate Fund IX, L.P. dated January 5, 1996, contained in Post-Effective
Amendment No. 11 to Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P. filed with the Commission on July
3, 1996 (Commission File No. 33-83852).
The TCI Building
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On October 10, 1996, Fund VIII-Fund IX Joint Venture purchased a one-story
office building containing approximately 40,000 rentable square feet, located on
approximately 4.864 acres of
7
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land in Farmer's Branch, Dallas County, Texas for a purchase price of
$4,450,000 excluding acquisition costs.
The funds used by the Fund VIII - Fund IX Joint Venture to acquire the TCI
Building were derived from capital contributions made by the Partnership and
Wells Fund IX totaling $2,238,170 and $2,236,530, respectively, for total
contributions to the Fund VIII-Fund IX Joint Venture of $4,474,700, including
acquisition costs. The Partnership owns an approximately 50% equity interest in
the Fund VIII - Fund IX Joint Venture.
The TCI Building is leased to TCI Valwood Limited Partnership I for a period of
fifteen years, with options to extend the lease for three consecutive five-year
periods. The annual base rent is $430,001 during the first five years, $454,001
during the next five years and $482,001 during the last five years. The TCI
lease commenced on July 19, 1996 and was assigned by the seller to the Fund VIII
- - Fund IX Joint Venture on October 10, 1996. The lease agreement is a net lease
in that the tenant is responsible for the operating expenses including real
estate taxes.
The occupancy rate at the TCI Building was 100% for the last three months of
1996. The average rental per square foot in the TCI Building is $10.75 for
1996, the first year of ownership.
For further information regarding the TCI Building, refer to Supplement No. 3
dated October 22, 1996, to the Prospectus of Wells Real Estate Fund IX, L.P.
dated January 5, 1996, contained in Post-Effective Amendment No. 12 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P. filed with the Commission on October 24, 1996 (commission
file No. 33-83852).
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 1996.
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 1996.
8
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PART II
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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, 1996,
at which time the Partnership had 2,613,534 outstanding Class A Status Units
held by a total of 1,938 Limited Partners and 590,735 outstanding Class B Status
Units held by a total of 302 Limited Partners. The capital contribution per
unit is $10.00. 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.
Class A Status Limited Partners are entitled to a distribution from Net Cash
from Operations, as defined in the Partnership Agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have received distributions in
each fiscal year of the Partnership equal to 10% of their adjusted capital
contributions. After this preference is satisfied, the General Partners will
receive an amount of Net Cash From Operations equal to 10% of the total amount
of Net Cash From Operations distributed. Thereafter, the Limited Partners
holding Class A Status Units will receive 90% of Net Cash From Operations and
the General Partners will receive 10%. No Net Cash from Operations will be
distributed to Limited Partners holding Class B Status Units. Holders of Class
A Status 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 the Class B Status Units, until their
capital account balances have been reduced to zero. No distributions have been
made to the General Partner as of December 31, 1996.
Cash available to distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Class A Status Limited Partners during the
two most recent fiscal years were as follows:
<TABLE>
<CAPTION>
Per Class A Status Unit
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Distribution for Total Cash Investment Return of
Quarter Ended Distributed Income Capital
- ------------- ----------- ---------- ---------
<S> <C> <C> <C>
March 31, 1995 $ 0.00 $0.00 $0.00
June 30, 1995 $ 0.00 $0.00 $0.00
September 30, 1995 $ 0.00 $0.00 $0.00
December 31, 1995 $295,926 $0.28 $0.00
March 31, 1996 $317,233 $0.11 $0.00
June 30, 1996 $273,502 $0.10 $0.00
September 30, 1996 $293,936 $0.11 $0.00
December 31, 1996 $322,869 $0.12 $0.00
</TABLE>
9
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The fourth quarter distribution was accrued for accounting purposes in 1996, and
was not actually paid to Limited Partners until February, 1997. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Class A Status Units will continue in 1997 at a level
at least comparable with 1996 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA.
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The Partnership did not commence active operations until it received and
accepted subscriptions for a minimum of 125,000 units on February 24, 1995, and
accordingly, there is no comparative financial data available from prior fiscal
years. As of December 31, 1994, the Partnership's assets totaled approximately
$600 consisting primarily of the General Partners' capital contributions.
The following sets forth a summary of the selected financial data for the fiscal
year ended December 31, 1996 and the eleven months ended December 31, 1995.
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Total assets $27,506,234 $26,254,253
Total revenues 1,057,694 402,428
Net income 936,590 273,914
Net loss allocated
to General Partners (297) (203)
Net income allocated to
Class A Limited Partners 1,207,540 294,221
Net loss allocated to
Class B Limited Partners (270,653) (20,104)
Net income per weighted average (1) Class A
Limited Partner Unit 0.46 0.28
Net loss per weighted average (1) Class B
Limited Partner Unit (0.47) (0.03)
Cash Distributions per weighted average (1)
Class A Limited Partner Unit:
Investment Income 0.44 0.28
Return of Capital 0.00 0.00
</TABLE>
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased by Limited
Partners in the Partnership.
10
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
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RESULTS OF OPERATION.
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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 the 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
- -------
The Partnership commenced active operations on February 24, 1995, when it
received and accepted subscriptions for 125,000 units. As of December 31, 1996,
the Partnership had sold 2,622,636 Class A Status Units and 581,633 Class B
Status Units, held by a total of 1,939 and 299 Limited Partners respectively,
for total Limited Partner contributions of $32,042,689. After payment of
$1,273,995 in Acquisition and Advisory Fees, payment of $4,806,770 in selling
commissions and organization and offering expenses, the investment by the
Partnership of $4,002,732 in the Fund VII-Fund VIII Joint Venture, $4,700,000 in
the Fund VI-VII-VIII Joint Venture and $4,725,614 in the Fund VIII-IX Joint
Venture, as of December 31, 1996, the Partnership was holding net offering
proceeds of approximately $12,500,000 available for investment in properties.
It is anticipated that additional investments in the Fund VII-Fund VIII Joint
Venture of approximately $128,000 will be required to complete the Gainesville
Property and $76,000 will be required to complete the Hannover Property, that an
additional investment in the Fund VIII - Fund IX Joint Venture of $5,500,000
will be required to complete the Cellular One Project and that an additional
investment in the Fund VI-VII-VIII Joint Venture of approximately $1,000,000
will be required to complete both the BellSouth Property and the Tanglewood
Commons Shopping Center Property. It is anticipated that the Partnership will
contribute approximately $204,000 to the Fund VII -Fund VIII Joint Venture,
approximately $1,000,000 to the Fund VI-VII-VIII Joint Venture and approximately
$2,750,000 to the Fund VIII - Fund IX Joint Venture for completion of these
projects. The Partnership has reserved $3,954,000 out of its net offering
proceeds of approximately $12,500,000 available for investment in properties for
these purposes.
11
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Gross revenues of the Partnership were $1,057,694 for the year ended December
31, 1996, as compared to $402,428 for the eleven months ended December 31, 1995.
This increase was attributable primarily to increased interest income earned on
funds held by the Partnership and increased investment in joint ventures.
Expenses of the Partnership were $121,104 for the year ended December 31, 1996,
and consisted primarily of decreased partnership administrative costs offset by
increased legal and accounting expenses. Net income of the Partnership was
$936,590 for the year ended December 31, 1996, as compared to $273,914 for the
eleven months ended December 31, 1995. Net income allocated per weighted
average unit to Class A Limited Partners was $0.46 for 1996 and $0.28 for 1995.
Net loss allocated per weighted average unit to Class B Limited Partners was
$0.47 for 1996 and $0.03 for 1995.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," which is
effective for fiscal years beginning with December 15, 1995. SFAS No. 121
establishes standards for determining when impairment losses on long-lived
assets have occurred and how impairment losses should be measured. The joint
ventures adopted SFAS No. 121, effective January 1, 1995. The impact of
adopting SFAS No. 121 was not material to the financial statements of the joint
ventures.
The Partnership made cash distributions of investment income to Limited Partners
holding Class A Status Units of $0.44 per Class A Status Unit for the year ended
December 31, 1996 and $0.28 per Class A Status Unit for the eleven months ended
December 31, 1995. The General Partners anticipate distributions per Unit will
continue to increase for Limited Partners holding Class A Status Units in 1997.
Distributions accrued for the fourth quarter of 1996 to the Limited partners
holding Class A Status Units were paid in February, 1997. No cash distributions
were made to Limited Partners holding Class B Status Units.
12
<PAGE>
Property Operations
- -------------------
The Partnership's ownership interest in the Fund VII - Fund VIII Joint Venture
is 62.1%, in the Fund VI-VII-VIII Joint Venture is 28.1%, and in the Fund VIII-
IX Joint Venture is 49.9%.
As of December 31, 1996, the Partnership owned equity through interests in Joint
Ventures in the following operational properties:
Gainesville Property/Fund VII-Fund VIII Joint Venture
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<TABLE>
<CAPTION>
For the Year Ended For the One Month
Dec. 31, 1996 Ended Dec. 31, 1995
------------- -------------------
<S> <C> <C>
Revenues:
Rental Income $534,276 $15,995
Expenses:
Depreciation 222,328 18,091
Management & leasing expenses 80,258 960
Other operating expenses (1,380) 2,770
-------- -------
301,206 21,821
-------- -------
Net income $233,070 $(5,826)
======== =======
Occupied % 93.5% 93.5%
Partnership's Ownership % in the Fund VII
- VIII Joint Venture 62.1% 77.7%
Cash Distribution to Partnership $268,812 $ 9,530
Net Income Allocated to the Partnership $156,368 $(4,527)
</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.
The average effective annual rental rate at the Gainesville Property was $9.22
per square foot for 1995 and $8.69 for 1996.
Real estate taxes were $75 for 1995, based on undeveloped land and $79,235 for
1996.
13
<PAGE>
For comments on the general competitive conditions to with the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
The Hannover Retail Center/Fund VII-Fund VIII Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1996
-----------------
Revenues:
<S> <C>
Rental Income $ 48,988
Expenses:
Depreciation 31,391
Management and leasing expenses 4,424
Other operating expenses 28,812
---------
64,627
---------
Net income (loss) $ (15,639)
=========
Occupied % 50.17%
Partnership's Ownership % in the Fund
VII - VIII Joint Venture 62.1%
Cash distribution to the Fund VII - VIII
Joint Venture $ 5,755
Net (loss) allocated to the
Partnership $ (9,703)
</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 store 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
prior years.
Real estate taxes were $9,650 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 tenants,
etc. refer to Item 2, Properties, page 3.
14
<PAGE>
Bell South Property / Fund VI - VII - VIII Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Eight Months Ended
December 31, 1996
------------------
Revenues:
<S> <C>
Rental income $876,711
Interest income 60,092
--------
936,803
--------
Expenses:
Depreciation 290,407
Management & leasing expenses 99,330
Other operating expenses 288,665
--------
678,402
--------
Net income $258,401
========
Occupied % 100%
Partnership's Ownership % in the
Fund VI - VII - VIII Joint Venture
28.1%
Cash distribution to Partnership $110,429
Net income allocated to
Partnership $ 59,658
</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%
The initial term of the BellSouth lease is for nine years and eleven months. The
annual base rent during the initial term is $1,048,061 during the first five
years and $1,150,878 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.
15
<PAGE>
Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts.
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.
Since the building opened in May 1996, comparative income and expense figures
for the years ended December 31, 1995 and December 31, 1994 are not available.
The BellSouth Property incurred property taxes of $23,234 for 1996.
The TCI Building - Fund VIII -Fund IX Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1996
-----------------
Revenues:
<S> <C>
Rental income $101,277
Expenses:
Depreciation 50,444
Management & leasing expenses 3,884
Other operating expenses 1,050
--------
55,378
--------
Net income $ 45,899
========
Occupied % 100%
Partnership's Ownership % in the Fund
VIII - Fund IX Joint Venture
49.9%
Cash distribution to Partnership $ 45,965
Net income allocated to Partnership $ 22,892
</TABLE>
Since the TCI Building was purchased in October, 1996, comparative income and
expense figures for prior years are not available.
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
16
<PAGE>
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.
On October 10, 1996, the Fund VIII - Fund IX Joint Venture purchased the TCI
Building in Farmer's Branch, Texas. The entire building is leased to TCI
Valwood Limited Partnership I for a term of fifteen years. The annual base rent
is $430,001 for the first five years, $454,001 for the next five years and
$482,001 for the last five years.
The funds used by the Fund VIII-Fund IX Joint Venture to acquire the TCI
Building were derived from capital contributions made by the Partnership and
Wells Fund IX, totaling $2,238,170 and $2,236,530, respectively. The
Partnership owns an approximately 50% equity interest in the Fund VIII - Fund IX
Joint Venture.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership commenced active operations on February 24, 1995, when it
received and accepted subscriptions for 125,000 units.
As of December 31, 1996, the Partnership raised $32,042,689 in capital through
the sale of 3,204,269 units. After payment of $6,080,765 in acquisition and
advisory fees, selling commissions and organizational and offering expenses, and
the investment by the Partnership of $13,428,346 in Joint Ventures, as of
December 31, 1996, the Partnership was holding net offering proceeds of
approximately $12,500,000 available for additional properties.
The Partnership's net cash used in operating activities for 1996 of $227,520 is
due primarily to payment of distributions to partners, offset by distributions
received from joint ventures and interest income earned on funds held by the
Partnership prior to investment in properties. Net cash used in investing
activities of $7,931,566 is primarily the result of the payment of acquisition
and advisory fees and investment in the joint ventures of $7,865,131. Net cash
provided by financing activities is the result of raising $1,898,147 in 1996 and
$30,144,542 in 1995 in Limited Partners contributions less commissions and
organizational and offering expenses.
The Partnership's distributions to holders of Class A Status Units for 1996 will
be paid in February, 1997 from Net Cash from Operations. Although there is no
assurance, the Partnership anticipates that distributions will continue to be
paid on a quarterly basis from such sources on a level at least consistent with
1996. No cash distributions were paid to holders of Class B Units in 1996.
The Partnership expects to continue to meet its short-term liquidity
requirements 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
17
<PAGE>
improvements or renovations to the properties expected to be funded from
cash flow from operations.
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures, from limited partnership contributions
and, as of December 31, 1996, has reserved approximately $204,000 for final
tenant buildout of the Gainesville Property and the Hannover Property owned by
the Fund VII-Fund VIII Joint Venture, approximately $1,000,000 needed to
complete both the BellSouth and Tanglewood Commons Properties owned by the Fund
VI-VII-VIII Joint Venture and $2,750,000 for construction of the Cellular One
Property owned by the Fund VIII-Fund IX Joint Venture. Wells Fund IX will fund
the approximately $2,750,000 needed to complete the Cellular One Property.
Subsequent to December 31, 1996, the Fund VIII - Fund IX Joint Venture has
purchased two additional properties. On January 10, 1997, a two-story office
building in Dallas County, Texas was acquired for approximately $7,232,860. The
entire building is currently under a net lease to Matsushita Avionics Systems
Corporation. On February 20, 1997, a two-story partially complete office
building was acquired in Boulder County, Colorado for approximately $7,071,522.
The entire building is leased to Cirrus Logic with scheduled occupancy in March,
1997. The funds used to purchase these two buildings by the Fund VIII -Fund IX
Joint Venture were derived from capital contributions of approximately
$7,162,691 from the Partnership and approximately $7,141,691 from Wells Fund IX.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
INFLATION
- ----------
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are 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 bases, or in
some cases, annual reimbursement of operating expenses above a certain per
square foot allowance. These provisions reduce the Partnership's exposure to
increases in costs and operating expenses resulting from inflation.
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.
18
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
The Partnership's change in accountants during 1995 was previously reported in
the Partnership's Form 8-K dated September 11, 1995. There were no
disagreements with the Partnership's accountants or other reportable events
during 1996.
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., 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 53
-----------------
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
Wells Capital, Inc. 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., and Wells Management Company, 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.
19
<PAGE>
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
- ---------------------------------------------------------
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 1996.
CASH COMPENSATION TABLE
-----------------------
<TABLE>
<CAPTION>
(A) (B) (C)
Name of individual or Capacities in which served - Cash Compensation
number in group Form of Compensation
- --------------------- ---------------------------- -----------------
<S> <C> <C>
Wells Capital, Inc. General Partner of Wells $ 218,936
Partners, L.P.
Acquisition and Advisory Fees
Wells Capital, Inc. General Partner of Wells $ 94,907
Partners, L.P. Reimbursement
of Organization and Offering
Expenses
Leo F. Wells, III General Partner 0
Wells Investment Dealer Manager - $ 189,449 (1)
Securities, Inc. Selling Commissions
Wells Management Property Manager - $ 58,378 (2)
Company, Inc. Management and Leasing
Fees
</TABLE>
(1) This amount includes all selling commissions paid or payable to Wells
Investment Securities, Inc., a substantial portion of which were
reallocated to other broker-dealers.
(2) These fees are not paid directly by the Partnership but are paid by the
joint venture entities which owns properties for which the property
management and leasing services relate and include management and leasing
fees which were accrued for accounting purposes in 1996 but not actually
paid until January, 1997.
20
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL 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,
1997.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount and Nature
Name of of Beneficial
Title of Class Beneficial Owner Ownership Percent of Class
- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C>
Class A Status Leo F. Wells, III 140.88 Units (IRA, less than 1%
Units 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 SALES PROCEEDS. The General
--------------------------------------------------------
Partners will receive a subordinated participation in net cash flow from
operations equal to 10% of net cash flow after the Limited Partners holding
Class A Status Units have received preferential distributions equal to 10%
of their adjusted capital accounts in each fiscal year. The General
Partners will also receive a subordinated participation in net sales
proceeds and net financing proceeds equal to 20% of residual proceeds
available for distribution after Limited Partners holding Class A Status
Units have received a return of their adjusted capital contributions plus a
10% cumulative return on their adjusted capital contributions and Limited
Partners holding Class B Units have received a return of their adjusted
capital contributions plus a 15% cumulative return on their adjusted
capital contributions; provided, however, that in no event shall the
General Partners receive in the aggregate in excess of 15% of net sales
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 sales proceeds for the year ended
December 31, 1996.
PROPERTY MANAGEMENT AND LEASING FEES. Wells Management Company, Inc., an
------------------------------------
affiliate of the General Partners, will receive compensation for
supervising the
21
<PAGE>
management of the Partnership properties equal to the lessor of (A) (i) 3%
of the gross revenues for management and 3% of the gross revenues for
leasing (aggregate maximum of 6%) plus a separate one-time fee for initial
rent-up or leasing-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; and (ii) in the case 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.
Management and leasing fees are not paid directly by the Partnership but by
the joint venture entity which owns the properties. The Partnership's
share of these fees were $58,378 for the year ended December 31, 1996.
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, 1996.
DEFERRED PROJECT COSTS
----------------------
The Partnership pays Acquisition and Advisory Fees to the General Partners
for acquisition and advisory services. These payments, as provided by the
Partnership Agreement, may not exceed 5% of the Limited Partners' capital
contributions. Acquisition and Advisory Fees paid as of December 31, 1996,
amounted to $1,273,995 and represented approximately 4.0% of the Limited
Partners' capital contributions received through such date. These fees are
allocated to specific properties as they are purchased.
DEFERRED OFFERING COSTS
-----------------------
Wells Capital, Inc. (the "Company"), the General Partner of Wells Partners,
L.P., pays all the offering expenses for the Partnership. The Company may
be reimbursed by the Partnership to the extent that such offering expenses
do not exceed 5% of total Limited Partners' capital contributions. As of
December 31, 1996, the Partnership had reimbursed the Company for
$1,602,131 in offering expenses, which amounted to approximately 5% of
Limited Partners' capital contributions.
22
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
Information with respect to this item is contained on Pages F-2 to F-
28 of this Annual
Report of Form 10-K.
(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) During the fourth quarter of 1996, the Partnership filed a Report on
Form 8-K dated October 10, 1996, to report the acquisition of the TCI
Building located in Farmer's Branch, Texas in the north Dallas, Texas
metropolitan area by the Fund VIII - Fund IX Joint Venture.
(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.
23
<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 17th day of March,
1997
WELLS REAL ESTATE FUND VIII, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
---------------------
LEO F. WELLS, III
Individual General Partner and as President,
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 17, 1997
- -----------------------------
LEO F. WELLS, III President and Sole Director
of Wells Capital, Inc.
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.
24
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund VIII, 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) Amended and Restated Agreement of Limited Partnership of Wells N/A
Real Estate Fund VIII, L.P. dated January 6, 1995 (Exhibit to Form 10-
K of Wells Real Estate Fund VIII, L.P. for the fiscal year ended
December 31, 1995, File No. 0-27888)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund VIII, N/A
L.P. (Exhibit 3(b) to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund VIII, L.P., File No.
33-83852)
*10(a) Management Agreement dated January 6, 1995, between Wells Real Estate
N/A Fund VIII, L.P. and Wells Management Company, Inc. (Exhibit to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal year
ended December 31, 1995, File No. 0-27888)
*10(b) Leasing and Tenant Coordinating Agreement dated January 6, 1995, N/A
between Wells Real Estate Fund VIII, L.P. and Wells Management
Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund VIII,
L.P. for the fiscal year ended December 31, 1995, File No. 0-27888)
*10(c) Custodial Agency Agreement dated November 15, 1994, between Wells Real N/A
Estate Fund VIII, L.P. and NationsBank of Georgia, N.A. (Exhibit to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal year
ended December 31, 1995, File No. 0-27888)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(d) Fund VII and Fund VIII Associates Joint Venture Agreement dated N/A
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)
*10(e) Agreement for the Purchase and Sale of Real Property dated March 31, N/A
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(f) Letter Agreement amending Agreement for the Purchase and Sale of Real N/A
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(g) Letter Agreement amending Agreement for the Purchase and Sale of Real N/A
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(h) Letter Agreement between NationsBank of Georgia, N.A., as Agent for N/A
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(i) First Amendment to Lease 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(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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(j) Second Amendment to Lease 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(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)
*10(k) Development Agreement between Wells Real Estate Fund VII, L.P. and N/A
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(l) Owner-Contractor Agreement between Wells Real Estate Fund VII, L.P., N/A
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(m) Architect's Agreement between Wells Real Estate Fund VII, L.P., as N/A
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(n) Joint Venture Agreement of Fund VI, Fund VII and Fund VIII Associates N/A
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(o) Agreement for the Purchase and Sale of Real Property dated February N/A
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(p) Agreement to Lease dated February 15, 1995, between NationsBank of N/A
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)
*10(q) Development Agreement dated April 25, 1995, between Fund VI, Fund VII N/A
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(r) Owner-Contractor Agreement dated April 24, 1995, between Fund VI, Fund N/A
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(s) Architect's Agreement dated February 15, 1995, between Wells Real N/A
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(t) First Amendment to Joint Venture Agreement of Fund VI, Fund VII and N/A
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(u) Real Estate Purchase Agreement dated April 13, 1995 (Exhibit 10(x) to N/A
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(v) Lease Agreement dated February 27, 1995, between NationsBank of N/A
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(w) Development Agreement dated May 31, 1995, between Fund VI, Fund VII N/A
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(x) First Amendment to Joint Venture Agreement of Fund VII and Fund VIII N/A
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(y) Lease Agreement with Moovies, Inc. dated May 20, 1996 (Exhibit 10(oo) N/A
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>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<S> <C> <C>
*10(z) Joint Venture Agreement of Fund VIII and Fund IX Associates dated June N/A
10, 1996 (Exhibit 10(aa) to Post-Effective Amendment No. 11 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) Agreement for the Purchase and Sale of Real Property dated April 23, N/A
1996, between American Family Mutual Insurance Company and Wells
Capital, Inc. (Exhibit 10(bb) to Post-Effective Amendment No. 11 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 to Lease dated June 18, 1996, between Fund VIII and IX N/A
Associates and Westel-Milwaukee, Inc., d/b/a Cellular One (Exhibit
10(cc) to Post-Effective Amendment No. 11 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) Development Agreement dated June 18, 1996, between Fund VIII and Fund N/A
IX Associates and ADEVCO Corporation (Exhibit 10(dd) to Post-Effective
Amendment No. 11 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(dd) Owner-Contractor Agreement dated June 18, 1996, with Kraemer Brothers, N/A
Inc. (Exhibit 10(ee) to Post-Effective Amendment No. 11 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) First Amendment to Joint Venture Agreement of Fund VIII and Fund IX N/A
Associates dated October 10, 1996 (Exhibit 10(ii) to Post-Effective
Amendment No. 12 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(ff) Agreement for the Purchase and Sale of Property dated October 10, N/A
1996, between TCI Valwood Limited Partnership I and Fund VIII and Fund
IX Associates (Exhibit 10(ff) to Post-Effective Amendment No. 12 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) Build to Suite Industrial Lease Agreement dated November 1, 1995, N/A
between Industrial Developments International, Inc. and TCI Central,
Inc., as amended July 16, 1996 and August 29, 1996 (Exhibit 10(gg) to
Post-Effective Amendment No. 12 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(hh) Assignment and Assumption of Lease dated October 10, 1996, between TCI N/A
Valwood Limited Partnership I and The Bank of New York, as Agent for
Fund VIII and Fund IX Associates (Exhibit 10(hh) to Post-Effective
Amendment No. 12 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>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
- -------------------- ----
<S> <C>
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Income for the Year Ended December 31, 1996 and for
the Eleven Months ended December 31, 1995 F-4
Statements of Partners' Capital for the Year Ended
December 31, 1996 and for the Eleven Months ended
December 31, 1995 F-5
Statements of Cash Flows for the Year Ended December 31,
1996 and for the Eleven Months ended December 31, 1995 F-6
Notes to Financial Statements for December 31, 1996 and
1995 F-7
</TABLE>
F-1
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Wells Real Estate Fund VIII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VIII,
L.P. (a Georgia public limited partnership) as of December 31, 1996 and 1995 and
the related statements of income, partners' capital, and cash flows for the year
ended December 31, 1996 and the 11 months ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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 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 VIII,
L.P. as of December 31, 1996 and 1995 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 10, 1997
F-2
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
---------- ----------
<S> <C> <C>
INVESTMENT IN JOINT VENTURES $13,787,531 $ 5,786,364
CASH AND CASH EQUIVALENTS 12,716,219 19,441,918
DUE FROM AFFILIATES 187,433 23,852
DEFERRED PROJECT COSTS 697,301 816,147
DEFERRED OFFERING COSTS 0 96,972
ORGANIZATION COSTS, LESS ACCUMULATED
AMORTIZATION OF $12,500 IN 1996 AND 18,750 25,000
$6,250 IN 1995
PREPAID EXPENSES AND OTHER ASSETS 99,000 64,000
----------- -----------
Total assets $27,506,234 $26,254,253
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 5,500 $ 5,450
Sales commissions payable 0 180,404
Partnership distributions payable 317,453 295,926
Due to affiliates 152,501 139,775
---------- ----------
Total liabilities 475,454 621,555
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
PARTNERS' CAPITAL:
General partners 0 297
Limited partners:
Class A 22,367,784 20,902,202
Class B 4,662,896 4,730,099
Original limited partner 100 100
----------- -----------
Total partners' capital 27,030,780 25,632,698
----------- -----------
Total liabilities and partners' capital $27,506,234 $26,254,253
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE 11 MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
REVENUES:
Equity in income of joint ventures $ 241,819 $ 28,377
Interest income 815,875 374,051
--------- --------
1,057,694 402,428
--------- --------
EXPENSES:
Partnership administration 74,440 103,444
Legal and accounting 35,745 12,882
Amortization of organization costs 6,250 6,250
Other 4,669 5,938
--------- --------
121,104 128,514
--------- --------
NET INCOME $ 936,590 $273,914
========= ========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ (297) $ (203)
========= ========
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $1,207,540 $294,221
========== ========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ (270,653) $(20,104)
========== ========
NET INCOME PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT $ 0.46 $ 0.28
========== ========
NET LOSS PER WEIGHTED AVERAGE CLASS B
LIMITED PARTNER UNIT $ (0.47) $ (0.03)
========== ========
CASH DISTRIBUTION PER WEIGHTED AVERAGE
CLASS A LIMITED PARTNER UNIT $ 0.44 $ 0.28
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE 11 MONTHS DECEMBER 31, 1995
<TABLE>
<CAPTION>
LIMITED PARTNERS TOTAL
----------------------------------------------------------------
CLASS A CLASS B GENERAL PARTNERS'
----------------------- --------------------
ORIGINAL UNITS AMOUNT UNITS AMOUNT PARTNERS CAPITAL
-------- ----- ------ ----- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $100 0 $ 0 0 $ 0 $ 500 $ 600
Net income (loss) 0 0 294,221 0 (20,104) (203) 273,914
Limited partner contributions 0 2,456,287 24,562,868 558,167 5,581,674 0 30,144,542
Partnership distributions 0 0 (295,926) 0 0 0 (295,926)
Sales commissions and discounts 0 0 (2,456,287) 0 (558,168) 0 (3,014,455)
Other offering expenses 0 0 (1,202,674) 0 (273,303) 0 (1,475,977)
----- --------- ---------- ------- --------- -------- ----------
BALANCE, DECEMBER 31, 1995 100 2,456,287 20,902,202 558,167 4,730,099 297 25,632,698
Net income (loss) 0 0 1,207,540 0 (270,653) (297) 936,590
Limited partner
contributions 0 166,349 1,642,845 23,466 255,302 0 1,898,147
Partnership distributions 0 0 (1,152,299) 0 0 0 (1,152,299)
Sales commissions and
discounts 0 0 (154,881) 0 (34,568) 0 (189,449)
Other offering expenses 0 0 (77,623) 0 (17,284) 0 (94,907)
----- --------- ----------- ------- ---------- -------- -----------
BALANCE, DECEMBER 31, 1996 $100 2,622,636 $22,367,784 581,633 $4,662,896 $ 0 $27,030,780
===== ========= =========== ======= ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE 11 MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 936,590 $ 273,914
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Equity in income of joint ventures (241,819) (28,377)
Distributions received from joint
ventures 279,984 20,287
Distributions to partners from
accumulated earnings (1,130,772) 0
Amortization of organization costs 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets (35,000) (64,000)
Organization costs 0 (31,250)
Accounts payable and accrued expenses 50 5,450
Due to affiliates, net of deferred
offering costs (42,803) 42,803
---------- ----------
Total adjustments (1,164,110) (48,837)
---------- ----------
Net cash (used in) provided by
operating activities (227,520) 225,077
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures (7,865,131) (5,563,214)
Deferred project costs paid (66,435) (1,055,059)
---------- ----------
Net cash used in investing activities (7,931,566) (6,618,273)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 1,898,147 30,144,542
Sales commission paid (369,853) (2,834,051)
Offering costs paid (94,907) (1,475,977)
----------- ----------
Net cash provided by financing
activities 1,433,387 25,834,514
----------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (6,725,699) 19,441,318
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 19,441,918 600
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $12,716,219 $19,441,918
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Deferred project costs applied to joint
venture property $ 337,782 $ 238,912
=========== ===========
Increase in deferred project cost
accrual $ (152,501) $ 0
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Wells Real Estate Fund VIII, L.P. (the "Partnership") is a public limited
partnership organized on August 15, 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 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 which
have operating histories. The Partnership owns an interest in several
properties through joint ventures between the Partnership and other Wells
Real Estate funds, as follows: (i) an office building in Jacksonville,
Florida (the "BellSouth property"); (ii) a retail shopping center under
construction in Clemmons, Forsyth County, North Carolina; (iii) an office
building in Gainesville, Florida; (iv) a retail office building located in
Stockbridge, Georgia; (v) an office building under construction in Madison,
Wisconsin; and (vi) an office building in Farmers Branch, Texas ("the
Dallas property") (Note 5).
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.
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 upon the Partnership's
ability to maintain rental rates, occupancy and an appropriate level
F-7
<PAGE>
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.
DISTRIBUTIONS OF NET CASH FROM OPERATIONS
Cash available for distribution, as defined by the partnership agreement,
is distributed to the limited partners on a quarterly basis. In accordance
with the partnership agreement, such distributions first are paid to
limited partners holding Class A units until they have received a 10%
annual return on their net capital contributions, as defined. Then such
distributions are paid to the general partners until they have received 10%
of the total amount thus far distributed. 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 such
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 holding units, which at any time have been
treated as Class B units, until they receive an amount necessary
to equal the net cash available for distribution received by the
limited partners holding Class A units
. To limited partners on a per unit basis until each limited
partner has received 100% of their net capital contributions, as
defined
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contribution, as defined
. To limited partners on a per unit basis until they receive an
amount equal to their preferential limited partners return
(defined as the sum of a 10% per annum cumulative return on net
capital contributions for all periods during which the units were
treated as Class A units and a 15% per annum cumulative return on
net capital contributions for all periods during which the units
were treated as Class B units)
. To all general partners until they have received 100% of their
capital contributions; in the event that limited partners have
received aggregate cash distributions from the Partnership over
the life of their investment in excess of a return of their net
capital contributions plus their preferential partner return,
then the general partners shall receive an additional sum equal
to 25% of such excess
F-8
<PAGE>
. Thereafter, 80% to the limited partners on a per unit basis and
20% to the general partners
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, amortization, and cost recovery. 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, amortization, and cost recovery 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 the qualified income offset
provisions of the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, and (c) allocations to limited partners holding Class B
units in amounts equal to the deductions for depreciation, amortization,
and cost recovery 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.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of," which is effective for fiscal years beginning after December 15, 1995.
SFAS No. 121 establishes standards for determining when impairment losses
on long-lived assets have occurred and how impairment losses should be
measured. The joint ventures adopted SFAS No. 121, effective January 1,
1995. The impact of adopting SFAS No. 121 was not material to the financial
statements of the joint ventures.
F-9
<PAGE>
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 that
indicate the carrying amount of real estate assets may not be recoverable,
management assesses the recoverability of real estate assets under SFAS No.
121 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 joint ventures as of December 31, 1996.
Depreciation for buildings, building improvements, and land improvements
are calculated using the straight-line method over their useful lives.
Effective October 1, 1995, the joint ventures revised their estimate of the
useful lives of those assets from 40 to 25 years. This change was made to
better reflect the estimated periods during which such assets will remain
in service. The change had the effect on the Partnership, through its
ownership interest in the joint ventures, of increasing depreciation
expense approximately $8,699 in the fourth quarter of 1995 and $94,314 in
the year ended December 31, 1996. Tenant improvements are amortized over
the life of the related lease or the life of the asset, whichever is
shorter.
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 instruments 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 year
ended December 31, 1996 and the 11 months ended December 31, 1995 is
computed based on the weighted average number of units outstanding during
the period.
F-10
<PAGE>
RECLASSIFICATIONS
Certain 1995 items have been reclassified to conform with the 1996
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 5% of the limited partner
contributions, subject to certain overall limitations contained in the
partnership agreement. Fees paid through December 31, 1996 were $1,273,995
and ultimately amounted to 4% 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. Fee totaling $152,501 had not yet been paid and are included in
due to affiliate at December 31, 1996. Deferred project costs at December
31, 1996 and 1995 represent fees not yet applied to properties.
3. DEFERRED OFFERING COSTS
The Company paid all the offering expenses for the Partnership and was
reimbursed as the partnership agreement allowed. Pursuant to the terms of
the partnership agreement, the Partnership can only reimburse the Company
for offering and organization expenses not exceeding 5% of total limited
partner contributions. Amounts not yet paid to the Company were included in
due to affiliates at December 31, 1995.
As of December 31, 1996, the Company paid offering and organization
expenses on behalf of the Partnership in the aggregate amount of
$1,704,855, which was $102,724 in excess of the 5% limitation. During 1996
and 1995, the Company absorbed the excess offering and organization
expenses of $64,724 and $38,000, respectively.
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1996 and 1995 represents the
Partnership's share of cash distributed for the fourth quarters of 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Fund VI, VII, and VIII Associates $ 75,614 $14,322
Fund VII and VIII Associates 65,853 9,530
Fund VIII and IX Associates 45,966 0
--------- ---------
$187,433 $23,852
========= =========
</TABLE>
The Partnership entered into a property management agreement with Wells
Management, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for
F-11
<PAGE>
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 $58,378 and $0 for the year ended
December 31, 1996 and the 11 months ended December 31, 1995, 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 of other Wells Real Estate
funds. As such, there may exist conflicts of interest where the general
partners, while serving in the capacity as general partners of other Wells
Real Estate funds, may be in competition with the Partnership for tenants
in similar geographic markets.
5. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
AMOUNT PERCENT Amount Percent
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Fund VI, VII, and VIII Associates $ 4,849,380 28% $2,084,185 13%
Fund VII and VIII Associates 4,032,669 62 3,702,179 78
Fund VIII and IX Associates 4,905,482 50 0 0
------------ ------------
$13,787,531 $5,786,364
============ ============
</TABLE>
F-12
<PAGE>
The following is a roll forward of the Partnership's investment in the
joint ventures for the year ended December 31, 1996 and the 11 months ended
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Investment in joint ventures, beginning of period $ 5,786,364 $ 0
Equity in income of joint ventures 241,819 28,377
Contributions to joint ventures 8,202,913 5,802,126
Distributions from joint ventures (443,565) (44,139)
------------ ------------
Investment in joint ventures, end of period $13,787,531 $5,786,364
============ ============
</TABLE>
FUND VI, VII, AND VIII ASSOCIATES
On April 17, 1995, the Partnership entered into a joint venture with Wells
Real Estate Fund VI, L.P. ("Fund VI") and Wells Real Estate Fund VII, L.P.
("Fund VII"). 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. The land is currently under
development.
During 1996, Fund VI and Fund VII each withdrew $500,000 from the joint
venture in order to contribute needed funds to the Fund II, III, VI, and
VII Associates joint venture. In addition, $23,160 and $21,739,
respectively, of deferred project costs related to these funds were
unapplied when the contribution were withdrawn. The Partnership made an
additional contribution of $2,815,965, which included $115,965 of deferred
project costs that were applied. Ownership percentages were recomputed
accordingly.
F-13
<PAGE>
Following are the financial statements for Fund VIII and IX Associates:
FUND VIII AND IX ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Assets
1996 1995
------------ -------------
<S> <C> <C>
Nonoperating real estate assets, at cost:
Land $ 3,159,929 $ 4,461,818
Construction in progress 4,587,178 4,430,443
------------ -------------
Total nonoperating real estate assets 7,747,107 8,892,261
------------ -------------
Operating real estate assets, at cost:
Land 1,301,890 0
Building and improvements, less accumulated
depreciation of $290,407 in 1996 7,004,986 0
------------ -------------
Total operating real estate assets 8,306,876 0
------------ -------------
Total real estate assets 16,053,983 8,892,261
Cash and cash equivalents 929,683 7,347,927
Accounts receivable 27,851 33,000
Prepaid expenses and other assets 691,741 264,378
------------ -------------
Total assets $17,703,258 $16,537,566
============ =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 203,275 $ 772,999
Partnership distributions payable 268,656 107,590
Due to affiliates 1,555 0
------------ -------------
Total liabilities 473,486 880,589
Partners' capital:
Wells Real Estate Fund VI 6,268,458 6,866,299
Wells Real Estate Fund VII 6,111,934 6,706,493
Wells Real Estate Fund VIII 4,849,380 2,084,185
------------ -------------
Total partners' capital 17,229,772 15,656,977
------------ -------------
Total liabilities and partners' capital $17,703,258 $16,537,566
============ =============
</TABLE>
F-14
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1995)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Rental income $ 876,711 $ 0
Interest income 147,581 270,723
Other income 150 0
--------- ---------
1,024,442 270,723
--------- ---------
Expenses:
Depreciation 290,407 0
Operating costs 262,090 12,792
Lease acquisition costs 50,388 0
Management and leasing fees 48,942 0
Legal and accounting 17,251 0
Property administration 15,975 10,980
Computer costs 642 0
--------- ---------
685,695 23,772
--------- ---------
Net income $ 338,747 $ 246,951
========= =========
Net income allocated to Wells Real Estate Fund VI $ 134,875 $ 108,199
========= =========
Net income allocated to Wells Real Estate Fund VII $ 131,609 $ 105,848
========= =========
Net income allocated to Wells Real Estate Fund VIII $ 72,263 $ 32,904
========= =========
</TABLE>
F-15
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1996)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE ESTATE PARTNER
FUND VI FUND VII FUND VIII CAPITAL
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, April 17, 1995 $ 0 $ 0 $ 0 $ 0
Net income 108,199 105,848 32,904 246,951
Partnership contributions 6,871,903 6,711,976 2,085,890 15,669,769
Partnership distributions (113,803) (111,331) (34,609) (259,743)
---------- ---------- ---------- -----------
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
========== ========== ========== ===========
</TABLE>
F-16
<PAGE>
FUND VI, VII, AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD FROM INCEPTION (APRIL 17, 1995)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 338,747 $ 246,951
------------- -------------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 290,407 0
Changes in assets and liabilities:
Accounts receivable 5,149 (33,000)
Prepaid expenses and other assets (427,363) (264,378)
Accounts payable 37,480 0
Due to affiliates 1,555 0
------------- -------------
Total adjustments (92,772) (297,378)
------------- -------------
Net cash provided by (used in) operating activities 245,975 (50,427)
------------- -------------
Cash flows from investing activities:
(Decrease) increase in construction payables (607,204) 772,999
Investment in real estate (7,381,063) (8,892,261)
------------- -------------
Net cash used for investing activities (7,988,267) (8,119,262)
------------- -------------
Cash flows from financing activities:
Contributions received from joint venture partners 2,700,000 15,669,769
Return of contributions from joint venture partners (1,000,000) 0
Distributions to joint venture partners (375,952) (152,153)
------------- -------------
Net cash provided by financing activities 1,324,048 15,517,616
------------- -------------
Net (decrease) increase in cash and cash equivalents (6,418,244) 7,347,927
Cash and cash equivalents, beginning of period 7,347,927 0
------------- -------------
Cash and cash equivalents, end of period $ 929,683 $ 7,347,927
============= =============
Supplemental disclosure of noncash items:
Deferred project costs contributed by partners, net $ 71,066 $ 669,769
============= =============
</TABLE>
FUND VII AND VIII ASSOCIATES
On February 10, 1995, the Partnership entered into a joint venture
agreement with Fund VII. 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 5-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, Fund VII
contributed 1.01 acres of land located in Stockbridge, Georgia, and
improvements thereon
F-17
<PAGE>
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.
Following are the financial statements for Fund VII and VIII Associates:
FUND VII AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
Assets
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 822,320 $ 288,058
Building and improvements, less accumulated
depreciation of $235,083 in 1996 and $15,609 in 1995 5,250,058 4,464,057
Personal property, less accumulated depreciation of
$32,270 in 1996 and $2,482 in 1995 265,613 295,401
Construction in progress 6,186 0
---------- ----------
Total real estate assets 6,344,177 5,047,516
Cash and cash equivalents 248,432 0
Accounts receivable 0 15,995
Prepaid expenses and other assets 71,963 0
---------- ----------
Total assets $6,664,572 $5,063,511
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 51,293 $ 285,787
Partnership distributions payable 106,136 12,265
Due to affiliates 0 960
---------- ----------
Total liabilities 157,429 299,012
---------- ----------
Partners' capital:
Wells Real Estate Fund VII 2,474,474 1,062,320
Wells Real Estate Fund VIII 4,032,669 3,702,179
---------- ----------
Total partners' capital 6,507,143 4,764,499
---------- ----------
Total liabilities and partners' capital $6,664,572 $5,063,511
========== ==========
</TABLE>
F-18
<PAGE>
FUND VII AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 10, 1995) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Revenues:
Rental income $583,264 $15,995
Other income 320 0
---------- ---------
583,584 15,995
---------- ---------
Expenses:
Depreciation 249,262 18,091
Management and leasing fees 57,590 960
Lease acquisition costs 31,060 0
Legal and accounting 23,554 0
Property administration 17,202 0
Computer costs 2,073 0
Operating costs, net of reimbursements (14,588) 2,770
---------- ---------
366,153 21,821
---------- ---------
Net income (loss) $217,431 $(5,826)
========== =========
Net income (loss) allocated to Wells Real Estate Fund VII $ 70,767 $(1,299)
========== =========
Net income (loss) allocated to Wells Real Estate Fund VIII $146,664 $(4,527)
========== =========
</TABLE>
F-19
<PAGE>
FUND VII AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 10, 1995) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND VII FUND VIII CAPITAL
----------- ------------ -----------
<S> <C> <C> <C>
Balance, February 10, 1995 $ 0 $ 0 $ 0
Net loss (1,299) (4,527) (5,826)
Partnership contributions 1,066,354 3,716,236 4,782,590
Partnership distributions (2,735) (9,530) (12,265)
----------- ----------- -----------
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
=========== =========== ===========
</TABLE>
F-20
<PAGE>
FUND VII AND VIII ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 10, 1995) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 217,431 $ (5,826)
----------------- ----------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 249,262 18,091
Changes in assets and liabilities:
Accounts receivable 15,995 (15,995)
Prepaid expenses and other assets (71,963) 0
Accounts payable 51,293 0
Due to affiliates (960) 960
----------------- ----------------
Total adjustments 243,627 3,056
----------------- ----------------
Net cash provided by (used in) operating activities 461,058 (2,770)
----------------- ----------------
Cash flows from investing activities:
(Decrease) increase in construction payables (285,787) 285,787
Investment in real estate (136,623) (4,868,154)
Contributions from partners 536,394 4,585,137
----------------- ----------------
Net cash provided by investing activities 113,984 2,770
----------------- ----------------
Cash flows from financing activities:
Distributions from joint venture partners (326,610) 0
----------------- ----------------
Net increase in cash and cash equivalents 248,432 0
Cash and cash equivalents, beginning of year 0 0
----------------- ----------------
Cash and cash equivalents, end of year $ 248,432 $ 0
================= ================
Supplemental disclosure of noncash activities:
Deferred project costs applied by partners, net of deferred
projects costs transferred $ 37,387 $ 197,453
================= ================
Contribution of real estate assets $1,371,913 $ 0
================= ================
</TABLE>
FUND VIII AND IX ASSOCIATES
On June 10, 1996, the Partnership entered into a joint venture with Wells
Real Estate Fund IX, L.P. The joint venture, Fund VIII and IX Associates,
was formed to acquire, develop, operate, and sell real properties. On June
19, 1996, the joint venture purchased a 7.09-acre parcel of land in
Madison, Wisconsin. The majority of the parcel is currently under
development. On October 10, 1996, the joint venture purchased a
F-21
<PAGE>
40,000-square-foot, one-story office building, known as the Dallas property, in
Farmers Branch, Texas.
Following are the financial statements for Fund VIII and IX Associates:
FUND VIII AND IX ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
Assets
Nonoperating real estate assets, at cost:
Land $ 896,698
Construction in progress 4,340,033
--------------
Total nonoperating real estate assets 5,236,731
--------------
Operating real estate assets, at cost:
Land 677,914
Building and improvements, less accumulated
depreciation of $50,444 in 1996 3,938,508
--------------
Total operating real estate assets 4,616,422
--------------
Total real estate assets 9,853,153
Cash and cash equivalents 675,353
Accounts receivable 7,489
--------------
Total assets $ 10,535,995
==============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 608,622
Partnership distributions payable 92,163
--------------
Total liabilities 700,785
--------------
Partners' capital:
Wells Real Estate Fund VIII 4,905,482
Wells Real Estate Fund IX 4,929,728
--------------
Total partners' capital 9,835,210
--------------
Total liabilities and partners' capital $ 10,535,995
==============
</TABLE>
F-22
<PAGE>
FUND VIII AND IX ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (JUNE 10, 1996)
TO DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenues:
Rental income $ 101,277
-----------
Expenses:
Depreciation 50,444
Management and leasing fees 3,884
Property administration 1,050
-----------
55,378
-----------
Net income $ 45,899
===========
Net income allocated to Wells Real Estate Fund VIII $ 22,892
===========
Net income allocated to Wells Real Estate Fund IX $ 23,007
===========
</TABLE>
FUND VIII AND IX ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION (JUNE 10, 1996)
TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND VIII FUND IX CAPITAL
<S> <C> <C> <C>
Balance, June 10, 1996 $ 0 $ 0 $ 0
Net income $ 22,892 23,007 45,899
Partnership contributions 4,928,555 4,952,919 9,881,474
Partnership distributions (45,965) (46,198) (92,163)
------------ ------------ ------------
Balance, December 31, 1996 $4,905,482 $4,929,728 $9,835,210
============ ============ ============
</TABLE>
F- 23
<PAGE>
FUND VIII AND IX ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 10, 1996)
TO DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 45,899
--------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 50,444
Changes in assets and liabilities:
Accounts receivable (7,489)
Accounts payable 520
--------------
Total adjustments 43,475
--------------
Net cash provided by operating activities 89,374
--------------
Cash flows from investing activities:
Increase in construction payables 608,102
Investment in real estate (9,489,739)
--------------
Net cash used for investing activities (8,881,637)
--------------
Cash flows from financing activities:
Contributions from joint venture partners 9,467,616
--------------
Net increase in cash and cash equivalents 675,353
Cash and cash equivalents, beginning of period 0
--------------
Cash and cash equivalents, end of period $ 675,353
==============
Supplemental disclosure of noncash activities:
Deferred project costs applied by partners $ 413,858
==============
</TABLE>
F- 24
<PAGE>
6. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the year ended December
31, 1996 and for the period from inception (February 10, 1995) to December
31, 1995 were calculated as follows:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Financial statement net income $ 936,590 $273,914
Increase in net income resulting from:
Depreciation expense for financial reporting purposes in
excess of amounts for income tax purposes 94,314 8,699
Expenses added when paid for income tax purposes,
accrued for financial reporting purposes 1,365 121,735
Other (22,932) 0
Rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (7,363) 0
------------- ------------
Income tax basis net income $1,001,974 $404,348
============= ============
</TABLE>
The Partnership's income tax basis partners' capital at December 31, 1996
and 1995 was computed as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Financial statement partners' capital $27,030,780 $25,632,698
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 103,013 8,699
Increase in partners' capital resulting from:
Capitalization of syndication costs for income tax purposes, which are
accounted for as cost of capital for financial reporting purposes 4,774,787 4,490,432
Accumulated expenses deductible when paid for income tax purposes,
accrued for financial reporting purposes 65,759 121,735
Rental income accrued for financial reporting purposes in excess of
amounts for income tax purposes (7,363) 0
Partnership's distributions payable 317,453 296,171
------------- -------------
Income tax basis partners' capital $32,284,429 $30,549,735
============= =============
</TABLE>
7. 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, 1996 is as follows:
F-25
<PAGE>
<TABLE>
Year ending December 31:
<S> <C>
1997 $ 1,486,832
1998 1,692,818
1999 1,697,001
2000 1,701,072
2001 1,664,356
Thereafter 10,366,429
-------------
$18,608,508
=============
</TABLE>
Two significant tenant contributed 55% and 23% of rental income, which is
included in equity in income of joint ventures, for the year ended December
31, 1996. In addition, five significant tenants will contribute
approximately 24%, 20%, 19%, 18% and 15% of future minimum rental income.
The future minimum rental income due Fund VI, VII and VIII Associates under
noncanceable operating leases, including those leases signed at properties
under construction, at December 31, 1996 is as follows:
<TABLE>
Year ending December 31:
<S> <C>
1997 $ 1,907,377
1998 2,002,460
1999 2,004,859
2000 2,006,856
2001 1,865,797
Thereafter 12,647,664
2,572,705
-------------
$22,435,013
=============
</TABLE>
Two significant tenants contributed approximately 75% and 25% of revenues
for the year ended to December 31, 1996. In addition, two significant
tenants will contribute approximately 55% and 45% of future minimum rental
income.
The future minimum rental income due Fund VII and VIII Associates under
noncanceable operating leases at December 31, 1996 is as follows:
<TABLE>
Year ending December 31:
<S> <C>
1997 $ 623,623
1998 623,623
1999 628,138
2000 632,653
2001 632,653
-------------
Thereafter $5,713,395
=============
</TABLE>
One significant tenant contributed 91% of rental income for the year ended
December 31, 1996. In addition, two significant tenants will contribute
approximately 83% and 17% of future minimum rental income.
F-26
<PAGE>
The future minimum rental income due Fund VIII and IX Associates under
noncancelable operating leases, including those leases signed at properties
under construction, as of December 31, 1996 is as follows:
<TABLE>
Year ending December 31:
<S> <C>
1997 $ 933,126
1998 1,292,501
1999 1,292,501
2000 1,292,501
2001 1,298,501
Thereafter 9,639,301
-------------
$15,748,431
=============
</TABLE>
One significant tenant contributed 100% of rental income for the year ended
December 31, 1996. In addition, two significant tenants will contribute
approximately 58% and 42% of future minimum rental income.
8. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 1996:
<TABLE>
<CAPTION>
1996 QUARTERS ENDED
-------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- --------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues $294,408 $257,476 $261,798 $244,012
Net income 267,598 221,278 229,270 218,444
Net income allocated to general partners (297) 0 0 0
Net income allocated to Class A limited partners 317,233 273,502 293,936 322,869
Net loss allocated to Class B limited partners (49,338) (52,224) (64,666) (104,425)
Net income per weighted average Class A
limited partner unit outstanding $0.12 $0.11 $0.11 $0.12
Net loss per weighted average Class B
limited partner unit outstanding (0.09) (0.09) (0.10) (0.19)
Cash distribution per weighted average
Class A limited partner unit outstanding 0.11 0.10 0.11 0.12
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
1995 QUARTER ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- --------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues $3,000 $72,371 $121,518 $205,539
Net (loss) income (6,232) 18,606 97,386 164,154
Net (loss) income allocated to general partners (62) 62 0 (203)
Net income allocated to Class A limited
partners 0 12,374 97,386 184,461
Net (loss) income allocated to Class B limited partners (6,170) 6,170 0 (20,104)
Net income per weighted average Class A
limited partner unit outstanding $0.00 $0.03 $0.13 $0.12
Net (loss) income per weighted average Class B
limited partner unit outstanding (0.15) 0.15 0.00 (0.03)
Cash distribution per weighted average
Class A limited partner unit outstanding 0.00 0.00 0.00 0.28
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership. In the normal
course of business, the Partnership may become subject to such litigation
or claims.
F-28
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INITIAL COST
--------------------------- COSTS OF
BUILDINGS AND CAPITALIZED
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
- ------------------------ ------------ ----------- --------------- --------------
<S> <C> <C> <C> <C>
BELLSOUTH PROPERTY (A) None $1,244,256 $ 0 $ 7,353,027
TANGLEWOOD COMMONS (B) None 3,020,040 0 4,727,066
GAINESVILLE PROPERTY (C) None 222,627 0 4,870,416
HANNOVER PROPERTY (D) None 512,001 869,037 137,449
TCI-DALLAS PROPERTY (E) None 650,000 0 4,016,866
CELLULAR ONE PROPERTY (F) None 833,942 0 4,402,789
----------- --------------- --------------
Total $6,482,866 $869,037 $25,507,613
=========== =============== ==============
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
--------------------------------------------------------
BUILDINGS AND CONSTRUCTION ACCUMULATED
DESCRIPTION LAND IMPROVEMENTS IN PROGRESS TOTAL DEPRECIATION
- ------------------------ ----------- --------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
BELLSOUTH PROPERTY (A) $1,301,890 $ 7,295,393 $ 0 $ 8,597,283 $290,407
TANGLEWOOD COMMONS (B) 3,159,928 0 4,587,178 7,747,106 0
GAINESVILLE PROPERTY (C) 288,058 4,801,785 3,200 5,093,043 235,963
HANNOVER PROPERTY (D) 534,262 981,239 2,986 1,518,487 31,390
TCI-DALLAS PROPERTY (E) 677,914 3,988,952 0 4,666,866 50,444
CELLULAR ONE PROPERTY (F) 896,698 0 4,340,033 5,236,731 0
----------- --------------- -------------- ------------- ---------------
Total $6,858,750 $17,067,369 $8,933,397 $32,859,516 $608,204
=========== =============== ============== ============= ===============
<CAPTION>
LIFE ON WHICH
DATE OF DATE DEPRECIATION IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED (G)
- ------------------------ -------------- ------------ -------------------
<S> <C> <C> <C>
BELLSOUTH PROPERTY (A) 1996 04/25/95 20 to 25 years
TANGLEWOOD COMMONS (B) 05/30/95 20 to 25 years
GAINESVILLE PROPERTY (C) 1995 01/20/95 20 to 25 years
HANNOVER PROPERTY (D) 1996 01/16/95 20 to 25 years
TCI-DALLAS PROPERTY (E) 1996 10/10/96 20 to 25 years
CELLULAR ONE PROPERTY (F) 06/19/96 20 to 25 years
</TABLE>
(a) The BellSouth Property co nsists of a four-story office building located in
Jacksonville, Florida. It is owned by Fund VI, VII, and VIII Associates.
The Partnership owned a 28% interest in Fund VI, VII, and VIII Associates
at December 31, 1996.
(b) 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 28% interest in
Fund VI, VII, and VIII Associates at December 31, 1996.
(c) 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 62% interest in Fund VII and VIII Associates at
December 31, 1996.
(d) 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 62% interest in Fund VII and VIII Associates at
December 31, 1996.
(e) The Dallas Property consists of a one-story office building located in
Farmers Branch, Texas. It is owned by Fund VIII and IX Associates. The
Partnership owned a 50% interest in Fund VIII and IX Associates at December
31, 1996.
(f) The Cellular One Property is a 7.09-acre tract of real property under
construction in Madison, Wisconsin. It is owned by Fund VIII and IX
Associates. The Partnership owned a 50% interest in Fund VIII and IX
Associates at December 31, 1996.
(g) Depreciation lives used for buildings are 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 VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
----------- ---------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 $ 0 $ 0
1995 additions 13,659,985 18,091
----------- ---------------
BALANCE AT DECEMBER 31, 1995 13,659,985 18,091
1996 additions 19,199,531 590,113
----------- ---------------
BALANCE AT DECEMBER 31, 1996 $32,859,516 $608,204
=========== ===============
</TABLE>
S-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,716,219
<SECURITIES> 13,787,531
<RECEIVABLES> 187,433
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,506,234
<CURRENT-LIABILITIES> 475,454
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,030,780
<TOTAL-LIABILITY-AND-EQUITY> 27,506,234
<SALES> 0
<TOTAL-REVENUES> 1,057,694
<CGS> 0
<TOTAL-COSTS> 121,104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 936,590
<INCOME-TAX> 936,590
<INCOME-CONTINUING> 936,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 936,590
<EPS-PRIMARY> .46
<EPS-DILUTED> 0
</TABLE>
