<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998 or
----------------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
---------------- ----------------
Commission file number 0-27888
----------------
Wells Real Estate Fund VIII, L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2126618
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
--------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- ---------
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund VIII, L.P.
---------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1998
and December 31, 1997....................................... 3
Statements of Income for the Three and Six
Months Ended June 30, 1998
and 1997.................................................... 4
Statement of Partners' Capital
for the Year Ended December 31, 1997,
and the Six Months Ended June 30, 1998...................... 5
Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997................................ 6
Condensed Notes to Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................. 8
PART II. OTHER INFORMATION............................................... 19
2
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets June 30, 1998 December 31, 1997
------ ------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $25,907,879 $24,501,876
Cash and cash equivalents 32,648 1,848,493
Due from affiliates 615,767 548,507
Deferred project costs 2,751 103,318
Organization costs, less accumulated
amortization of $18,750 in 1997
and $21,875 in June 1998 9,375 12,500
Prepaid expenses and other assets 3,486 7,000
----------- -----------
Total assets $26,571,906 $27,021,694
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distribution payable $ 566,089 $ 530,714
----------- -----------
Partners' capital:
Limited partners:
Class A - 2,650,385 units outstanding 22,929,037 22,828,363
Class B - 552,884 units outstanding 3,076,780 3,662,617
----------- -----------
Total partners' capital 26,005,817 26,490,980
----------- -----------
Total liabilities and partners' capital $26,571,906 $27,021,694
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Equity in earnings of joint
ventures (Note 2) $ 333,523 $ 225,725 $ 661,293 $ 358,177
Interest income 103 35,984 16,109 120,298
--------- --------- ---------- ---------
333,626 261,709 677,402 478,475
Expenses:
Legal and accounting 9,739 13,681 14,510 21,871
Computer costs 1,837 1,651 3,854 4,344
Partnership administration 16,472 20,328 24,205 42,869
Amortization of 1,563 1,563 3,125 3,125
organization costs --------- --------- ---------- ---------
29,611 37,223 45,694 72,209
--------- --------- ---------- ---------
Net income $ 304,015 $ 224,486 $ 631,708 $ 406,266
========= ========= ========== =========
Net income (loss) allocated to
General Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to Class
A Limited Partners $ 610,559 $ 422,125 $1,202,496 $ 749,851
Net loss allocated to Class B
Limited Partners $(306,544) $(197,639) $ (570,788) $(343,585)
Net income per Class A Limited
Partner Unit $ 0.23 $ 0.16 $ 0.45 $ 0.28
Net loss per Class B
Limited Partner Unit $ (0.55) $ (0.36) $ (1.02) $ (0.61)
Cash distribution per Class A
Limited Partner Unit $ 0.21 $ 0.13 $ 0.42 $ 0.23
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1997 AND SIX MONTHS ENDED
JUNE 30, 1998
<TABLE>
<CAPTION>
LIMITED PARTNERS
-------------------------------------------------
CLASS A CLASS B TOTAL
------------------------- ---------------------- GENERAL PARTNERS'
ORIGINAL UNITS AMOUNTS UNITS AMOUNTS PARTNERS CAPITAL
--------- ---------- ------------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1996 $ 100 2,622,636 $22,367,784 581,633 $4,662,896 $0 $27,030,780
Net income (loss) 0 0 1,947,536 0 (844,969) 0 1,102,567
Partnership distributions 0 0 (1,633,767) 0 0 0 (1,633,767)
Class B conversion elections 0 22,044 155,310 (22,044) (155,310) 0 0
Return of capital (100) (1,000) (8,500) 0 0 0 (8,600)
----- --------- ----------- ------- ---------- -- -----------
BALANCE,
DECEMBER 31, 1997 0 2,643,680 22,828,363 559,589 3,662,617 0 26,490,980
Net income (loss) 0 0 1,202,496 0 (570,788) 0 631,708
Partnership distributions 0 0 (1,116,871) 0 0 0 (1,116,871)
Class B conversion elections 0 6,705 (15,049) (6,705) 15,049 0 0
----- --------- ----------- ------- ---------- -- -----------
BALANCE,
JUNE 30, 1998 $ 0 2,650,385 $22,929,037 552,884 $3,076,780 $0 $26,005,817
===== ========= =========== ======= ========== == ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------------
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 631,708 $ 406,266
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in income of joint ventures (661,293) (358,177)
Amortization of organization costs 3,125 3,125
Changes in assets and liabilities:
Prepaid expenses and other assets 3,514 38,000
Accounts payable 0 (4,708)
Due to affiliates 0 (152,501)
----------- ------------
Net cash used in operating activities (22,946) (67,995)
----------- ------------
Cash flows from investing activities:
Distributions received from joint ventures 1,099,073 419,140
Investment in joint ventures (1,810,476) (10,114,996)
----------- ------------
Net cash used in investing activities (711,403) (9,695,856)
----------- ------------
Cash flows from financing activities:
Distributions to partners from
accumulated earnings (1,081,496) (591,176)
Return of original limited partner
investment 0 (8,500)
----------- ------------
Net cash used in financing
activities (1,081,496) (599,676)
----------- ------------
Net decrease cash and cash equivalents (1,815,845) (10,363,527)
Cash and cash equivalents, beginning of year 1,848,493 12,716,220
----------- ------------
Cash and cash equivalents, end of period $ 32,648 $ 2,352,693
=========== ============
Supplemental disclosure of noncash
investing activities:
Deferred project costs applied to joint
venture property $ 100,567 $ 565,428
=========== ============
</TABLE>
6
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statement
June 30, 1998
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
- -----------
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., as
General Partners. The Partnership was formed on August 15, 1994, for the purpose
of acquiring, developing, owning, operating, improving, leasing, and otherwise
managing for investment purposes income producing commercial 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 on Form S-11 filed under the Securities Act of 1933. The
Partnership commenced active operations on February 24, 1997, when it received
and accepted subscriptions for 125,000 units. The offering was terminated on
January 4, 1997, 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.
The Partnership owns interests in the following properties through its equity
ownership in the following joint ventures: (i) Fund VII and Fund VIII
Associates, a joint venture between the Partnership and Wells Real Estate Fund
VII, L.P. (the "Fund VII-Fund VIII Joint Venture"); (ii) Fund VI, Fund VII and
Fund VIII Associates, a joint venture among the Partnership and Wells Real
Estate Fund VI, L.P., and Wells Real Estate Fund VII, L.P. (the "Fund VI-VII-
VIII Joint Venture"); and (iii) Fund VIII and Fund IX Associates, a joint
venture between the Partnership and Wells Real Estate Fund IX, L.P. (the "Fund
VIII-Fund IX Joint Venture").
As of June 30, 1998, the Partnership owned interests in the following properties
through its ownership in the foregoing joint ventures: (i) a single-story
retail/office building located in Clayton County, Georgia (the "Hannover
Center") and (ii) a two-story office building located in Gainesville, Florida
(the "CH2M Hill") which are owned by the Fund VII-Fund VIII Joint Venture; (iii)
a four-story office building located in Jacksonville, Florida (the "BellSouth
Building") and (iv) a retail shopping center located in Clemmons, North Carolina
(the "Tanglewood Commons") which are owned by the Fund VI-VII-VIII Joint
Venture; and (v) a four-story office building located in Madison, Wisconsin (the
"US Cellular Building"), (vi) a one-story office building located in Farmers
Branch, Texas (the "TCI Building"), (vii) a two-story office building located in
Orange County, California (the "Matsushita Building"), and (viii) a two-story
office building located in Boulder County, Colorado (the "Cirrus Logic
Building") which are owned by the Fund VIII-Fund IX Joint Venture.
7
<PAGE>
All of the foregoing properties were acquired on an all cash basis. For further
information regarding these joint ventures and properties, refer to the
Partnership's Form 10-K for the year ended December 31, 1997.
(b) Basis of Presentation
- -------------------------
The financial statements of Wells Real Estate Fund VIII, L.P. (the
"Partnership") have been prepared in accordance with instructions to Form 10-Q
and do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
quarterly statements have not been examined by independent accountants, but in
the opinion of the General Partners, the statements for the unaudited interim
periods presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for such
periods. For further information, refer to the financial statements and
footnotes included in the Partnership's Form 10-K for the year ended December
31, 1997.
2) Investment in Joint Ventures
----------------------------
The Partnership owns interests in six office buildings and two retail centers
through its ownership in joint ventures. The Partnership does not have control
over the operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investment in joint ventures is recorded on the equity
method. For further information, refer to the financial statements and
footnotes included in the Partnership's Form 10-K for the year ended December
31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- ---------------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
from any forward-looking statement made in this Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon expiration of existing leases, and
the potential need to fund tenant improvements or other capital expenditures out
of operating cash flow.
8
<PAGE>
RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS
- ---------------------------------------------------------
(a) General
- -----------
As of June 30, 1998, the properties owned by the Partnership were 97% occupied.
Gross revenues of the Partnership were $677,402 for the six months ended June
30, 1998, as compared to $478,475 for the six months ended June 30, 1997. The
increase was attributable primarily to increased income from joint ventures
offset partially by decreased interest income earned on funds held by the
Partnership prior to the investment in joint venture. Expenses of the
Partnership decreased to $45,694 for the six months ended June 30, 1998,
compared to $72,209 for the same period in 1997, as the result of decreased
expenses primarily in legal, printing and postage. Net income of the
Partnership was $631,708 for the six months ended June 30, 1998, as compared to
$406,266 for the six months ended June 30, 1997.
The Partnership's net cash used in operating activities decreased to $(22,946)
for 1998 as compared to $(67,995) for 1997. The decrease is due primarily to a
decrease in payments to affiliates offset by decreased interest earned on funds
held by the Partnership prior to investment in properties. Net cash used in
investing activities decreased to $711,403 for 1998 from $9,695,856 in 1997, due
primarily to decreased investments in joint ventures, offset by increased
distributions from joint ventures. Net cash used in financing activities
increased from 1997 due to increased distributions to partners. Cash and cash
equivalents decreased from $2,352,693 at June 30, 1997 to $32,648 for the same
period in 1998.
The Partnership's distributions from Investment Income accrued to Class A Unit
holders for the second quarter of 1998 was $0.21 per Class A Unit as compared to
distributions of $.13 per Class A Unit for the second quarter of 1997.
The General Partners have verified that all operational computer systems are
year 2000 compliant. This includes systems supporting accounting, property
management and investor services. Also, as part of this review, all building
control systems have been verified as compliant. The current line of business
applications are based on compliant operating systems and database servers. All
of these products are scheduled for additional upgrades before the year 2000.
Therefore, it is not anticipated that the year 2000 will have significant impact
on operations.
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 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 Partners' capital
contributions and, as of June 30, 1998, has reserved
9
<PAGE>
approximately $40,000 for final tenant buildout of the Hannover Center owned by
the Fund VII-Fund VIII Joint.
Recent Accounting Pronouncements
- --------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", requires certain transactions (e.g., unrealized
gains/losses on available for sale securities) that are not reflected in net
income to be displayed as other comprehensive income. The Statement also
requires an entity to report total comprehensive income (i.e., net income plus
other comprehensive income) for every period in which an income statement is
presented. SFAS No. 130 is effective for annual and interim periods beginning
after December 15, 1997. None of the transactions required to be reported in
other comprehensive income pertain to the Partnership; consequently, adoption of
this Statement had no impact on the partnership's disclosures.
Effective April 3, 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 is effective for fiscal years beginning after December
15, 1998, and initial application is required to be reported as a cumulative
effect of change in accounting principle. This SOP provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred.
Adoption of this Statement by the Partnership in the first quarter of 1999 may
result in the write-off of certain capitalized organization costs. Adoption of
this Statement is not expected to have a material impact on the Partnership's
results of operations and financial condition.
10
<PAGE>
PROPERTY OPERATIONS
- -------------------
As of June 30, 1998, the Partnership owned interests in the following
operational properties:
CH2M Hill/Fund VII - Fund VIII Joint Venture
- --------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $144,440 $132,579 $277,018 $265,157
Expenses:
Depreciation 59,346 54,548 113,891 106,132
Management & leasing expenses 22,568 21,308 50,689 42,617
Other operating expenses 13,584 (14,649) 29,065 (34,273)
-------- -------- -------- --------
95,498 61,207 193,645 114,476
-------- -------- -------- --------
Net income $ 48,942 $ 71,372 $ 83,373 $150,681
======== ======== ======== ========
Occupied % 100% 94% 100% 94%
Partnership's Ownership % in the
Fund VII-VIII Joint Venture 63.4% 62.1% 63.4% 62.1%
Cash distribution to Partnership $ 79,949 $ 78,816 $123,496 $160,725
Net income allocated to the
Partnership $ 30,881 $ 44,286 $ 52,305 $ 93,492
</TABLE>
Rental income increased in 1998, as compared to 1997, due to a new tenant
occupying the remaining space in the building in late March 1998. Depreciation,
management and leasing expenses increased compared to 1997, due primarily to the
increased occupancy. Other operating expenses increased for the six months
ended June 30, 1998, as compared to the same period of 1997, due primarily to a
decrease in CAM reimbursements, which is the result of a refund to the tenant of
property taxes overpaid in 1997 which was identified during a CAM reconciliation
process performed after year end. Income and distribution to the Partnership
have decreased primarily due to refund of taxes to the tenant noted above.
11
<PAGE>
BellSouth Building/Fund VI - Fund VII - Fund VIII Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $380,277 $407,513 $760,554 $760,554
Interest income 2,098 2,041 4,172 4,172
-------- -------- -------- --------
382,375 409,554 764,726 790,580
-------- -------- -------- --------
Expenses:
Depreciation 110,953 110,889 221,842 221,778
Management & leasing expenses 47,381 51,286 95,196 96,459
Other operating expenses 102,655 143,280 190,065 227,247
-------- -------- -------- --------
260,989 305,455 507,103 545,484
-------- -------- -------- --------
Net income $121,386 $104,099 $257,623 $245,096
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund VI - VII - Fund VIII Joint
Venture 32.3% 30.3% 32.3% 30.3%
Cash distribution to Partnership $ 77,871 $ 79,250 $160,527 $172,938
Net income allocated to the
Partnership $ 39,275 $ 36,737 $ 83,353 $ 88,034
</TABLE>
Net income has increased slightly due primarily to differences in the annual
adjustment for prior year common area maintenance billings to tenants. Cash
distributions and net income allocated to the Partnership increased in 1998 as
compared to 1997, due primarily to additional funding by the Partnership, which
increased the Partnership's ownership interest in the Fund VI - VII - VIII Joint
Venture.
12
<PAGE>
The Hannover Center/Fund VII - Fund VIII Joint Venture
- ------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $26,061 $26,061 $52,122 $55,257
Expenses:
Depreciation 10,982 10,982 21,963 21,963
Management & leasing expenses 2,661 2,434 5,322 5,004
Other operating expenses 6,173 5,472 14,289 14,153
------- ------- ------- -------
19,816 18,888 41,574 41,120
------- ------- ------- -------
Net income $ 6,245 $ 7,173 $10,548 $14,137
======= ======= ======= =======
Occupied % 50% 50% 50% 50%
Partnership's Ownership % in the
Fund VII - VIII Joint Venture 63.4% 62.1% 63.4% 62.1%
Cash distribution to Partnership $ 9,809 $10,073 $18,280 $18,188
Net income allocated to the
Partnership $ 3,944 $ 4,451 $ 6,630 $ 8,772
</TABLE>
On April 1, 1996, Fund VII-Fund VIII Joint Venture acquired a 1.01 acre tract of
land and a 12,000 square foot combination retail/office building known as the
Hannover Retail Center (the "Hannover Center").
Moovies, Inc., a video sales and rental store, signed a nine year, eleven month
lease for 6,020 square feet and occupied the space and opened for business on
June 22, 1996. As of June 30, 1998, the remaining space at the Hannover Center
has been leased.
Rental income decreased for 1998, compared to 1997, due to a correction in
straight line rent made in the first quarter of 1997. Expenses remained
relatively stable and the decrease in net income was primarily the result of the
aforementioned straight line adjustment.
13
<PAGE>
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $182,139 $160,049 $364,752 $209,583
Interest income 4,587 2,785 9,725 6,385
-------- -------- -------- --------
186,726 162,834 374,477 215,968
-------- -------- -------- --------
Expenses:
Depreciation 61,059 51,145 121,486 82,251
Management & leasing expenses 15,032 10,173 29,851 13,337
Other operating expenses (19,872) 29,706 5,230 51,612
-------- -------- -------- --------
56,219 91,024 156,567 147,200
-------- -------- -------- --------
Net income $130,507 $ 71,810 $217,910 $ 68,768
======== ======== ======== ========
Occupied % 87% 78% 87% 78%
Partnership's Ownership % in the
Fund VI - VII - Fund VIII Joint
Venture 32.3% 30.3% 32.3% 30.3%
Cash distribution to Partnership $ 61,934 $ 22,880 $109,292 $ 30,779
Net income allocated to the
Partnership $ 42,225 $ 21,758 $ 70,504 $ 20,902
</TABLE>
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shopping center
are anticipated to be approximately $8,700,000 when all tenant improvements are
completed.
The Fund VI-VII-VIII Joint Venture developed a large strip shopping center
building containing approximately 67,320 gross square feet which opened on
February 26, 1997, on a 12.48 acre tract. The remaining 2.2 acre portion of
the property will remain in a vegetative or natural state.
In February 1997, Harris Teeter, Inc., a regional supermarket chain, occupied
its leased space of 46,120 square feet with an initial term of 20 years. The
annual base rent during the initial term is $488,250. In addition, Harris
Teeter has agreed to pay percentage rents equal to one percent of the amount by
which Harris Teeter's gross sales exceed $35,000,000 for any lease year.
Since this property commenced operations in February 1997, comparable income and
expense figures for the complete six months ended June 30, 1998 and 1997 are not
available. Income has increased for the three months ended June 30, 1998, as
compared to the same period in 1997, due to increased occupancy at the shopping
center while expenses have decreased, due primarily to differences in the annual
adjustment for prior year common area maintenance billings to tenants.
14
<PAGE>
The TCI Building/Fund VIII-Fund IX Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $113,795 $113,795 $227,589 $227,589
Interest income 7,700 0 15,150 0
-------- -------- -------- --------
121,495 113,795 242,739 227,589
-------- -------- -------- --------
Expenses:
Depreciation 41,649 41,649 83,297 83,297
Management & leasing expenses 4,300 4,240 8,600 8,807
Other operating expenses 1,815 2,340 4,973 6,389
-------- -------- -------- --------
47,764 48,229 96,870 98,493
-------- -------- -------- --------
Net income $ 73,731 $ 65,566 $145,869 $129,096
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund VIII-Fund IX Joint Venture 54.8% 50.1% 54.8% 50.1%
Cash distribution to Partnership $ 59,546 $ 50,511 $114,947 $ 99,908
Net income allocated to the
Partnership $ 40,247 $ 32,816 $ 77,435 $ 64,552
</TABLE>
Net income and cash distributions are greater in 1998, as compared to 1997, due
primarily to increased interest income and a slight decrease in accounting
expenses.
The Partnership's ownership in the Fund VIII-Fund IX Joint Venture increased in
1998, as compared to 1997, due to additional fundings by the Partnership which
increased the Partnership's ownership interest in the Fund VIII-Fund IX Joint
Venture.
15
<PAGE>
The Matsushita Building/Fund VIII-Fund IX Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $167,698 $151,304 $335,396 $222,665
Interest income 0 1,008 0 1,511
-------- -------- -------- --------
167,698 152,312 335,396 224,176
-------- -------- -------- --------
Expenses:
Depreciation 53,917 53,833 107,835 107,233
Management & leasing expenses 6,512 7,599 13,025 11,880
Other operating expenses 4,661 458 10,243 993
-------- -------- -------- --------
65,090 61,890 131,103 120,106
-------- -------- -------- --------
Net income $102,608 $ 90,422 $204,293 $104,070
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund VIII-Fund IX Joint Venture 54.8% 50.1% 54.8% 50.1%
Cash distribution to Partnership $ 90,468 $ 35,735 $175,399 $ 35,735
Net income allocated to the
Partnership $ 56,022 $ 45,274 $108,448 $ 52,092
</TABLE>
On January 10, 1997, Fund VIII-Fund IX Joint Venture acquired a two-story office
building containing approximately 63,417 rentable square feet on a 4.4 acre
tract of land located in the Irvine Spectrum planned business community in
metropolitan Orange County, California for a purchase price of $7,193,000
excluding acquisition costs.
The entire Matsushita Building is currently under a net lease to Matsushita
Avionics Systems Corporation. Under the Lease, Matsushita Avionics is
responsible for all utilities, taxes, insurance and other operating expenses
during the term of the Lease.
Rental income and net income have increased, as compared to 1997, due primarily
to an understatement of straight line rent in 1997.
The Partnership's ownership in the Fund VIII-Fund IX Joint Venture increased in
1998, as compared to 1997, due to additional fundings by the Partnership which
increased the Partnership's ownership interest in the Fund VIII-Fund IX Joint
Venture.
16
<PAGE>
The Cirrus Logic Building/Fund VIII-Fund IX Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Four Months Ended
----------------------------- ---------------- -----------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $184,539 $175,565 $369,078 $202,491
Interest income 0 0 0 57
-------- -------- -------- --------
184,539 175,565 369,078 202,548
-------- -------- -------- --------
Expenses:
Depreciation 72,765 64,526 145,530 86,026
Management & leasing expenses 9,056 6,601 18,406 6,601
Other operating expenses (9,950) 6,523 (8,049) 6,968
-------- -------- -------- --------
71,871 77,650 155,887 99,595
-------- -------- -------- --------
Net income $112,668 $ 97,915 $213,191 $102,953
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund VIII-Fund IX Joint Venture 54.8% 50.1% 54.8% 50.1%
Cash distribution to Partnership $ 92,510 $ 49,840 $173,689 $ 63,100
Net income allocated to the
Partnership $ 61,316 $ 49,008 $113,059 $ 51,525
</TABLE>
On February 20, 1997, the Fund VIII-Fund IX Joint Venture purchased a two-story
partially completed office building in Boulder County, Colorado (the "Cirrus
Logic Building") for $7,029,000 excluding acquisition costs. Construction of
the 49,460 square foot building was substantially completed in March, 1997.
Cirrus Logic, Inc. has leased the entire building for a fifteen year term
beginning March 17, 1997. The annual base rental under the term of the Cirrus
Logic lease is $617,656 for the first five years, will be increased by 10% in
the sixth through tenth years and will be increased an additional 10% in years
eleven through fifteen.
Since the Cirrus Logic Building was purchased in February 1997 and was not
completed until March 1997, comparative income and expense figures for the six
months ended June 30, 1998 and 1997 are not available. Other operating expenses
decreased for the three months ended June 30, 1998, as compared to the same
period in 1997, due primarily to differences in the annual adjustment for common
area maintenance billing to the tenant.
The Partnership's ownership in the Fund VIII-Fund IX Joint Venture increased in
1998, as compared to 1997, due to additional fundings by the Partnership which
increased the Partnership's ownership in the Fund VIII-Fund IX Joint Venture.
17
<PAGE>
The Cellular One Building/Fund VIII-Fund IX Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended One Month Ended
June 30, 1998 June 30, 1998 June 30, 1997
------------------- ----------------- -------------------
<S> <C> <C> <C>
Revenues:
Rental income $320,519 $641,038 $40,108
Expenses:
Depreciation 179,152 307,201 38,000
Management & leasing expense 34,153 68,551 10,875
Other operating expenses (2,005) (18,548) 0
-------- -------- -------
211,300 357,204 48,875
-------- -------- -------
Net income (loss) $109,219 $283,834 $(8,767)
======== ======== =======
Occupied % 100% 100% 75%
Partnership's Ownership % in the
Fund VIII-Fund IX Joint Venture 54.8% 54.8% 50.1%
Cash distribution to Partnership $152,679 $290,704 $14,642
Net income (loss) allocated to Partnership $ 59,615 $149,560 $(4,386)
</TABLE>
In June 1997, Cellular One, a subsidiary of BellSouth Corporation, occupied its
leased space of 76,276 square feet comprising approximately 75% of the building.
The initial term of the lease is 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. Cellular One changed its name to US
Cellular in October 1997. One additional tenant has occupied the remaining 25%
of the building.
Since the building opened June 15, 1997, comparative income and expenses figures
are not available for prior periods.
The Partnership's ownership in the Fund VIII-Fund IX Joint Venture increased in
1998, as compared to 1997, due to additional fundings by the Partnership which
increased the Partnership's ownership in the Fund VIII-Fund IX Joint Venture.
18
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6 (b.) No reports on Form 8-K were filed during the second quarter of
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WELLS REAL ESTATE FUND VIII, L.P.
(Registrant)
Dated: August 10, 1998 By: /s/ Leo F. Wells, III
-----------------------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 32,648
<SECURITIES> 25,907,879
<RECEIVABLES> 615,767
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,486
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,571,906
<CURRENT-LIABILITIES> 566,089
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,005,817
<TOTAL-LIABILITY-AND-EQUITY> 26,571,906
<SALES> 0
<TOTAL-REVENUES> 677,402
<CGS> 0
<TOTAL-COSTS> 45,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 631,708
<INCOME-TAX> 631,708
<INCOME-CONTINUING> 631,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 631,708
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0
</TABLE>
