<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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
--- ---
1
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund VIII, L.P.
---------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1998
and December 31, 1997 .............................. 3
Statements of Income for the Three and Nine
Months Ended September 30, 1998
and 1997 ........................................... 4
Statement of Partners' Capital
for the Year Ended December 31, 1997,
and the Nine Months Ended September 30, 1998........ 5
Statements of Cash Flows for the Nine Months
Ended September 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
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WELLS REAL ESTATE FUND VIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 1998 December 31, 1997
------ ------------------ -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $ 25,674,665 $ 24,501,876
Cash and cash equivalents 41,928 1,848,493
Due from affiliates 545,923 548,507
Deferred project costs 2,751 103,318
Organization costs, less accumulated
amortization of $18,750 in 1997
and $23,439 in September 1998 7,813 12,500
Prepaid expenses and other assets 0 7,000
---------- ----------
Total assets $ 26,273,080 $ 27,021,694
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distribution payable $ 573,351 $ 530,714
---------- ----------
Partners' capital:
Limited partners:
Class A - 2,657,026 units outstanding 22,980,022 22,828,363
Class B - 546,243 units outstanding 2,719,707 3,662,617
---------- ----------
Total partners' capital 25,699,729 26,490,980
---------- ----------
Total liabilities and partners' capital $ 26,273,080 $ 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 Nine Months Ended
-------------------------------------- -------------------------------------
September 30, 1998 September 30, 1997 September 30, 1998 September 30,1997
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Equity earnings of joint
ventures (Note 2) $ 288,768 $ 365,080 $ 950,061 $ 723,257
Interest income 36 29,101 16,145 149,399
--------- --------- ---------- ----------
288,804 394,181 966,206 872,656
--------- --------- ---------- ----------
Expenses:
Legal and accounting 338 1,180 14,848 23,051
Computer costs 2,341 3,069 6,195 7,413
Partnership administration 18,568 6,161 42,773 49,030
Amortization of
organization costs 1,562 1,562 4,687 4,687
--------- --------- ---------- ----------
22,809 11,972 68,503 84,181
--------- --------- ---------- ----------
Net income $ 265,995 $ 382,209 $ 897,703 $ 788,475
========= ========= ========== ==========
Net loss allocated to General
Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to
Class A Limited Partners $ 592,469 $ 630,233 $1,794,965 $1,381,646
Net loss allocated to Class
B Limited Partners $(326,474) $(248,024) $ (897,262) $ (593,171)
Net income per Class A
Limited Partner Unit $ 0.22 $ 0.24 $ 0.67 $ 0.52
Net loss per Class B Limited
Partner Unit $ (0.60) $ (0.44) $ (1.62) $ (1.05)
Cash distribution per Class A
Limited Partner Unit $ 0.22 $ 0.19 $ 0.64 $ 0.42
</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 NINE MONTHS ENDED
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LIMITED PARTNERS TOTAL
-------------------------------------------------
CLASS A CLASS B 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 1,794,965 0 (897,262) 0 897,703
Partnership distributions 0 0 (1,688,954) 0 0 0 (1,688,954)
Class B conversion elections 0 13,346 45,648 (13,346) (45,648) 0 0
----- --------- ----------- ------- ---------- -- -----------
BALANCE,
SEPTEMBER 30, 1998 $ 0 2,657,026 $22,980,022 546,243 $2,719,707 $0 $25,699,729
===== ========= =========== ======= ========== == ===========
</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 Nine Months Ended
-------------------------
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 897,703 $ 788,475
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in income of joint ventures (950,061) (723,257)
Amortization of organization costs 4,687 4,687
Changes in assets and liabilities:
Prepaid expenses and other assets 7,000 90,000
Accounts payable 0 (5,482)
Due to affiliates 0 (152,501)
----------- ------------
Net cash (used in) provided by
operating activities (40,671) 1,922
----------- ------------
Cash flows from investing activities:
Distributions received from joint ventures 1,731,211 751,034
Investment in joint ventures (1,850,788) (10,675,811)
----------- ------------
Net cash used in investing activities (119,577) (9,924,777)
----------- ------------
Cash flows from financing activities:
Distributions to partners from accumulated earnings (1,646,317) (923,767)
Return of original limited partner investment 0 (8,500)
----------- ------------
Net cash used in financing activities (1,646,317) (932,267)
----------- ------------
Net decrease cash and cash equivalents (1,806,565) (10,855,122)
Cash and cash equivalents, beginning of year 1,848,493 12,716,219
----------- ------------
Cash and cash equivalents, end of period $ 41,928 $ 1,861,097
=========== ============
Supplemental disclosure of noncash
investing activities:
Deferred project costs applied to joint
venture property $ 100,567 $ 593,983
=========== ============
</TABLE>
6
<PAGE>
WELLS REAL ESTATE FUND VIII, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statement
September 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 September 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
7
<PAGE>
Boulder County, Colorado (the "Cirrus Logic Building") which are owned by
the Fund VIII-Fund IX Joint Venture.
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 September 30, 1998, the properties owned by the Partnership were 97%
occupied. Gross revenues of the Partnership were $966,206 for the nine
months ended September 30, 1998, as compared to $872,656 for the nine
months ended September 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 $68,503 for the
nine months ended September 30, 1998, compared to $84,181 for the same
period in 1997, as the result of decreased expenses primarily in legal,
printing and postage. Net income of the Partnership was $897,703 for the
nine months ended September 30, 1998, as compared to $788,475 for the nine
months ended September 30, 1997.
The Partnership's net cash used in operating activities decreased to
$(40,671) for 1998 as compared to $1,922 for 1997. The decrease is due
primarily to a decrease in payments to affiliates and prepaid items offset
by decreased interest earned on funds held by the Partnership prior to
investment in properties. Net cash used in investing activities decreased
to $119,577 for 1998 from $9,924,777 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 $1,861,097 at September 30, 1997 to $41,928 for the same period in
1998.
The Partnership's distributions from Investment Income accrued to Class A
Unit holders for the third quarter of 1998 was $0.22 per Class A Unit as
compared to distributions of $.19 per Class A Unit for the third 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.
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)
9
<PAGE>
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 September 30, 1998, the Partnership owned interests in the following
operational properties:
CH2M Hill/Fund VII - Fund VIII Joint Venture
--------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ---------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 143,832 $ 132,578 $ 420,850 $ 397,735
-------------- ------------ ------------ -------------
Expenses:
Depreciation 68,946 56,025 182,837 162,157
Management & leasing expenses 14,330 21,473 65,019 64,090
Other operating expenses 14,902 (25,759) 43,967 (60,032)
-------------- ------------ ------------ -------------
98,178 51,739 291,823 166,215
-------------- ------------ ------------ -------------
Net income $ 45,654 $ 80,839 $ 129,027 $ 231,520
============== ============ ============ =============
Occupied % 100% 94% 100% 94%
Partnership's Ownership % in the
Fund VII-VIII Joint Venture 63.3% 62.0% 63.3% 62.0%
Cash distribution to Partnership $ 74,018 $ 85,609 $ 197,514 $ 246,334
Net income allocated to the
Partnership $ 28,892 $ 50,157 $ 81,197 $ 143,649
</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 nine months ended September 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 Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $380,278 $350,461 $1,140,832 $1,137,024
Interest income 2,096 2,097 6,268 6,114
-------- -------- ---------- ----------
382,374 352,558 1,147,100 1,143,138
-------- -------- ---------- ----------
Expenses:
Depreciation 110,985 110,889 332,827 332,667
Management & leasing
expenses 47,414 47,095 142,610 143,554
Other operating expenses 121,718 85,739 311,783 312,986
-------- -------- ---------- ----------
280,117 243,723 787,220 789,207
-------- -------- ---------- ----------
Net income $102,257 $108,835 $ 359,880 $ 353,931
======== ======== ========== ==========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership's Ownership %
in the Fund VI - Fund VII -
Fund VIII Joint Venture 32.3% 32.3% 32.3% 32.3%
Cash distribution to
Partnership $ 71,693 $ 71,099 $ 232,220 $ 211,619
Net income allocated to the
Partnership $ 33,085 $ 33,774 $ 116,438 $ 105,000
</TABLE>
Net income has increased slightly in 1998 as compared to 1997. Cash
distributions allocated to the Partnership increased in 1998 as compared to
1997, due primarily to additional funding by the Partnership in early 1997,
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 Nine Months Ended
------------------------------- --------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 26,061 $ 26,061 $ 78,183 $ 81,318
--------- --------- --------- ---------
Expenses:
Depreciation 10,981 10,981 32,944 32,944
Management & leasing expenses 2,661 2,775 7,983 7,779
Other operating expenses 2,133 4,872 16,422 19,025
--------- --------- --------- ---------
15,775 18,628 57,349 59,748
--------- --------- --------- ---------
Net income $ 10,286 $ 7,433 $ 20,834 $ 21,570
========= ========= ========= =========
Occupied % 50% 50% 50% 50%
Partnership's Ownership % in the
Fund VII - VIII Joint Venture 63.3% 62.0% 63.3% 62.0%
Cash distribution to Partnership $ (14,582) $ 10,446 $ 3,698 $ 28,634
Net income allocated to the
Partnership $ 6,513 $ 4,611 $ 13,143 $ 13,383
</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 September 30, 1998, the remaining space at the Hannover
Center had 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. Distributions decreased for the nine
months ended September 30, 1998 as compared to the same period in 1997 due
primarily to construction being funded by operating cash flow.
13
<PAGE>
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Mths Ended Eight Mths Ended
------------------------------ -------------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
--------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $183,587 $172,682 $548,339 $382,265
Interest income 4,345 3,890 14,070 10,275
-------- -------- -------- --------
187,932 176,572 562,409 392,540
-------- -------- -------- --------
Expenses:
Depreciation 61,235 53,435 182,721 135,686
Management & leasing expenses 14,953 13,390 44,804 26,727
Other operating expenses 19,150 20,740 24,380 72,352
-------- -------- -------- --------
95,338 87,565 251,905 234,765
-------- -------- -------- --------
Net income $ 92,594 $ 89,007 $310,504 $157,775
======== ======== ======== ========
Occupied % 90% 78% 90% 78%
Partnership's Ownership % in the
Fund VI - VII - Fund VIII Joint
Venture 32.3% 32.3% 32.3% 32.3%
Cash distribution to Partnership $ 49,401 $ 41,269 $158,693 $ 72,048
Net income allocated to the
Partnership $ 29,958 $ 27,705 $100,462 $ 48,607
</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.
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 nine months ended September 30, 1998 and 1997
are not available. Income has increased for the three months ended September
30, 1998, as compared to the same period in 1997, due to increased occupancy at
the shopping center while expenses have increased, due primarily to increased
depreciation.
14
<PAGE>
The TCI Building/Fund VIII-Fund IX Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------- ---------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $113,794 $118,273 $341,383 $345,862
Interest income 7,800 0 22,950 0
-------- -------- -------- --------
121,594 118,273 364,333 345,862
-------- -------- -------- --------
Expenses:
Depreciation 41,648 41,648 124,945 124,945
Management & leasing expenses 4,300 2,389 12,900 13,196
Other operating expenses 1,755 2,167 6,728 6,556
-------- -------- -------- --------
47,703 46,204 144,573 144,697
-------- -------- -------- --------
Net income $ 73,891 $ 72,069 $219,760 $201,165
======== ======== ======== ========
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 $ 59,853 $ 53,815 $174,810 $153,723
Net income allocated to the
Partnership $ 40,490 $ 36,104 $117,925 $100,656
</TABLE>
Net income and cash distributions are greater in 1998, as compared to 1997, due
primarily to increased interest income.
The Partnership's ownership in the Fund VIII-Fund IX Joint Venture increased in
1998, as compared to 1997, due to increased interest income and additional
funding 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 Nine Months Ended
-------------------- ------------------- ----------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $167,698 $270,821 $503,094 $493,486
Interest income 0 0 0 1,511
-------- -------- -------- --------
167,698 270,821 503,094 494,997
-------- -------- -------- --------
Expenses:
Depreciation 53,917 54,219 161,752 161,452
Management & leasing expenses 6,513 13,496 19,538 25,376
Other operating expenses 1,660 950 11,903 1,943
-------- -------- -------- --------
62,090 68,665 193,193 188,771
-------- -------- -------- --------
Net income $105,608 $202,156 $309,901 $306,226
======== ======== ======== ========
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 $ 92,446 $ 65,718 $267,845 $101,453
Net income allocated to the
Partnership $ 57,869 $101,273 $166,317 $153,365
</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 remained relatively constant for 1998, as
compared to 1997. Rental income decreased for the three months ended September
30, 1998 as compared to the same period in 1997 due to a straight line rent
adjustment in July 1997 reflected in rental income. Cash distributions have
increased in 1998 as compared to 1997 due primarily to the tenant not paying
rent until May of 1997 and an increase in the Partnership's ownership.
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 Nine Months Ended Seven Mths Ended
-------------------------------------- ------------------ -----------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
------------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $184,539 $197,344 $553,617 $399,835
Interest income 0 21,345 0 21,402
-------- -------- -------- --------
184,539 218,689 553,617 421,237
-------- -------- -------- --------
Expenses:
Depreciation 72,765 72,874 218,295 158,900
Management & leasing expenses 11,293 10,348 29,699 16,949
Other operating expenses 33,455 368 25,406 7,336
-------- -------- -------- --------
117,513 83,590 273,400 183,185
-------- -------- -------- --------
Net income $ 67,026 $135,099 $280,217 $238,052
======== ======== ======== ========
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 $ 68,041 $ 90,332 $241,730 $153,432
Net income allocated to the
Partnership $ 36,728 $ 67,680 $149,787 $119,205
</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 nine
months ended September 30, 1998 and 1997 are not available. Net income is lower
for the three months ended September 30, 1998 as compared to the same period in
1997 due primarily to a decrease in interest income and an increase in the
property tax accrual.
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 Nine Months Ended Four Months Ended
------------------------------------- ------------------ ------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $320,519 $239,645 $961,557 $279,753
-------- -------- -------- --------
Expenses:
Depreciation 202,625 118,500 509,826 156,500
Management & leasing expenses 35,422 24,817 103,973 24,817
Other operating expenses (18,320) 8,937 (36,868) 19,812
-------- -------- -------- --------
219,727 152,254 576,931 201,129
-------- -------- -------- --------
Net income $100,792 $ 87,391 $384,626 $ 78,624
======== ======== ======== ========
Occupied % 100% 75% 100% 75%
Partnership's Ownership % in the
Fund VIII-Fund IX Joint Venture 54.8% 50.1% 54.8% 50.1%
Cash distribution to Partnership $161,413 $ 59,962 $452,117 $ 74,604
Net loss allocated to the
Partnership $ 55,231 $ 43,779 $204,791 $ 39,393
</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
for the nine months ended September 30, 1998 and 1997 are not available. Other
operating expense decreased for the three months ended September 30, 1998, as
compared to the same period in 1997 due primarily to differences in the 1997
estimate for common area maintenance billing to the tenants.
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 third 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: November 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 41,928
<SECURITIES> 25,674,665
<RECEIVABLES> 545,923
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,564
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,273,080
<CURRENT-LIABILITIES> 573,351
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,699,729
<TOTAL-LIABILITY-AND-EQUITY> 26,273,080
<SALES> 0
<TOTAL-REVENUES> 966,206
<CGS> 0
<TOTAL-COSTS> 68,503
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 897,703
<INCOME-TAX> 897,703
<INCOME-CONTINUING> 897,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 897,703
<EPS-PRIMARY> .67
<EPS-DILUTED> 0
</TABLE>
