<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, 1996 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 33-83852 (1933 Act)
---------------------------------------------
Wells Real Estate Fund IX, L.P.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2126622
- -------------------------------------- -----------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
--------------
- -----------------------------------------------------------------------------
(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
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<PAGE>
Form 10-Q
---------
Wells Real Estate Fund IX,L.P.
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996
and December 31, 1995............................. 3
Statements of Income for the Three
Months and Six Months ended June 30, 1996......... 4
Statement of Partners' Capital
for the Six Months Ended June 30, 1996............ 5
Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1995...................... 6
Condensed Notes to Financial Statements............. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................... 11
PART II. OTHER INFORMATION........................................... 12
2
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WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets June 30, 1996 December 31, 1995
------ ------------- -----------------
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 10,078,161 $ 600
Investment in joint venture (Note 2) 533,377 0
Deferred project costs (Note 3) 429,951 0
Deferred offering costs (Note 4) 240,712 142,229
Accounts receivables 1,885 0
Prepaid expenses and other assets 25,000 0
---------- -------
Total assets $ 11,309,086 $ 142,829
========== =======
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Accounts payable $ 0 $ 0
Sales commissions payable 70,055 0
Due to affiliates (Note 5) 251,149 142,229
---------- -------
Total liabilities 321,204 142,229
---------- -------
Partners' capital:
General partners 500 500
Original limited partner 100 100
Limited partners:
Class A-1,010,926 units at June 30, 1996 8,630,110 0
Class B-277,314 units at June 30, 1996 2,357,172 0
---------- -------
Total partners' capital 10,987,882 600
---------- -------
Total liabilities and partners' capital $ 11,309,086 $ 142,829
========== =======
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 1996 June 30, 1996
------------------ ----------------
Revenues:
<S> <C> <C>
Interest Income $ 69,153 $ 80,326
Expenses:
Legal and accounting 3,560 3,560
Computer costs 1,006 2,216
Printing and Notebooks 9,370 13,164
Administrative Salaries 8,515 12,694
Office Expense 1,013 3,806
Postage 450 479
Taxes and licenses 0 30
Other 7,017 7,136
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30,931 43,085
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Net income $ 38,222 $ 37,241
====== =======
Net income allocated to General Partners $ 10 0
Net income allocated to Class A Limited Partners $ 37,241 37,241
Net income allocated to Class B Limited Partners $ 971 0
Net income per Class A weighted average Limited
Partner Unit $ .07 .07
Net income per weighted average Class B Limited
Partner Unit $ .01 0
Cash distribution per Class A Limited Partner
Unit $ 0 0
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<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, 1995 $100 - $ - - $ - $500 $ 600
Limited partner - 1,010,926 10,109,257 277,314 2,773,143 - 12,882,400
contributions
Net income - - 37,241 - 0 0 37,241
Sales commissions - - (1,010,925) - (277,314) - (1,288,239)
Other offering
expenses - - (505,463) - (138,657) - (644,120)
---------- ---------- ----------- --------- ---------- ---- -----------
BALANCE, JUNE 30, 1996 $100 1,010,926 $ 8,630,110 277,314 $2,357,172 $500 $10,987,882
========== ========== =========== ========= ========== ---- ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1996
-----------------------
<S> <C>
Cash flow from operating activities:
Net income $ 37,241
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in assets and liabilities:
Increase in prepaid and other assets (25,000)
Increase in accounts payable (1,885)
Increase in due to affiliates 10,437
-----------
Net cash used in operating activities 20,793
-----------
Cash flow from investing activities:
Investment in Joint Venture (512,444)
Deferred Project Costs Paid (450,884)
-----------
Net cash used by investing activities (963,328)
-----------
Cash flows from financing activities:
Limited partners' contributions 12,882,400
Sales commissions paid (1,218,184)
Offering costs paid (644,120)
-----------
Net cash provided by financing
activities 11,020,096
-----------
Net increase in cash and cash equivalents 10,077,561
Cash and cash equivalents, beginning of year 600
-----------
Cash and cash equivalents, end of period $10,078,161
===========
Supplemental Schedule of Noncash Investing
activities - deferred project costs applied to Joint
Venture Activities $ 20,993
===========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statement
June 30, 1996
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
- -----------
Wells Real Estate Fund IX, 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 purposed income producing commercial properties.
On January 5, 1996, 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 12, 1996, when it received
and accepted subscriptions for 125,000 units. An aggregate requirement of
$2,500,000 of offering proceeds was reached on February 26, 1996, thus allowing
for the admission of New York and Pennsylvania investors in the Partnership. As
of June 30, 1996, the Partnership had sold 1,010,926 Class A status Units, and
277,314 Class B Status Units, held by a total of 1,140 and 134 Limited Partners
respectively, for total Limited Partner capital contributions of $12,882,400.
After payment of $450,884 in Acquisition and Advisory Fees, payment of
$1,932,360 in selling commissions and organization and offering expenses and the
investment by the Partnership of $512,444 in the Fund VIII - Fund IX Joint
Venture, as of June 30, 1996, the Partnership was holding net offering proceeds
of $9,986,712 available for investment in properties.
(b) 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.
(c) 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.
7
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(d) 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.
(e) Basis of Presentation
- -------------------------
The financial statements of Wells Real Estate Fund IX, 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.
(f) Partnership Distributions
- -----------------------------
Net Cash From Operations, as defined in the Partnership Agreement, will be
distributed first to Limited Partners holding Class A Status Units on a per Unit
basis until they have received a 10% annual return on their Net Capital
Contributions, as defined in the Partnership Agreement. Further distributions
of Net Cash From Operations will be made to the General Partners until they
receive distributions equal to 10% of the total amount of Net Cash From
Operations distributed. Thereafter, the Limited Partners holding Class A Status
Units will receiver 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. No distributions will be paid to the
Limited Partners for the quarter ended June 30, 1996.
(g) Income Taxes
- ----------------
The Partnership has not requested a ruling from the Internal Revenue Service to
the effect that it will be treated as a partnership and not an association
taxable as a corporation for Federal income tax purposes. The Partnership
requested an opinion of counsel as to its tax status, but such opinion is not
binding upon the Internal Revenue Service.
(h) Statement of Cash Flows
- ---------------------------
For the purpose of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and short-
term investments.
(2) Investment in Joint Venture
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Fund VIII - Fund IX Joint Venture
- ---------------------------------
On June 10, 1996, the Partnership and Wells Real Estate Fund VIII, L.P.
("Wells Fund VIII"), a Georgia public limited partnership, affiliated with the
Partnership through common general partners, entered into a Joint Venture
8
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Agreement known as Fund VIII and Fund IX Associates (the "Fund VIII - Fund IX
Joint Venture"). The investment objectives of Wells Fund VIII are substantially
identical to those of the Partnership. As of June 30, 1996, the Partnership had
contributed $512,444 for an approximate 51% equity interest, and Wells Fund VIII
had contributed $487,444 for an approximate 49% equity interest in the Fund VIII
- - Fund IX Joint Venture which is developing an office building in Madison,
Wisconsin. The total cost to complete the 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 VIII will contribute equally
to the remaining cost of approximately $9,500,000 for an approximately 50%
equity interest each.
The Partnership does not have control over the operations of the joint
venture; however, it does exercise significant influence. Accordingly,
investment in joint ventures is recorded on the equity method.
Cellular One Property
- ---------------------
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. As of June 30, 1996, the Partnership had
contributed $512,444 and Wells Fund VIII had contributed $487,444 to the closing
costs and development of this project.
The Fund VIII - Fund IX Joint Venture will develop and construct a four-story
office building containing approximately 96,750 rentable square feet 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. has been signed 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 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.
It is currently anticipated that the total cost to complete the property, which
is anticipated to be approximately $10,500,000, will be contributed equally by
the Partnership and Wells Fund VIII. 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 XI, 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).
9
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(3) Deferred Project Costs
----------------------
The Partnership pays Acquisitions 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 June 30, 1996,
amounted to $450,884 and represented approximately 3.5% of the Limited Partners'
capital contributions received. These fees are allocated to specific properties
as they are purchased.
(4) 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 June 30,
1996, the Partnership had reimbursed the Company for $644,120 in offering
expenses, which amounted to approximately 5% of Limited Partners' capital
contributions.
(5) Due To Affiliates
------------------
Due to Affiliates consists of Acquisition and Advisory Fees, deferred offering
costs, and other operating expenses paid by the Company on behalf of the
Partnership.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- ---------------------
The Partnership commenced active operations on February 12, 1996, when it
received and accepted subscriptions for 125,000 units. An aggregate requirement
of $2,500,000 of offering proceeds was reached on February 26, 1996, thus
allowing for the admission of New York and Pennsylvania investors into the
Partnership. As of June 30, 1996, the Partnership had sold 1,010,926 Class A
Status Units and 277,314 Class B Status Units, held by a total of 1140 and 134
Limited Partners respectively, for total Limited Partner contributions of
$12,882,400. After payment of $450,884 in Acquisition and Advisory Fees, payment
of $1,932,360 in selling commissions and organization and offering expenses and
the investment by the Partnership of $512,444 in the Fund VIII - Fund IX Joint
Venture, as of June 30, 1996, the Partnership was holding net offering proceeds
of $9,986,712 available for investment in properties. Of this amount,
$4,750,000 has been reserved to invest in the Fund VIII - Fund IX Joint Venture
to fund the development of the Cellular One Property.
Gross revenues of the Partnership of $80,326 for the six months and $69,153 for
the three months ended June 30, 1996, were attributable primarily to interest
income earned on funds held by the Partnership prior to the investment in
properties. Expenses of the Partnership were $43,085 for the six months ended
and $30,931 for the three months ended June 30, 1996, and consisted primarily of
printing, computer, administrative salaries, office and partnership
administrative costs. Since the Partnership did not commence active operations
until it received and accepted subscriptions for a minimum of 125,000 units on
February 12, 1996, there is no comparative financial data available from the
prior fiscal year.
Net income per weighted average unit for Class A Limited Partners was $0.07 for
both the three months and six months ended June 30, 1996.
Net income per weighted average unit for Class B Limited Partners was $0.01 for
the three months and $0.00 for the six months ended June 30, 1996. The General
Partners were allocated net income of $971 for the three months ended June 30,
1996. The net income allocated to Class B Limited Partners and the General
Partners for the second quarter of 1996 offset the net loss allocated to these
partners for the first quarter of 1996.
Net increase in cash and cash equivalents is the result of raising $12,882,400
in Limited Partners' capital contributions before deducting commissions and
offering costs.
No cash distributions were made to Limited Partners during the second quarter of
1996.
11
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6 (b). During the second quarter of 1996, the Partnership filed a
current report on Form 8-K dated June 19, 1996, to describe the acquisition
of the Cellular One Property in Madison, Wisconsin.
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 IX, L.P.
(Registrant)
Dated: August 13, 1996 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.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,078,161
<SECURITIES> 533,377
<RECEIVABLES> 1,885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,309,086
<CURRENT-LIABILITIES> 321,204
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,987,882
<TOTAL-LIABILITY-AND-EQUITY> 11,309,086
<SALES> 0
<TOTAL-REVENUES> 69,153
<CGS> 0
<TOTAL-COSTS> 30,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38,222
<INCOME-TAX> 38,222
<INCOME-CONTINUING> 38,222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,222
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
