<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, 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.
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(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
-------- --------
<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 - September 30, 1996
and December 31, 1995.................................. 3
Statements of Income for the Three
Months and Nine Months ended September 30, 1996........ 4
Statement of Partners' Capital
for the Nine Months Ended September 30, 1996........... 5
Statements of Cash Flows for the Nine Months
Ended September 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.......... 10
PART II. OTHER INFORMATION.............................................. 12
2
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1996 1995
------ ------------- ------------
<S> <C> <C>
Cash and cash equivalents (Note 1) $14,715,325 $ 600
Investment in joint venture (Note 2) 1,577,396 0
Deferred project costs (Note 3) 620,922 0
Deferred offering costs (Note 4) 381,038 142,229
Accounts receivables 1,600 0
Prepaid expenses and other assets 40,000 0
----------- --------
Total assets $17,336,281 $142,829
=========== ========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 0 $ 0
Sales commissions payable 113,929 0
Partnership distribution payable 149,279 0
Due to affiliates (Note 5) 415,530 142,229
----------- --------
Total liabilities 678,738 142,229
----------- --------
Partners' capital:
General partners 500 500
Original limited partner 100 100
Limited partners:
Class A-1,565,469 units at Sept. 30, 1996 13,224,206 0
Class B-394,171 units at Sept. 30, 1996 3,432,737 0
----------- --------
Total partners' capital 16,657,543 600
----------- --------
Total liabilities and partners' capital $17,336,281 $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 Nine Months
Ended Ended
------------- -------------
Sept 30, 1996 Sept 30, 1996
------------- -------------
<S> <C> <C>
Revenues:
Interest Income $135,635 $215,961
Expenses:
Legal and accounting 623 4,183
Computer costs 1,403 3,619
Printing and Notebooks 2,846 16,010
Administrative Salaries 7,796 20,490
Office Expense 1,973 5,779
Postage 1,937 2,416
Taxes and licenses 0 30
Other 7,019 14,155
-------- --------
23,597 66,682
-------- --------
Net income $112,038 $149,279
======== ========
Net income allocated to General Partners $ 0 0
Net income allocated to Class A Limited Partners $112,038 149,279
Net loss allocated to Class B Limited Partners $ 0 0
Net income per Class A weighted average Limited
Partner Unit $ .12 .19
Net loss per weighted average Class B Limited
Partner Unit $ 0 0
Cash distribution per Class A weighted
average Limited Partner Unit $ .19 .19
</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 NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Limited Partners
----------------
Class A Class B Total
------- ------- 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 - 1,565,465 15,654,654 277,314 3,941,749 - 19,596,403
contributions
Net income - - 149,279 - 0 0 149,279
Partnership distributions - - (149,279) - - (149,279)
Sales commissions - - (1,565,465) - (394,175) - (1,959,640)
Other offering expenses - - (782,733) - (197,087) - (979,820)
Conversion elections - - (82,250) - 82,250 - 0
---- --------- ----------- ------- ---------- ---- -----------
BALANCE, JUNE 30, 1996 $100 1,565,465 $13,224,206 277,314 $3,432,737 $500 $16,657,543
==== ========= =========== ======= ========== ---- ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended
-------------------
September 30, 1996
-------------------
<S> <C>
Cash flow from operating activities:
Net income $ 149,279
Adjustments to reconcile net loss to net
cash used in operating activities:
Changes in assets and liabilities:
Increase in prepaid and other assets (40,000)
Increase in accounts payable (1,600)
Increase in due to affiliates 34,492
-----------
Net cash used in operating activities 142,171
-----------
Cash flow from investing activities:
Investment in Joint Venture (1,512,444)
Deferred Project Costs Paid (685,874)
-----------
Net cash used by investing activities (2,198,318)
-----------
Cash flows from financing activities:
Limited partners' contributions 19,596,403
Sales commissions paid (1,845,711)
Offering costs paid (979,820)
-----------
Net cash provided by financing
activities 16,770,872
-----------
Net increase in cash and cash equivalents 14,714,725
Cash and cash equivalents, beginning of year 600
-----------
Cash and cash equivalents, end of period $14,715,325
===========
Supplemental Schedule of Noncash Investing
activities - deferred project costs applied to
Joint Venture Activities $ 64,952
===========
</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
September 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 September 30, 1996, the Partnership had sold
1,565,469 Class A Status Units, and 394,171 Class B Status Units, held by a
total of 1,421 and 189 Limited Partners respectively, for total Limited
Partner capital contributions of $19,596,403. After payment of $685,874 in
Acquisition and Advisory Fees, payment of $2,939,460 in selling commissions
and organization and offering expenses and the investment by the Partnership
of $1,512,444 in the Fund VIII -Fund IX Joint Venture, as of September 30,
1996, the Partnership was holding net offering proceeds of $14,458,625
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 receive 90% of Net Cash From Operations
and the General Partners will receive 10%. No Net Cash From Operations will
be distributed to Limited Partners holding Class B Status Units.
(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
- -------------------------------
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 Agreement known as Fund VIII and Fund IX Associates (the "Fund
VIII - Fund IX Joint Venture"). The investment objectives of Wells
8
<PAGE>
Fund VIII are substantially identical to those of the Partnership. As of
September 30, 1996, the Partnership had contributed $1,512,444 for an
approximate 50% equity interest, and Wells Fund VIII had contributed
$1,487,444 for an approximate 50% 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 $7,500,000 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 September 30, 1996, the
Partnership had contributed $1,512,444 and Wells Fund VIII had contributed
$1,487,444 to the closing costs and development of this project.
A four-story office building containing approximately 96,750 rentable square
feet is under construction on the site. An agreement was signed with ADEVCO
Corporation to supervise, manage and coordinate the planning, design,
construction and completion of the property. Kraemer Brothers, Inc. is
acting as the general contractor and Strang, Inc. as the architect.
Cellular One, a subsidiary of BellSouth Corporation, has executed a lease
for 75,000 rentable square feet comprising approximately 78% of the
building. The initial term of the lease will be 9 years and 11 months 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 estimated 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 IX, L.P. dated January 5, 1996,
contained in Post-Effective Amendment No. 11 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund
IX, L.P. filed with the Commission on July 3, 1996 (Commission File No. 33-
83852).
9
<PAGE>
(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 September 30, 1996,
amounted to $685,874 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 for such offering expenses in an amount not to
not exceed 5% of total Limited Partners' capital contributions. As of
September 30, 1996, the Partnership had reimbursed the Company for $979,820
in offering expenses, which represented 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.
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 September 30, 1996, the Partnership had sold
1,565,469 Class A Status Units and 394,171 Class B Status Units, held by a
total of 1,421 and 189 Limited Partners respectively, for total Limited
Partner contributions of $19,596,403. After payment of $685,874 in
Acquisition and Advisory Fees, payment of $2,939,460 in selling commissions
and organization and offering expenses and the investment by the Partnership
of $1,512,444 in the Fund VIII - Fund IX Joint Venture, as of September 30,
1996, the Partnership was holding net offering proceeds of $14,458,625
available for investment in properties. Of this amount, $3,750,000 has been
reserved for future contributions to the Fund VIII - Fund IX Joint Venture
to fund the development of the Cellular One Property.
Gross revenues of the Partnership of $215,961 for the nine months and
$135,635 for the three months ended September 30, 1996, were attributable
primarily to interest income earned on funds held by the Partnership prior
10
<PAGE>
to the investment in properties. Expenses of the Partnership were $66,682
for the nine months ended and $23,597 for the three months ended September
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 $0.19
for the nine months and $0.12 for the three months ended September 30, 1996.
No net income or loss was allocated to Class B Limited Partners or the
General Partners for the nine months or three months ended September 30,
1996.
Net increase in cash and cash equivalents is the result of raising
$19,596,403 in Limited Partners' capital contributions before deducting
commissions and offering costs.
The Partnership's distributions from Investment Income accrued to Limited
Partners holding Class A Status Units for the third quarter of 1996 was
$0.19 per weighted average unit and will be paid in November, 1996.
[The remainder of this page intentially left blank.]
11
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 6 (b). No reports on Form 8-K were filed during the third quarter of
1996.
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: November 11, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,715,325
<SECURITIES> 1,577,396
<RECEIVABLES> 1,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,336,281
<CURRENT-LIABILITIES> 678,738
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,657,543
<TOTAL-LIABILITY-AND-EQUITY> 17,336,281
<SALES> 0
<TOTAL-REVENUES> 135,635
<CGS> 0
<TOTAL-COSTS> 23,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 112,038
<INCOME-TAX> 112,038
<INCOME-CONTINUING> 112,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,038
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
