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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the fiscal year ended December 31, 1998 or
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[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from to
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Commission file number 0-22039
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Wells Real Estate Fund IX, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2126622
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3885 Holcomb Bridge Road
Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Aggregate market value of the voting stock held by
non-affiliates: Not Applicable
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PART I
ITEM 1. BUSINESS
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., a non-public
Georgia limited partnership, as General Partners. The Partnership was formed on
August 15, 1994, for the purpose of acquiring, developing, constructing, owning,
operating, improving, leasing, and otherwise managing for investment purposes
income- producing commercial properties or industrial 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. The offering was terminated on
December 30, 1996, at which time the Partnership had sold 2,935,931 Class A
Status Units, and 564,069 Class B Status Units, held by a total of 1,877 and 241
Class A and Class B Limited Partners respectively, for total Limited Partner
capital contributions of $35,000,000.
The Partnership owns interests in properties through equity ownership in the
following joint ventures: (i) Fund VIII and Fund IX Associates, a joint venture
between the Partnership and Wells Real Estate Fund VIII, L.P. (the "Fund VIII -
Fund IX Joint Venture"), and (ii) The Fund IX, Fund X, Fund XI and REIT Joint
Venture, a joint Venture among the Partnership, Wells Real Estate Fund X, L.P.,
Wells Real Estate Fund XI, L.P. and Wells Operating Partnership, L.P. (the "Fund
IX-X-XI-REIT Joint Venture).
As of December 31, 1998 the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a four-
story office building in Madison, Wisconsin (the "US Cellular Building"), which
is owned by the Fund VIII - Fund IX Joint Venture; (ii) a one-story office
building in Farmer's Branch, Texas (the "TCI Building"), which is owned by the
Fund VIII - Fund IX Joint Venture; (iii) a two-story office building in Irvine,
California (the "Matsushita Building"), which is owned by the Fund VIII - Fund
IX Joint Venture; (iv) a two-story office building in Boulder County, Colorado
(the "Cirrus Logic Building"), which is owned by the Fund VIII -Fund IX Joint
Venture; (v) a three story office building in Knoxville, Tennessee (the
"ABB"Building"), "which is owned by the Fund IX-X-XI-REIT; (vi) a two-story
office building in Boulder County, Colorado (the "Ohmeda Building"), which is
owned by the Fund IX-X-XI REIT Joint Venture; (vii) a three-story office
building located in Boulder County, Colorado (the "360 Interlocken Building"),
which is owned by the Fund IX-X-XI-REIT Joint Venture; (viii) a one-story office
building located in Oklahoma City, Oklahoma (the "Lucent Technologies
Building"), which is owned by the Fund IX-X-XI-REIT Joint Venture; and (ix) a
single-story warehouse and office building located in Ogden, Weber County, Utah
(the "Iomega Building"), which is owned by the Fund IX-X-XI-REIT Joint Venture.
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Employees
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The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., a General Partner of the
Partnership, perform a full range of real estate services including leasing and
property management, accounting, asset management and investor relations for the
Partnership. See Item 11 "Compensation of General Partners and Affiliates," for
a summary of the fees paid to the General Partners and their affiliates during
the fiscal year ended December 31, 1998.
Insurance
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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.
Competition
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The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES.
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The Partnership owns interests in nine properties through its investment in
joint ventures, eight of which are office buildings. The Partnership does not
have control over the operations of the joint ventures; however, it does
exercise significant influence. Accordingly, investment in joint ventures is
recorded on the equity method. As of December 31, 1998, these properties were
99.43% occupied, up from 84.42% at December 31, 1997, but slightly down from
100% at December 31, 1996.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1998, assuming no exercise of renewal options
or termination rights:
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<TABLE>
<CAPTION>
Partnership Percentage of
Share of Total
Number of Annualized Annualized Percentage of Annualized
Year of Lease Leases Square Feet Gross Base Gross Base Total Square Gross Base
Expiration Expiring Expiring Rent (1) Rent (1) Feet Expiring Rent
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<S> <C> <C> <C> <C> <C> <C>
1999 1 23,490 236,748 94,117 4.1% 4.0%
2000 - - - - - -
2001 2 20,739 328,620 130,640 3.7% 5.6%
2002 4 38,057 579,900 248,130 6.7% 9.8%
2003(3) 2 82,152 934,824 407,460 14.5% 15.8%
2004 - - - - - -
2005(3) 1 106,750 1,027,320 408,402 18.8% 17.4%
2005(4) 1 108,250 497,892 197,932 19.1% 8.4%
2007(5) 2 131,276 $1,723,512 $ 737,433 23.1% 29.1%
2008(6) 1 57,186 $ 583,020 $ 231,774 10.0% 9.9%
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14 567,900 5,911,836 3,055,888 100% 100%
</TABLE>
(1) Average monthly gross rent over the life of the lease, annualized.
(2) Expiration of Matsushita lease, Irvine, California and ODS Technologies in
the 360 Interlocken Building in Broomfield, Colorado
(3) Expiration of Ohmeda lease, Louisville, Colorado
(4) Expiration of Iomega lease, Ogden, Utah
(5) Expiration of ABB lease, Knoxville, Tennessee, and US Cellular lease
Madison, Wisconsin
(6) Expiration of Lucent Technologies lease, Oklahoma City, Oklahoma
The following describes the properties in which the Partnership owns an interest
as of December 31, 1998:
Fund VIII - Fund IX Joint Venture
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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, formed a joint venture known as
Fund VIII and Fund IX Associates (the "Fund VIII -Fund IX Joint Venture"). The
investment objectives of Wells Fund VIII are substantially identical to those of
the Partnership. As of December 31, 1998, Fund VIII had contributed $15,987,323
for an approximately 55% equity interest, and Wells Fund IX had contributed
$13,289,358 for an approximately 45% equity interest in the Fund VIII - Fund IX
Joint Venture.
US Cellular Building
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On June 17, 1996, the Fund VIII - Fund IX Joint Venture purchased a 7.09 acre
tract of real property in Madison, Dane County, Wisconsin for a total cost of
$859,255 including closing costs. Construction has been completed on a four-
story office building containing approximately 101,727 rentable square feet (the
"US Cellular Building").
In June, 1997, US Cellular, a subsidiary of BellSouth Corporation, occupied its
leased space of 76,276 rentable 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
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term of the lease for two consecutive five year periods. The annual base rent
payable during the initial term is $902,418 payable in equal monthly
installments of $75,201 during the first five years and $1,016,822 payable in
equal monthly installments of $84,735 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 rates. US Cellular is required to pay additional rent equal to its
share of operating expenses during the lease term. Cellular One changed its name
to US Cellular as of October 31, 1997.
The land purchase and construction costs have been funded by capital
contributions of $3,912,444 by the Partnership and $6,573,342 by Wells Fund VIII
for a total cost of approximately $10,500,000.
The average effective annual rental per square foot at the US Cellular Building
was $12.60 for 1998 and $8.87 for 1997, the first year of occupancy. The
occupancy rate at year end was 100% in 1998, and 75% in 1997.
The TCI Building
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On October 10, 1996, the Fund VIII - Fund IX Joint Venture purchased a one-story
office building containing approximately 40,000 rentable square feet, located on
approximately 4.864 acres of land in Farmer's Branch, Dallas County, Texas for a
purchase price of $4,450,000 excluding acquisition costs (the "TCI Building").
The funds used by the Fund VIII - Fund IX Joint Venture to acquire the TCI
Building were derived from capital contributions made by the Partnership and
Wells Fund VIII totaling $2,236,530 and $2,238,170, respectively, for total
contributions to the Fund VIII - Fund IX Joint Venture of $4,474,700, including
acquisition costs. The Partnership currently owns an approximate 45% equity
interest in the Fund VIII - Fund IX Joint Venture.
The TCI Building is leased to TCI Valwood Limited Partnership I for a period of
fifteen years, with options to extend the lease for three consecutive five-year
periods. The annual base rent is $430,001 during the first five years, $454,001
during the next five years and $482,001 during the last five years. The TCI
lease commenced on July 19, 1996 and was assigned by the seller to the Fund VIII
- - Fund IX Joint Venture on October 10, 1996. The lease agreement is a net lease
in that the tenant is responsible for the operating expenses including real
estate taxes.
The occupancy rate at the TCI Building at year end was 100% in 1998, 1997 and
for the last three months of 1996. The average effective rental per square foot
in the TCI Building is $11.38 for 1998 and $11.49 for 1997 and 1996, the first
year of ownership.
The Matsushita Building
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On January 10, 1997, the Fund VIII - Fund IX Joint Venture acquired a two story
office building containing approximately 65,006 rentable square feet on a 4.4
acre tract of land located at 15253 Bake Parkway, in the Irvine Spectrum planned
business community in metropolitan Orange
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County, California (the "Matsushita Building"). The total consideration paid for
the Matsushita Building was $7,193,000 excluding acquisition expenses.
The Matsushita Building was originally constructed in 1984 and was completely
refurbished in 1996. The entire Matsushita Building is currently under a net
lease dated April 29, 1996 (the "Lease") to Matsushita Avionics Systems
Corporation, a Delaware corporation ("Matsushita Avionics"), which lease was
assigned to the Fund VIII - Fund IX Joint Venture at the closing. The lease
currently expires in September 2003, and Matsushita Avionics has the option to
extend the lease for two additional five-year periods.
The lease provides that Matsushita Avionics' rental payment obligations do not
commence until the ninth month of the lease term which commenced when Matsushita
Avionics took possession in September 1996. Commencing in May 1997, the ninth
month of the lease term, the monthly base rental payable by Matsushita Avionics
under the lease is $45,879.47 through the 12th month of the lease term. The
monthly base rental payable under the lease for the 13th month of the lease term
through the 30th month of the lease term is $57,709.47; the monthly base rental
payable for the 31st month of the lease term through the 60th month of the lease
term is $59,611.98, and the monthly base rental payable for the 61st month of
the lease term through the 84th month of the lease term is $61,831.58. The
base rental payable during the option periods, if Matsushita Avionics exercises
its option to extend the Lease, is 95% of the then current market rental rate
for office space in other comparable buildings located in the Irvine area of
southern California. Under the lease, Matsushita Avionics is responsible for
all utilities, taxes, insurance and other operating expenses during the term of
the lease.
The funds used by the Fund VIII - Fund IX Joint Venture to acquire the
Matsushita Building were derived entirely from capital contributions made to the
Fund VIII - Fund IX Joint Venture by the Partnership and Wells Fund VIII. The
Partnership and Wells Fund VIII made capital contributions of approximately
$3,608,109 and $3,620,316, respectively, to fund the purchase of the building,
for total capital contributions to the Fund VIII - Fund IX Joint Venture with
respect to the Matsushita Building of approximately $7,228,425.
The average effective rental per square foot at the Matsushita building is
$10.32 for 1998 and $9.91 for 1997, the first year of ownership. The occupancy
rate at year end was 100% in 1998 and 1997.
The Cirrus Logic Building
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On February 20, 1997, the Fund VIII - Fund IX Joint Venture acquired a 4.26 acre
tract of real property in Broomfield, Colorado, located in Boulder County in the
Denver/Boulder metropolitan area (the "Denver Property"). A two-story office
building containing approximately 50,400 rentable square feet has been
constructed on the Denver Property (the "Cirrus Logic Building"). The Denver
Property is part of the Interlocken Business Park, a 963-acre business
development for advanced technology and research/development oriented companies.
The purchase price paid for the Cirrus Logic Building was $7,029,000, excluding
acquisition costs. Construction of the Cirrus Logic building was substantially
completed in March 1997 with Cirrus Logic, Inc. occupying the entire building.
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The lease, as well as Cirrus Logic's obligation to pay rent, commenced on the
date upon which Cirrus Logic took occupancy of the building. The lease with
Cirrus Logic provides for a term of 15 years from the commencement date. Cirrus
Logic has the option to renew the lease for two additional terms of five years
each. The base rental payable during any such extended term would be 95% of the
then current market rental rate for comparable office buildings in the Boulder
County area. The initial annual base annual rent payable by Cirrus Logic under
its lease is $667,755. The base annual rent will be increased by 10% beginning
with the sixth year of the lease and will be increased another 10% beginning
with the eleventh year of the lease.
Under its lease, Cirrus Logic is responsible for all utilities, cleaning, taxes
and other operating expenses and for maintaining property and liability
insurance on the Cirrus Logic Building. The Fund VIII - Fund IX Joint Venture
shall maintain for its own benefit liability insurance for the Cirrus Logic
Building as well as insurance for fire, vandalism and malicious mischief.
The funds used by the Fund VIII - IX Joint Venture to acquire the Cirrus Logic
Building were derived entirely from capital contributions made to the Fund VIII
- - IX Joint Venture by the Partnership and Wells Fund VIII. The Partnership and
Wells Fund VIII each made capital contributions of approximately $3,532,275 and
$3,555,495, respectively, to fund the purchase of the property, for total
capital contributions to the Fund VIII - Fund IX Joint Venture with respect to
the Cirrus Logic Building of approximately $7,087,770.
The average effective rental rate per square foot at the Cirrus Logic Building
was $14.65 for 1998 and $13.25 for 1997, the first year of occupancy. The
occupancy rate at year end was 100% in 1998 and 1997.
Fund IX-X-XI-REIT Joint Venture
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On June 11, 1998, Fund IX and Fund X Associates (the "Joint Venture"), a joint
venture between the Partnership and Wells Real Estate Fund X, L.P. ("Wells Fund
X"), a Georgia public limited partnership, was amended and restated to admit
Wells Real Estate Fund IX, L.P. ("Wells Fund XI"), a Georgia public limited
partnership, and Wells Operating Partnership, L.P., a Delaware limited
partnership having Wells Real Estate Investment Trust, Inc. (the "Wells REIT"),
a Maryland corporation, as its General Partner. Wells Fund X, Wells Fund XI,
Wells OP and the Wells REIT are all Affiliates of the Partnership and its
General Partners.
The Joint Venture, which changed its name to the Fund IX-X-XI-REIT Joint
Venture, had previously acquired and owned the following three properties: (i)
the ABB Building located in Knoxville, Knox County, Tennessee, (ii) the Ohmeda
Building located in Louisville, Boulder County, Colorado, and (iii) the 360
Interlocken Building located in Broomfield, Boulder County, Colorado. On June
24, 1998, the Fund IX-X-XI-REIT Joint Venture purchased the Lucent Technologies
Building in Oklahoma City, Oklahoma County, Oklahoma.
On July 1, 1998, Wells Fund X contributed a single -story warehouse and office
building with 108,000 retable square feet (the "Iomega Building") to the Fund
IX-X-XI-REIT Joint Venture as a capital contribution. Wells Fund X was credited
with making a capital contribution to the Fund
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IX-X-XI-REIT Joint Venture in the amount of $5,050,425, which represents the
purchase price of $5,025,000 plus acquisitions expenses of $25,425 originally
paid by Wells Fund X for the Iomega Building on April 1, 1998.
The building is 100% occupied by one tenant with a ten year lease term that
expires on July 31, 2006. The monthly base rent payable under the lease is
$40,000 through November 12, 1999. Beginning on the 40th and 80th months of the
lease term, the monthly base rent payable under the lease will be increased to
reflect an amount equal to 100% of the increase in the Consumer Price Index (as
defined in the lease) during the preceding 40 months; provided however that in
no event shall the base rent be increased with respect to any one year by more
than 6% or by less than 3% per annum, compounded annually, on a cumulative basis
from the beginning of the lease term. The lease is a triple net lease, whereby
the terms require the tenant to reimburse the IX-X-XI-REIT Joint Venture for
certain operating expenses, as defined in the lease, related to the building.
As of December 31, 1998, the Partnership held an approximately 39.8% equity
interest in the Fund IX-X-XI-REIT Joint Venture. As of December 31, 1998, Wells
Fund X held an approximate 49.7% equity interest, Wells Fund XI held an
approximate 6.7% equity interest, and Wells OP held an approximate 3.8% equity
interest in the Fund IX-X-XI-REIT Joint Venture.
The ABB Building
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On March 20, 1997, the Joint Venture began construction on a three-story office
building containing approximately 83,885 rentable square feet (the "ABB
Building") on a 5.62 acre tract of real property in Knoxville, Knox County,
Tennessee.
ABB Environmental Systems, a subsidiary of ABB, Inc., occupied its lease space
of 55,000 rentable square feet comprising approximately 67% of the building in
December 1997. The initial term of the lease is 9 years and 11 months
commencing in December of 1997. ABB has the option under its lease to extend
the initial term of the lease for two consecutive five year periods. The annual
base rent payable during the initial term is $646,250 payable in equal monthly
installments of $53,854 during the first five years and $728,750 payable in
equal installments of $60,729 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 rates. In addition to the base rent, ABB is required to pay additional
rent equal to its share of operating expenses during the lease term.
It is currently anticipated that the remaining cost to complete the project
which includes the final build out of remaining space will be approximately
$170,000, which is anticipated will be contributed by the Partnership.
The average effective annual rental per square foot at the ABB Building was
$9.97 for 1998 and $8.16 for 1997, the first year of occupancy. The occupancy
rate at year end was 95% for 1998 and 67% for 1997.
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Ohmeda Building
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On February 13, 1998, the Joint Venture acquired a two-story building that was
completed in 1998 with approximately 106,750 rentable square feet (the "Ohmeda
Building") on a 15-acre tract of land located in Louisville, Boulder Colorado.
The purchase price for the Ohmeda Building was $10,325,000. The Joint Venture
also incurred additional acquisition expenses in connection with the purchase of
the Ohmeda Building, including attorney's fees, recording fees and other closing
costs for a total of $10,347,955.
The entire 106,750 rentable square feet of the Ohmeda Building is currently
under a net lease date February 26,1987, as amended by First Amendment to Lease
dated December 3, 1987 and as amended by Second Amendment to Lease dated October
20, 1997 (the "Lease") with Ohmeda, Inc., a Delaware corporation. The lease was
assigned to the Joint Venture at the closing. The lease currently expires in
January 2005, subject to (i) Ohmeda's right to effectuate an early termination
of the lease under the terms and conditions described below, and (ii) Ohmeda's
right to extend the lease for two additional five year periods of time at the
then current market rental rates.
The Monthly base rental payable under the lease is $83,709.79 through January
31,2003; $87,890.83 from February 1, 2003 through January 31, 2004; and
$92,249.79 from February 1, 2004 through January 31,2005. Under the Lease,
Ohmeda is responsible for all utilities, taxes, insurance and other operating
cost with respect to the Ohmeda Building during the term of the lease. In
Addition, Ohmeda shall pay a $21,000 per year management fee for maintenance and
administrative services of the Ohmeda Building. The Fund IX-X-XI-REIT Joint
Venture, as landlord, is responsible for maintenance of the roof, exterior and
structural walls, foundation, other structural members ad floor slab, provided
that the landlord's obligation to make repairs specifically excludes items of
cosmetic and routine maintenance such as the painting of walls.
The lease contains an early termination cause that allows Ohmeda the right to
terminate the lease, subject to certain conditions, on either January 31, 2001
or January 31, 2002. In order to exercise this early termination clause,
Ohmeda must give the landlord notice on or before 5:00 pm. MST, January 31,
2000, and said notice must identify which early termination date Ohmeda is
exercising. If Ohmeda exercises its right to terminate on January 31, 2001,
then Ohmeda must tender $753,388.13 plus an amount equal to the amount real
property taxes estimated to be payable to the landlord in 2002 for the tax year
2001 based on the most recent assessment information available on the early
termination date. If Ohmeda exercises its right to terminate on January 31,
2002, then Ohmeda must tender $502,258.75 plus an amount equal to the amount of
real property taxes estimated to be payable to the landlord in 2003 for the tax
year 2002 based on the most recent assessment information available on the early
termination. At the present time, real property taxes relating to this property
are approximately $135,500 per year. The payment of these amounts by Ohmeda for
early termination must be made on or before the 180th day prior to the
appropriate early termination date. If the amount of the real property taxes
actually assessed is less than the amount paid by Ohmeda on the early
termination date, then Ohmeda shall be entitled to a refund from the landlord of
the difference within thirty (30) days of the landlord's receipt of the real
property tax invoice for the appropriate tax year.
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The average effective annual rental rate per square foot at the Ohmeda Building
was $9.62, the first year of occupancy. The occupancy rate at year end was 100%
for 1998.
360 Interlocken Building
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On March 20, 1998, the Joint Venture acquired a three-story multi-tenant office
building containing approximately 51,974 rentable square feet (the "360
Interlocken Building") on 5.1 acre tract of land in Broomfield, Boulder County,
Colorado for a purchase price of $8,275,000, excluding acquisition costs.
The 360 Interlocken Building was completed in December 1996. The first floor
has multiple tenants and contain 15,599 rentable square feet; the second floor
is leased to ODS Technologies, L.P. and contains 17,146 rentable square feet;
and the third is leased to Transecon, Inc. and contains 19,229 rentable square
feet.
The average effective annual rental rate per square foot at the 360 Interlocken
Building was $16.31 the first year of occupancy. The occupancy rate at year-end
was 100% for 1998.
Lucent Technologies Building
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On May 30, 1997, the Joint Venture entered into an agreement for the purchase
and sale of real property with Wells Development Corporation ("Wells
Development"), an affiliate of the General Partners, for the acquisition and
development of a one-story office building containing 57,186 net rentable square
feet on 5.3 acres of land (the "Lucent Technologies Building"). On June 24,
1998, the Fund IX-X-XI-REIT Joint Venture purchased this property for a purchase
price of $5,504,276.
Lucent Technologies, Inc., a world-wide leader in the telecommunications
technology producing a variety of communication products, has occupied the
entire Lucent Technologies Building. The initial item of the lease will be ten
years commencing January 5, 1998. Lucent Technologies has the option to extend
the initial term of the lease for two additional five year periods. The annual
base rent payable during the initial term is $508,383 payable in equal monthly
installments of $42,365 during the first five years and $594,152 payable in
equal monthly installments of $49,513 during the second five year lease term.
The annual base rent for each extended term will be at market rental rates. In
addition to the base rent, Lucent Technologies will be required to pay
additional rent equal to its share of operating expenses during the lease term.
The average effective annual rental per square foot at the Lucent Technologies
Building was $9.69 the first year of occupancy. The occupancy rate at year end
was 100% for 1998.
Iomega Building
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On July 1, 1998, Wells Fund X, contributed a single story warehouse and office
building with 108,250 rentable square feet (the 'Iomega Building ") and was
credited with making a capital contribution to the IX-X-XI-REIT Joint Venture in
the amount of $5,050,425, which represents
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the purchase price of $5,025,000 plus acquisition expenses of $25,425 originally
paid by Wells Fund X for the Iomega Building on April 1, 1998.
The building is 100% occupied by one tenant with a ten year lease term that
expires on July 30, 2006. The monthly base rent payable under the lease is
$40,000 through November 12, 1999. Beginning on the 40th and 80th months of the
lease term, the monthly base rent payable under the lease will be increased to
reflect an amount equal to 100% of the increase in the Consumer Price Index (as
defined in the lease) during the preceding 40 months; provided however, that in
no event shall the base rent be increased with respect to any one year by more
than 6% or by less than 3% per annum, compounded annually, on a cumulative basis
from the beginning of the lease term. The lease is a triple net lease, whereby
the terms require the tenant to reimburse the IX-X-XI-REIT Joint Venture for
certain operating expenses, as defined in the lease, related to the building.
The average effective annual rental per square foot at the Iomega Building was
$4.60 the first year of occupancy. The occupancy rate at year end was 100% for
1998.
ITEM 3. LEGAL PROCEEDINGS
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1998.
PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
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The offering for sale of Units in the Partnership terminated on December 30,
1996, at which time the Partnership had 2,935,931 outstanding Class A Status
Units held by a total of 1,841 Limited Partners and 564,069 outstanding Class B
Status Units held by a total of 257 Limited Partners. As of February 28, 1999,
the Partnership had 2,989,875 outstanding Class A Units held by a total of
1,877 Limited partners and 510,125 outstanding Class B Units held by a total of
241 Limited Partners. The capital contribution per unit is $10.00. There is no
established public trading market for the Partnership's limited partnership
units, and it is not anticipated that a public trading market for the units will
develop. Under the Partnership Agreement, the General Partners have the right
to prohibit transfers of units.
Class A Status Limited Partners are entitled to a distribution from Net Cash
From Operations, as defined in the Partnership Agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have
11
<PAGE>
received distributions in each fiscal year of the Partnership equal to 10% of
their adjusted capital contributions. After this preference is satisfied, the
General Partners will receive an amount of Net Cash From Operations equal to 10%
of the total amount of Net Cash From Operations distributed. Thereafter, the
Limited Partners holding Class A Status Units will receive 90% of Net Cash From
Operations and the General Partners will receive 10%. No Net Cash From
Operations will be distributed to Limited Partners holding Class B Status Units.
Holders of Class A Status Units will, except in limited circumstances, be
allocated none of the Partnership's net loss, depreciation, and amortization
deductions. These deductions will be allocated to the Class B Status Units,
until their capital account balances have been reduced to zero. No distributions
have been made to the General Partners as of December 31, 1998.
Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Class A Status Limited Partners during the
two most recent fiscal years were as follows:
Per Class A Status Unit
----------------------------------
Distribution for Total Cash Investment Return of
Quarter Ended Distributed Income Capital
- ---------------- ----------- ---------- ---------
March 31, 1997 $222,805 $0.09 $0.00
June 30, 1997 $275,805 $0.09 $0.00
September 30, 1997 $275,283 $0.13 $0.00
December 31, 1997 $395,513 $0.13 $0.00
March 31, 1998 $507,688 $0.17 $0.00
June 30, 1998 $611,512 $0.21 $0.00
September 30, 1998 $631,658 $0.21 $0.00
December 31, 1998 $681,355 $0.23 $0.00
The fourth quarter distribution was accrued for accounting purposes in 1998, and
was not actually paid to Limited Partners until February, 1999. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Class A Status Units will continue in 1999 at a level
at least comparable with 1998 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------
The Partnership did not commence active operations until it received and
accepted subscriptions for a minimum of 125,000 Units on February 12, 1996, and
accordingly, there is no comparative financial data available from prior fiscal
years. As of December 31, 1995, the Partnership's assets totaled approximately
$142,829 consisting primarily of the General Partners' capital contributions and
deferred offering costs.
12
<PAGE>
The following sets forth a summary of the selected financial data for the fiscal
year ended December 31, 1998 and 1997, and the eleven months ended December 31,
1996:
1998 1997 1996
---- ---- ----
Total assets $29,211,164 $29,945,898 $30,913,877
Total revenues 1,561,456 1,199,300 406,891
Net income 1,449,955 1,091,766 298,756
Net loss allocated
to General Partners $ 0 $ (206) (294)
Net income allocated to
Class A Limited Partners $ 2,597,938 $ 1,564,778 330,270
Net loss allocated to
Class B Limited Partners $(1,147,983) $ (472,806) (31,220)
Net income per weighted
average (1) Class A
Limited Partner Unit $ 0.88 $ 0.53 0.28
Net loss per weighted
average (1) Class B
Limited Partner Unit $ (2.18) $ (0.77) (0.11)
Cash Distributions per
Weighted average (1)
Class A Limited Partner Unit:
Investment Income $ 0.82 $ 0.46 0.28
Return of Capital $ 0.00 $ 0.00 0.00
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased or
converted by Limited Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- --------------------
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the accompanying financial statements of the
Partnership and notes thereto.
This Report contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934, including discussion and analysis of the financial condition of the
Partnership, anticipated capital expenditures required to complete certain
projects, amounts of cash distributions anticipated to be distributed to Limited
Partners in the future and certain other matters. Readers of this Report should
be aware that there are various factors that could cause actual results to
differ materially from any forward-looking statement made in the Report, which
include construction costs which may exceed estimates, construction delays,
lease-up risks, inability to obtain new tenants upon the expiration of existing
leases, and the potential need to fund tenant improvements or other capital
expenditures out of operating cash flow.
13
<PAGE>
Results of Operations and Changes in Financial Conditions
- ---------------------------------------------------------
General
- -------
The Partnership commenced active operations on February 24, 1996, when it
received and accepted subscriptions for 125,000 units. The offering was
terminated on December 30, 1996, at which time the Partnership had sold
2,935,931 Class A Status Units and 564,069 Class B Status Units, held by a total
of 1,841 and 257 Limited Partners respectively, for total Limited Partner
contributions of $35,000,000. After payment of $1,400,000 in acquisition and
advisory fees and expenses, payment of $5,254,603 in selling commissions and
organization and offering expenses, the investment by the Partnership of
$13,289,359 in the Fund VIII - Fund IX Joint Venture, and the investment of
$14,747,320 in the Fund IX-X-XI-REIT Joint Venture, as December 31, 1998, the
Partnership was holding net offering proceeds of $308,718 available for
investments in properties, of which $170,000 is being reserved for completion of
the ABB Building owned by the Fund IX-X-XI-REIT Joint Venture.
Gross revenues of the Partnership were $1,561,456 for the year December 31,
1998, $1,199,300 for the year ended December 31, 1997, and $406,891 for the
eleven months ended December 31, 1996. This increase was attributable primarily
to increased investments in joint ventures. Expenses of the Partnership were
$111,501 for 1998, $107,534 for 1997, and $108,135 for the eleven months ended
December 31, 1996, and consisted primarily of legal, accounting and partnership
administrative costs. Net income of the Partnership was $1,449,955 for the year
ended December 31, 1998, $1,091,766 for the year ended December 31, 1997, and
$298,756 for the eleven months ended December 31, 1996.
The Partnership made cash distributions of investment income to Limited Partners
holding Class A Status Units of $0.82 per Class A Status Unit for the year ended
December 31, 1998, $0.46 per Class A Status Unit for the year ended December 31,
1997, and $0.28 per Class A Status Unit for the eleven months ended December 31,
1996. The General Partners anticipate distributions per Unit to Limited Partners
holding Class A Status Units will continue in 1999 at a level at least
comparable with 1998 cash distributions on an annual basis. Distributions
accrued for the fourth quarter of 1998 to the Limited partners holding Class A
Status Units were paid in February, 1999. No cash distributions were made to
Limited Partners holding Class B Status Units.
14
<PAGE>
Property Operations
- -------------------
The Partnerships ownership interest in the Fund VIII - Fund IX Joint Venture is
45.2%, and the Partnership's ownership interest in the Fund IX-X-XI-REIT Joint
Ventures is 39.8%
As of December 31, 1998, the Partnership owned interests in the following
operational properties:
The TCI Building - Fund VIII -Fund IX Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended Three Months Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------ ------------------- ------------------
<S> <C> <C> <C>
Revenues:
Rental income $455,177 $455,177 $101,277
Interest income 32,194 6,607 0
Other income 0 4,479 0
-------- -------- --------
487,371 466,263 101,277
-------- -------- --------
Expenses:
Depreciation 166,594 166,595 50,444
Management & leasing expenses 17,199 17,496 3,884
Other operating expenses 9,236 10,082 1,050
-------- -------- --------
193,029 194,173 55,378
-------- -------- --------
Net income $294,342 $272,090 $ 45,899
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund VIII - Fund IX Joint Venture 45.2% 49.9% 50.1%
Cash distribution to Partnership $200,708 $206,543 $ 46,197
Net income allocated to the Partnership $135,548 $135,904 $ 23,007
</TABLE>
On October 10, 1996, the Fund VIII - Fund IX Joint Venture purchased a one-story
office building containing approximately 40,000 rentable square feet, located on
approximately 4.864 acres of land in Farmer's Branch, Dallas, Texas (the "TCI
Building") for a purchase price of $4,450,000 excluding acquisition costs. The
TCI Building is leased to TCI Valwood Limited Partnership I for a period of
fifteen years. Net income and cash distributions allocated to the Partnership
have decreased in 1998 as compared to 1997 due primarily to the Partnership's
decreased ownership in the Fund VIII - Fund IX Joint Venture. The Partnership's
ownership decreased due to additional funding by Wells Fund VIII. Since the TCI
Building was purchased in October 1996, comparative income and expense figures
for 1996 are not available. Real estate taxes and primarily all operational
expenses for the building are the responsibility of the tenant.
15
<PAGE>
For comments on the general competitive conditions to which the property may be
subject, see Item 1, business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
The US Cellular Building/Fund VIII - Fund IX Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Seven Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Rental income $1,282,076 $519,542
---------- --------
Expenses:
Depreciation 601,509 276,566
Management & leasing expense 139,396 47,957
Other operating expenses (118,009) (8,883)
---------- --------
622,896 315,640
---------- --------
Net income $ 659,180 $203,902
========== ========
Occupied % 100% 75%
Partnership's Ownership % in the
Fund VIII - Fund IX Joint Venture 45.2% 49.9%
Cash distribution to Partnership $ 550,715 $191,052
Net income allocated to Partnership
$ 303,943 $101,751
</TABLE>
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. Total cost and
expenses incurred by the Fund VIII - Fund IX Joint Venture for the acquisition,
development, construction and completion of the 101,727 rentable square foot
building was approximately $10,371,000. 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. One additional tenant has occupied
the remaining 25% of the building in 1998. Since the US Cellular Building
opened June 15, 1997, comparative income and expenses figures are not available
for 1997. Other operating expenses and negative due to tenant reimbursements
reflected in this category which includes management and leasing expense
reimbursement. The building incurred property taxes of $50,825 for 1998 and
$93,865 for 1997, the first year of occupancy.
The Partnership's ownership in the Fund VIII - Fund IX Joint Venture decreased
due to additional funding by Wells Fund VIII
16
<PAGE>
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
The Matsushita Building/Fund VIII - Fund IX Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Rental income $670,792 $644,240
Interest income 0 1,511
-------- --------
670,792 645,751
-------- --------
Expenses:
Depreciation 215,669 215,670
Management & leasing expense 26,050 30,872
Other operating expenses 16,180 3,973
-------- --------
257,899 250,515
-------- --------
Net income $412,893 $395,236
======== ========
Occupied % 100 % 100 %
Partnership's Ownership % in the
Fund VIII - Fund IX Joint Venture 45.2% 49.9%
Cash distribution to Partnership $306,434 $185,783
Net income allocated to Partnership $190,139 $197,953
</TABLE>
On January 10, 1997, the Fund VIII - Fund IX Joint Venture acquired a two-story
office building containing approximately 65,006 rentable square feet on a 4.4
acre tract of land located in the Irvine Spectrum planned business community in
metropolitan Orange County, California (the "Matsushita Building") 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, and began paying rent in May, 1997.
The Partnership's ownership is the Fund VIII - Fund IX Joint Venture decreased
due to additional funding by Wells Fund VIII.
Since the Matsushita Building was purchased in January 1997, comparative income
and expense figures for the prior year are not available. Real estate taxes and
primarily all operational expenses for the building are the responsibility of
the tenant.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
17
<PAGE>
The Cirrus Logic Building/Fund VIII - Fund IX Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Ten Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Rental income $738,156 $584,373
Interest income 0 21,402
-------- --------
738,156 605,775
-------- --------
Expenses:
Depreciation 291,064 236,049
Management & leasing expenses 39,149 25,605
Other operating expenses 62,038 5,330
-------- --------
392,251 266,984
-------- --------
Net income $345,905 $338,791
======== ========
Occupied % 100% 100%
Partnership's Ownership % in the
Fund VIII - Fund IX Joint Venture 45.2% 49.9%
Cash distribution to Partnership $265,441 $234,008
Net income allocated to the Partnership $160,123 $169,121
</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.
Since the Cirrus Logic Building was purchased in February 1997 and was not
completed until March 1997, comparative income and expense figures for the prior
year are not available. Real estate taxes and primarily all operational expenses
for the building are the responsibility of the tenant.
The Partnership's ownership in the Fund VIII - Fund IX Joint Venture decreased
due to additional funding by Wells Fund VIII.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
18
<PAGE>
The ABB Building Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------
<TABLE>
<CAPTION>
For The Year Ended One Month Ended
December 31, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Revenues:
Rental income $836,746 $ 28,512
Interest Income 20,192 0
-------- --------
856,938 28,512
-------- --------
Expenses:
Depreciation 475,020 36,863
Management & leasing expense 107,338 1,711
Operating costs, net of reimbursements (40,641) 10,118
-------- --------
541,717 48,692
-------- --------
Net income (loss) $315,221 $(20,180)
======== ========
Occupied % 95% 67%
Partnership's Ownership % in the
Fund IX-X-XI-REIT Joint Venture 39.8% 50.3%
Cash distribution to partnership $312,163 $ 0
Net loss allocated to Partnership
$134,866 $(10,145)
</TABLE>
ABB Environmental Systems, a subsidiary of ABB, Inc., occupied its leased space
of 56,012 rentable square feet comprising approximately 67% of the building in
December 1997. The initial term of the lease is 9 years and 11 months. ABB has
the option under its lease to extend the initial term of the lease for two
consecutive five year periods. The annual base rent payable during the initial
term is $646,250 payable in equal monthly installments of $53,854 during the
first five years and $728,750 payable in equally monthly installments of $60,729
during the last four years and 11 months of the initial term. The annual base
rent of each extended term will be at market rental rates. In addition to base
rent, ABB is required to pay additional rent equal to its share of operating
expenses during the lease term. Another tenant has occupied 23,490 rentable
square feet bringing the occupancy to 95%.
It is currently anticipated that the total cost of the project, upon completion
will be approximately $7,900,000. It is currently anticipated that the
Partnership will contribute approximately $170,000 to complete the building.
Since the ABB Project was opened in December 1997, comparative income and
expense figures for 1997 are available only for a one month period. Other
operating expenses are negative due to
19
<PAGE>
tenant reimbursement reflected in this category which includes management and
leasing expense reimbursement. The ABB Building incurred property taxes of
$36,771 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 3. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
The Ohmeda Building / Fund IX X XI REIT Joint Venture
- -----------------------------------------------------
Eleven Months Ended
December 31, 1998
-------------------
Revenues:
Rental income $ 898,901
----------
Expenses:
Depreciation 299,112
Management & leasing expenses 41,688
Other operating expenses, net of
Reimbursement 2,863
----------
343,663
----------
Net Income $ 555,238
==========
Occupied % 100%
Partnership's Ownership % in the
Fund IX-X-XI-REIT Joint Venture 39.8%
Cash distribution to Partnership $ 360,390
Net income allocated to the
Partnership $ 243,597
On February 13, 1998, the Fund IX-X-XI-REIT Joint Venture (formerly, the Fund IX
- - Fund X Joint Venture) acquired a two story office building containing
approximately 106,750 rentable square feet on a 15 acre tract of land located on
Louisville, Boulder County, Colorado (the "Ohmeda Building") for a purchase
price of $10,325,000 excluding acquisition costs.
The entire Ohmeda Building is currently under a net lease with Ohmeda, Inc. and
was assigned to the Fund IX-X-XI-REIT Joint Venture at closing. The lease
currently expires in January, 2005. The monthly base rental payable under the
lease is $83,709.79 through January 31,2003; $87,890.83 from February 1, 2003
through January 31, 2004; and $92,249.79 from February 1, 2004 through January
31, 2005. Under the lease, Ohmeda is responsible for all utilities, taxes,
insurance and other operating costs with respect to the Ohmeda Building. In
addition, Ohmeda is required to pay $21,000 per year management fee for
maintenance and administrative services of the Ohmeda Building. The Fund IX-X-
XI-REIT Joint Ventures, as landlord, is responsible for
20
<PAGE>
maintenance of the roof, exterior and structural walls, foundations, other
structural members and floor slab, provided that the landlord's obligation to
make repairs specifically excludes items of cosmetic and routine maintenance
such as the painting of walls.
Since the Ohmeda Building was purchased in February 1998, comparative income and
expense figures are not available for the prior year. The Ohmeda building
incurred property taxes of $143,962 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item I, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
The 360 Interlocken Building / Fund IX-X-XI-REIT Joint Venture
- --------------------------------------------------------------
Ten Months Ended
December 31, 1998
-----------------
Revenues: $665,405
Rental income 246
--------
Interest Income 665,651
--------
Expenses:
Depreciation 238,299
Management & leasing expenses 55,130
Other operating expenses, net of
Reimbursement (55,654)
--------
237,775
--------
Net Income $427,876
========
Occupied % 100%
Partnership's Ownership % in the
Fund IX-X-XI-REIT Joint Venture 39.8%
Cash distribution to Partnership $282,781
Net income allocated to the
Partnership $188,147
On March 20, 1998, the Fund IX-X-XI-REIT Joint Venture (formerly, the Fund IX -
Fund X Joint Venture), acquired a three-story multi-tenant office building
containing approximately 51,974 rentable square feet on a 5.1 acre tract in
Broomfield, Boulder County, Colorado (the "360 Interlocken Building") for a
purchase price of $8,275,000, excluding acquisition costs.
21
<PAGE>
The 360 Interlocken Building was completed in December, 1996. The first floor
has multiple tenants and contains 15,599 rentable square feet; the second floor
is leased to ODS Technologies, L.P. and contains 17,146 rentable square feet;
and the third floor is leased to Transecon, Inc. and contains 19,229 rentable
square feet.
Since the 360 Interlocken Building was purchased in March, 1998, comparable
income and expenses figures for the prior year are not available. Other
operating expenses are negative due to reimbursements being greater than
operating expenses, this category includes management and leasing expense
reimbursements. The 360 Interlocken Building incurred property taxes of $96,747
for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
The Iomega Building / Fund IX-X-XI-REIT Joint Venture
- -----------------------------------------------------
Nine Months Ended
December 31, 1998
-----------------
Revenues:
Rental income $373,420
--------
Expenses:
Depreciation 145,975
Management & leasing expenses 23,058
Other operating expenses, net of
Reimbursement (4,579)
--------
164,454
--------
Net Income $215,216
========
Occupied % 100%
Partnership's Ownership % in the
Fund IX-X-XI-REIT Joint Venture 39.8%
Cash distribution to Partnership $ 93,461
Net income allocated to the
Partnership $ 60,311
On April 1, 1998, the Wells Fund X acquired a single story warehouse and office
building containing approximately 108,250 rentable square feet on a 8.03 acre
tract of land in Ogden, Weber County, Utah (the "Iomega Building") for a
purchase price of $5,025,000.
22
<PAGE>
On July 1, 1998, Wells Fund X contributed the Iomega Building to the Fund IX-X-
XI-REIT Joint Venture. The Partnership acquired an interest in the Iomega
Building and began participating in income and distribution from this property
as of July 1, 1998. The entire Iomega Building is under a net lease with Iomega
Corporation until July 31, 2006.
Since the Iomega Building was purchased in April 1998, comparable income and
expense figures for the prior year are not available. Other operating expense
are negative due to tenant reimbursement reflected in this category which
includes management and leasing expense reimbursement. The Iomega Building
incurred property taxes of $44,559 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenant,
etc. refer to Item 2, Properties, page 3.
The Lucent Technologies Building / Fund IX-X-XI-REIT Joint Venture
Seven Months Ended
December 31, 1998
-----------------
Revenues:
Rental income $291,508
--------
Expenses:
Depreciation 106,871
Management & leasing expenses 11,281
Other operating expenses, net of
reimbursement 9,883
--------
128,035
--------
Net Income $163,473
========
Occupied % 100%
Partnership's Ownership % in the
Fund IX-X-XI-REIT Joint Venture 39.8%
Cash distribution to Partnership $157,332
Net income allocated to the
Partnership $ 65,200
On June 24, 1998, Fund IX-X-XI-REIT Joint Venture acquired a one-story office
building containing approximately 57,186 rentable square feet on a 5.3 acre
tract of land in Oklahoma
23
<PAGE>
City, Oklahoma, (the "Lucent Technologies Building ") for a purchase price of
$5,504,276, excluding acquisition cost.
The Lucent Technologies Building was completed in January, 1998, with Lucent
Technologies occupying the entire building. Under the terms of the lease, the
tenant is responsible for all utilities, property taxes and other operating
expenses.
Since the Lucent Technologies Building was purchased by the IX-X-XI-REIT Joint
Venture in June, 1998, comparable income and expenses figures for the prior year
are not available.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
Liquidity and Capital Resources
- -------------------------------
The Partnership commenced active operations on February 24, 1996, when it
received and accepted subscriptions for 125,000 Units. As of December 31, 1998,
the Partnership raised $35,000,000 in capital through the sale of 3,500,000
Units. After payment of $1,400,000 in acquisition and advisory fees and
expenses, payment of $5,250,000 in selling commissions and organizational and
offering expenses, and the investment by the Partnership of $28,041,283 in joint
ventures, as of December 31, 1998, the Partnership was holding net offering
proceeds of approximately $308,717 available for investment in the Partnership.
Of this amount, $170,000 is being reserved by the Partnership for the completion
of the ABB Building owned by the Fund IX-X-XI-REIT Joint Venture.
The Partnership had net cash provided by operating activities in 1998 of
$80,147, 1997 of $501,390 and $151,150 in 1996. Net cash used in investing
activities decreased to $7,330,065 in 1998 down from 1997 amount of $12,899,768,
which in turn was up from 1996 amount of $6,544,019. This was primarily the
result of scaling back investment in the joint ventures. Net cash used in
financing activities of $2,188,189 in 1998 and $1,395,478 in 1997 as compared to
$29,950,254 which was provided by financing activities in 1996 was the result of
the offering being terminated on December 31, 1996, as well as distributions to
partners from accumulated earnings which began in 1997 and continued in 1998.
The Partnership's distributions paid and payable through the fourth quarter of
1998 have been paid from net cash from operations and from distributions
received from its equity investment in joint ventures. The Partnership
anticipates that distributions will continue to be paid on a quarterly basis
from such sources. No cash distributions were paid to Class B Unit holders for
1998. The Partnership expects to meet liquidity requirements and budget demands
through 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 December 31, 1998, has reserved approximately $170,000
needed to complete the ABB Building which is owned by the Fund IX-X-XI-REIT
Joint Venture.
24
<PAGE>
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Inflation
- ---------
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are provisions
in the majority of tenant leases to protect the Partnership from the impact of
inflation. These leases contain common area maintenance charges (CAM charges),
real estate tax and insurance reimbursements on a per square foot bases, or in
some cases, annual reimbursement of operating expenses above a certain per
square foot allowance. These provisions should reduce the Partnership's
exposure to increases in costs and operating expenses resulting from inflation.
Year 2000
- ---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and is expected
to be completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted as the assessment progresses. The
costs incurred by the Partnership and its affiliates thus far for renovations
and replacements have been immaterial. Some testing of systems has begun and
all testing is expected to be complete by June 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant. The Partnership's affiliated entities are purchasing the upgrade for
the accounting and property management package system; however, it is not slated
to be available until the end of the first quarter of 1999. At the present
time, it is believed that all major non-information technology systems are Year
2000 compliant. The cost to upgrade any non-compliant systems is believed to be
immaterial.
The Partnership is in the process of confirming with the Partnership's
vendors, including third-party service providers such as banks, that their
systems will be Year 2000 compliant. Based on the information received thus far,
the primary third-party service providers with which the Partnership has
relationships have confirmed their Year 2000 readiness.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use with
its accounting, property management and investment portfolio tracking. The
Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on the future operations or financial
condition of the Partnership. The Partnership will perform due diligence as to
the Year 2000 readiness of each property owned by the Partnership and each
property contemplated for purchase by the Partnership.
25
<PAGE>
The Partnership's reliance on embedded computer systems (i.e.,
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
The Partnership is currently formulating contingency plans to cover any
areas of concern. Alternate means of operating the business are being developed
in the unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors. A written plan is being developed for testing and dispensation to each
staff member of the Advisor of the Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down, the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed. In the event that the security system shuts down, the Partnership
has devised a plan for each building to hire temporary on-site security guards.
In the event that a third-party vendor has Year 2000 problems relating to
investor information, the Partnership intends to perform a full system back-up
of all investor information as of December 31, 1999 so that the Partnership will
have accurate hard-copy investor information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
The Financial Statements of the Registrant and supplementary data are detailed
under Item 14 (a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
There were no disagreements with the Partnership's accountants or other
reportable events during 1998.
26
<PAGE>
PART III
--------
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP.
- ---------------------------------------------
Wells Partners, L.P. Wells Partners, L.P. is a private Georgia limited
- --------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., a Georgia corporation. The executive
offices of Wells Capital, Inc. are located at 3885 Holcomb Bridge Road,
Norcross, Georgia 30092.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 55 years of
- ------------------
age and holds a Bachelor of Business Administration Degree in Economics from the
University of Georgia. Mr. Wells is the President and sole Director of Wells
Capital, Inc. Mr. Wells is the President of Wells & Associates, Inc., a real
estate brokerage and investment company formed in 1976 and incorporated in 1978,
for which he serves as principal broker. Mr. Wells is also currently the sole
Director and President of Wells Management Company, Inc., a property management
company he founded in 1983. In addition, Mr. Wells is the President and
Chairman of the Board of Wells Investment Securities, Inc., Wells & Associates,
Inc., and Wells Management Company, Inc. which are affiliates of the General
Partners. From 1980 to February 1985, Mr. Wells served as Vice-President of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business.
From 1973 to 1976, he was associated with Sax Gaskin Real Estate Company and
from 1970 to 1973, he was a real estate salesman and property manager for Roy D.
Warren & Company, an Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
- ---------------------------------------------------------
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 1998.
CASH COMPENSATION TABLE
(A) (B) (C)
Name of Individual Capacities in which served Form
or Number in Group served Form of Compensation Cash Compensation
- --------------------------------------------------------------------------------
Wells Management Company, Inc. Property Manager -
Management & Leasing Fees $166,317
(1) These fees are not paid directly by the Partnership but are paid by the
joint venture entities which owns properties for which the property
management and leasing services relate and include management and leasing
fees which were accrued for accounting purposes in 1998 but not actually
paid until January, 1999.
27
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 28, 1999.
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- -------------- ------------------- -------------------- ----------------
Class A Units Leo F. Wells, III 128.70 Units Less than 1%
(IRA, 401 (k) Plan)
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sales Proceeds.
- --------------------------------------------------------
The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow after the Limited Partners holding
Class A Status Units have received preferential distributions equal to 10% of
their adjusted capital accounts in each fiscal year. The General Partners will
also receive a subordinated participation in net sales proceeds and net
financing proceeds equal to 20% of residual proceeds available for distribution
after Limited Partners holding Class A Status Units have received a return of
their adjusted capital contributions plus a 10% cumulative return on their
adjusted capital contributions and Limited Partners holding Class B Units have
received a return of their adjusted capital contributions plus a 15% cumulative
return on their adjusted capital contributions; provided, however, that in no
event shall the General Partners receive in the aggregate in excess of 15% of
net sales proceeds and net financing proceeds remaining after payments to
Limited Partners from such proceeds of amounts equal to the sum of their
adjusted capital contributions plus a 6% cumulative return on their adjusted
capital contributions. The General Partners did not receive any distributions
from net cash flow from operations or net sales proceeds for the year ended
December 31, 1998.
28
<PAGE>
Property Management and Leasing Fees.
- ------------------------------------
Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lessor of (A) (i) 3% of the gross revenues for
management and 3% of the gross revenues for leasing (aggregate maximum of 6%)
plus a separate one-time fee for initial rent-up or leasing-up of newly
constructed properties in an amount not to exceed the fee customarily charged in
arm's-length transactions by others rendering similar services in the same
geographic area for similar properties; and (ii) in the case of industrial and
commercial properties which are leased on a long-term (ten or more years) net
basis, 1% of the gross revenues except for initial leasing fees equal to 3% of
the gross revenues over the first five years of the lease term; or (B) the
amounts charged by unaffiliated persons rendering comparable services in the
same geographic area.
Management and leasing fees are not paid directly by the Partnership but by the
joint venture entity which owns the properties. The Partnership's share of
these fees were $166,317 for the year ended December 31, 1998.
Real Estate Commissions
- -----------------------
In connection with the sale of Partnership properties, the General Partners or
their affiliates may receive commissions not exceeding the lesser of (A) 50% of
the commissions customarily charged by other brokers in arm's-length
transactions involving comparable properties in the same geographic area or (B)
3% of the gross sales price of the property, and provided that payments of such
commissions will be made only after Limited Partners have received prior
distributions totaling 100% of their capital contributions plus a 6% cumulative
return on their adjusted capital contributions. No real estate commissions were
paid to the General Partners or affiliates for the year ended December 31, 1998.
29
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------------------------------------------------------------------------
(a) 1. The Financial Statements are contained on Pages F-2 through F-23 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(a) 2. Financial Statement Schedule III
Information with respect to this item begins on Page S-1 of this Annual
Report on Form 10-K
(a) 3. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1998.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(d) See (a) 2 above.
30
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 26th day of March,
1999.
Wells Real Estate Fund IX, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
-----------------------------------------------
Leo F. Wells, III
Individual General Partner and as President
and Chief Financial Officer of Wells Capital,
Inc., the General Partner of Wells Partners,
L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature Title
- --------- -----
/s/Leo F. Wells, III
- ---------------------
Leo F. Wells, III Individual General Partner, March 26, 1999
President and Sole Director of
Wells Capital, Inc., the General
Partner of Wells Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
31
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements Page
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1998 and 1997 F-3
Statements of Income for the Year Ended December 31, 1998, 1997
and for the Eleven Months ended December 31, 1996 F-4
Statements of Partners' Capital for the Year Ended December 31,
1998, and for the Eleven Months ended December 31, 1996 F-5
Statements of Cash Flows for the Year Ended December 31, 1998, and
for the Eleven Months ended December 31, 1996 F-6
Notes to Financial Statements for December 31, 1998, 1997 and 1996 F-7
Audited Financial Statements - Ohmeda Building F-24-30
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund IX, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND IX,
L.P. (a Georgia public limited partnership) as of December 31, 1998 and 1997 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund IX, L.P.
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III--Real Estate Investments
and Accumulated Depreciation as of December 31, 1998 is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
----------- -----------
INVESTMENT IN JOINT VENTURES $28,119,579 $18,551,918
CASH AND CASH EQUIVALENTS 326,022 9,764,129
DUE FROM AFFILIATES 739,442 335,512
DEFERRED PROJECT COSTS 13,621 523,278
ORGANIZATIONAL COSTS, less accumulated
amortization of $12,500 in 1998
and $6,250 in 1997 12,500 18,750
PREPAID EXPENSES AND OTHER ASSETS 0 752,311
----------- -----------
Total assets $29,211,164 $29,945,898
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 3,500 $ 0
Partnership distributions payable 681,204 437,180
----------- -----------
Total liabilities 684,704 437,180
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A 25,646,950 25,322,591
Class B 2,879,510 4,186,127
Original limited partner 0 0
----------- -----------
Total partners' capital 28,526,460 29,508,718
----------- -----------
Total liabilities and partners' capital $29,211,164 $29,945,898
=========== ===========
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- --------
<S> <C> <C> <C>
REVENUES:
Equity in income of joint ventures $ 1,481,869 $ 593,914 $ 23,007
Interest income 79,587 605,386 383,884
----------- ---------- --------
1,561,456 1,199,300 406,891
----------- ---------- --------
EXPENSES:
Partnership administration 63,643 61,885 90,469
Legal and accounting 33,673 31,125 7,008
Amortization of organization costs 6,250 6,250 6,250
Computer costs 7,935 8,274 4,408
----------- ---------- --------
111,501 107,534 108,135
----------- ---------- --------
NET INCOME $ 1,449,955 $1,091,766 $298,756
=========== ========== ========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ 0 $ (206) $ (294)
=========== ========== ========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 2,597,938 $1,564,778 $330,270
=========== ========== ========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $(1,147,983) $ (472,806) $(31,220)
=========== ========== ========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 0.88 $ 0.53 $ 0.28
=========== ========== ========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT $ (2.18) $ (0.77) $ (0.11)
=========== ========== ========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 0.82 $ 0.46 $ 0.28
=========== ========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 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 0 $ 0 0 $ 0 $ 500 $ 600
Net income (loss) 0 0 330,270 0 (31,220) (294) 298,756
Limited partner contributions 0 2,935,931 29,359,306 564,069 5,640,694 0 35,000,000
Partnership distributions 0 0 (328,196) 0 0 0 (328,196)
Sales commissions and discounts 0 0 (2,934,927) 0 (564,073) 0 (3,499,000)
Other offering expenses 0 0 (1,442,752) 0 (277,000) 0 (1,719,752)
Class a conversion elections 0 (8,488) (72,470) 8,488 72,470 0 0
----- --------- ----------- ------- ----------- ----- -----------
BALANCE, DECEMBER 31, 1996 100 2,927,443 24,911,231 572,557 4,840,871 206 29,752,408
Net income (loss) 0 0 1,564,778 0 (472,806) (206) 1,091,766
Partnership distributions 0 0 (1,330,748) 0 (0) 0 (1,330,748)
Sales commission 0 0 (4,608) 0 0 0 (4,608)
Return of capital (100) 0 0 0 0 0 (100)
Class B conversion elections 0 22,333 181,938 (22,333) (181,938) 0 0
----- --------- ----------- ------- ----------- ----- -----------
BALANCE, DECEMBER 31, 1997 0 2,949,776 25,322,591 550,224 4,186,127 0 29,508,718
Net income (loss) 0 0 2,597,938 0 (1,147,983) 0 1,449,955
Partnership distributions 0 0 (2,432,213) 0 0 0 (2,432,213)
Class A conversion elections 0 40,099 158,634 (40,099) (158,634) 0 0
----- --------- ----------- ------- ----------- ----- -----------
BALANCE, DECEMBER 31, 1998 $ 0 2,989,875 $25,646,950 510,125 $ 2,879,510 $ 0 $28,526,460
===== ========= =========== ======= =========== ===== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,449,955 $ 1,091,766 $ 298,756
------------ ------------ -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of joint ventures (1,481,869) (593,914) (23,007)
Amortization of organizational costs 6,250 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets 102,311 689 (103,000)
Organizational costs 0 0 (31,250)
Accounts payable and accrued expenses 3,500 (3,401) 3,401
------------ ------------ -----------
Total adjustments (1,369,808) (590,376) (147,606)
------------ ------------ -----------
Net cash provided by operating activities 80,147 501,390 151,150
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture (10,611,655) (12,116,292) (4,748,974)
Sale of joint venture interest 1,156,101 0 0
Distributions received from joint ventures 2,125,489 527,390 0
Deferred project costs paid 0 (271,266) (1,118,789)
(Decrease) increase in construction payable 0 (389,600) 389,600
Earnest money deposit 0 (650,000) 0
Investment in real estate 0 0 (1,065,856)
------------ ------------ -----------
Net cash used in investing activities (7,330,065) (12,899,768) (6,544,019)
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated earnings (2,188,189) (1,072,339) (149,425)
Limited partners' contributions 0 0 35,000,000
Sales commissions and discounts paid 0 (171,304) (3,333,299)
Offering costs paid 0 (151,735) (1,567,022)
Return of capital 0 (100) 0
------------ ------------ -----------
Net cash (used in) provided by financing activities (2,188,189) (1,395,478) 29,950,254
------------ ------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,438,107) (13,793,856) 23,557,385
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,764,129 23,557,985 600
------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 326,022 $ 9,764,129 $23,557,985
============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs contributed to joint ventures $ 509,657 $ 637,800 $ 228,977
============ ============ ===========
Contribution of real estate assets to joint venture $ 0 $ 1,090,889 $ 0
============ ============ ===========
Earnest money deposit applied to investment in joint venture $ 650,000 $ 0 $ 0
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund IX, L.P. (the "Partnership") is a public limited
partnership organized on August 15, 1994 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners, L.P.
("Wells Partners"), a Georgia nonpublic limited partnership. The Partnership
began offering units for sale in the beginning of 1996. The Partnership has
two classes of limited partnership units. Upon subscription for units, each
limited partner must elect whether to have their units treated as Class A
units or Class B units. Thereafter, limited partners shall have the right to
change their prior elections to have some or all of their units treated as
Class A units or Class B units one time during each quarterly accounting
period. Limited partners may vote to, among other things, (a) amend the
partnership agreement, subject to certain limitations, (b) change the
business purpose or investment objectives of the Partnership, and (c) remove
a general partner. A majority vote on any of the described matters will bind
the Partnership, without the concurrence of the general partners. Each
limited partnership unit has equal voting rights, regardless of class.
The Partnership was formed to acquire and operate commercial real properties,
including properties which are either to be developed, currently under
development or construction, newly constructed, or have operating histories.
The Partnership owns an interest in the following properties through joint
ventures between the Partnership and other Wells Real Estate Funds: (i) an
office building in Madison, Wisconsin (the "U.S. Cellular Building"); (ii)
office building in Farmers Branch, Texas (the "TCI Building"); (iii) a two-
story office building in Orange County, California (the "Matsushita
Building"); (iv) a two-story office building in Boulder County, Colorado (the
"Cirrus Logic Building"); (v) a three-story office building in Knoxville,
Tennessee (the "ABB Building"), (vi) a two-story office building in
Louisville, Colorado (the "Ohmeda Building"); (vii) a three-story office
building in Broomfield, Colorado (the "360 Interlocken Building"); (viii) a
one-story warehouse facility in Ogden, Utah (the "Iomega Corporation
Building"); and (ix) a one-story office building in Oklahoma City, Oklahoma
(the "Lucent Technologies Building").
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The carrying values of the real estate assets are based on management's
current intent to hold the real estate assets as long-term investments. The
success of the Partnership's future operations and
F-7
<PAGE>
the ability to realize the investment in its assets will be dependent on the
Partnership's ability to maintain an appropriate level of rental rates,
occupancy, and operating expenses in future years. Management believes that
the steps it is taking will enable the Partnership to realize its investment
in its assets.
Income Taxes
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares of
profits and losses in their individual income tax returns.
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement, is
distributed to the limited partners quarterly. In accordance with the
partnership agreement, such distributions are paid first to limited partners
holding Class A units until they have received a 10% per annum return on
their net capital contributions, as defined. Then, such distributions are
paid to the general partners until they have received 10% of the total amount
distributed thus far. Any remaining cash available for distribution is split
between the limited partners holding Class A units and the general partners
on a basis of 90% and 10%, respectively. No distributions will be made to
the limited partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds will be distributed in the
following order:
. To limited partners holding units, which at any time have been
treated as Class B units, until they receive an amount necessary to
equal the net cash available for distribution received by the limited
partners holding Class A units
. To limited partners on a per unit basis until each limited partner
has received 100% of their net capital contribution, as defined
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital contribution, as
defined
. To limited partners on a per unit basis until they receive an amount
equal to their preferential limited partner return (defined as the
sum of a 10% per annum cumulative return on net capital contributions
for all periods during which the units were treated as Class A units
and a 15% per annum cumulative return on net capital contributions
for all periods during which the units were treated as Class B units)
. To all general partners until they have received 100% of their
capital contributions; in the event that limited partners have
received aggregate cash distributions from the Partnership over the
life of their investment in excess of a return of their net capital
contributions plus their preferential partner return, then the
general partners shall receive an additional sum equal to 25% of such
excess
. Thereafter, 80% to the limited partners on a per unit basis and 20%
to the general partners
F-8
<PAGE>
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. Net income, as defined, of the
Partnership will be allocated each year in the same proportions that net cash
from operations is distributed to the partners. To the extent the
Partnership's net income in any year exceeds net cash from operations, it
will be allocated 99% to the limited partners holding Class A units and 1% to
the general partners.
Net loss, depreciation, and amortization deductions for each fiscal year will
be allocated as follows: (a) 99% to the limited partners holding Class B
units and 1% to the general partners until their capital accounts are reduced
to zero; (b) then to any partner having a positive balance in his capital
account in an amount not to exceed such positive balance; and (c) thereafter
to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (i) allocations made pursuant to the qualified income offset
provisions of the partnership agreement; (ii) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero; and (iii) allocations to limited partners holding Class B
units in amounts equal to the deductions for depreciation and amortization
previously allocated to them with respect to the specific Partnership
property sold, but not in excess of the amount of gain on sale recognized by
the Partnership with respect to the sale of such property.
Investment in Joint Ventures
Basis of Presentation. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, the Partnership's investment in joint ventures is
recorded using the equity method of accounting.
Real Estate Assets. Real estate assets held by the joint ventures are stated
at cost less accumulated depreciation. Major improvements and betterments
are capitalized when they extend the useful life of the related asset. All
ordinary repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present that
indicate the carrying amounts of real estate assets may not be recoverable,
management assesses the recoverability of real estate assets by determining
whether the carrying value of such real estate assets will be recovered
through the future cash flows expected from the use of the asset and its
eventual disposition. Management has determined that there has been no
impairment in the carrying value of real estate assets held by the joint
ventures as of December 31, 1998.
Depreciation for buildings and improvements is calculated using the straight-
line method over 25 years. Tenant improvements are amortized over the life
of the related lease or the life of the asset, whichever is shorter.
Revenue Recognition. All leases on real estate assets held by the joint
ventures are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective leases.
Partners' Distributions and Allocations of Profit and Loss. Cash available
for distribution and allocations of profit and loss to the Partnership by the
joint ventures are made in accordance with the terms of the joint venture
agreements. Generally, these items are allocated in proportion to the
F-9
<PAGE>
partners' respective ownership interests. Cash is paid from the joint
ventures to the Partnership quarterly.
Deferred Lease Acquisition Costs. Costs incurred to procure operating leases
are capitalized and amortized on a straight-line basis over the terms of the
related leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market accounts.
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 1998, 1997, and 1996 is computed based on the weighted
average number of units outstanding during the period.
Reclassifications
Certain prior year items have been reclassified to conform with the current
year financial statement presentation.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells Partners, for
acquisition and advisory services. These payments, as stipulated by the
partnership agreement, can be up to 5% of the limited partner contributions,
subject to certain overall limitations contained in the partnership
agreement. Aggregate fees paid through December 31, 1998 were $1,390,055 and
amounted to 4% of the limited partners' contributions received. These fees
are allocated to specific properties as they are purchased or developed and
are included in capitalized assets of the joint venture. Deferred project
costs at December 31, 1998 and 1997 represent fees not yet applied to
properties.
3. RELATED-PARTY TRANSACTIONS
Due from affiliate at December 31, 1998 and 1997 represents the Partnership's
share of cash to be distributed from its joint venture investments for the
fourth quarters of 1998 and 1997:
1998 1997
-------- --------
Fund VIII and IX Associates $341,850 $335,512
Fund IX, X, XI, and REIT Joint Venture 397,592 0
-------- --------
$739,442 $335,512
======== ========
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells Management
management and leasing fees equal to: (a) 3% of the gross revenues for
management and 3% of the
F-10
<PAGE>
gross revenues for leasing (aggregate maximum of 6%) plus a separate fee for
the one-time initial lease-up of newly constructed properties, and (b) in the
case of commercial properties which are leased on a long-term net basis (ten
or more years), 1% of the gross revenues except for initial leasing fees
equal to 3% of the gross revenues over the first five years of the lease
term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $166,317, $61,979, and $1,947 for the
years ended December 31, 1998, 1997, and 1996, respectively, which were paid
to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate Funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
4. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in ventures at December
31, 1998 and 1997 are summarized as follows:
1998 1997
---------------------------------------------
Amount Percent Amount Percent
----------- ------- ----------- -------
Fund VIII and IX Associates $13,159,479 45% $14,849,125 50%
Fund IX, X, XI, and REIT Joint
Venture 14,960,100 40 3,702,793 50
----------- -----------
$28,119,579 $18,551,918
=========== ===========
The following is a rollforward of the Partnership's investment in the joint
ventures for the years ended December 31, 1998 and 1997:
1998 1997
----------- -----------
Investment in joint ventures, beginning of year $18,551,918 $ 4,929,728
Equity in income of joint ventures 1,481,869 593,914
Contributions to joint ventures 11,771,312 13,844,981
Sale of joint venture interest (1,156,101) 0
Distributions from joint ventures (2,529,419) (816,705)
----------- -----------
Investment in joint ventures, end of year $28,119,579 $18,551,918
=========== ===========
Fund VIII and IX Associates
On June 10, 1996, the Partnership entered into a joint venture with Wells
Real Estate Fund VIII, L.P. ("Wells Fund VIII"). The joint venture, Fund
VIII and IX Associates, was formed to acquire, develop, operate, and sell
real properties. On June 19, 1996, the joint venture purchased
F-11
<PAGE>
a 7.09-acre parcel of land in Madison, Wisconsin. The parcel was developed
and commenced operations as the U.S. Cellular Building in 1997. On October
10, 1996, the joint venture purchased a 40,000-square-foot, one-story office
building, known as the Dallas property, in Farmers Branch, Texas. On January
10, 1997, the joint venture purchased a 63,417-square foot, two-story office
building, known as the Matsushita Building, in Orange County, California. On
February 20, 1997, the joint venture purchased a two-story partially
completed office building, known as the Cirrus Logic Building, in Boulder
County, Colorado. Construction of the 49,460-square-foot building was
completed and commenced operations in 1997.
During 1998, Wells Fund VIII purchased a portion of the Partnership's joint
venture interest for $1,100,000. In addition, the related deferred project
costs of $56,101 were transferred from the Partnership to Wells Fund VIII.
In addition, Wells Fund VIII contributed $518,450 in 1998 to Fund VIII and IX
Associates, which included $32,352 of deferred project costs that were
applied.
F-12
<PAGE>
Following are the financial statements for Fund VIII and IX Associates:
Fund VIII and IX Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
1998 1997
----------- -----------
Real estate assets, at cost:
Land $ 4,724,579 $ 4,724,579
Building and improvements, less accumulated
depreciation of $2,220,160 in 1998 and
$945,324 in 1997 23,687,510 24,122,271
Construction in progress 0 272,779
----------- -----------
Total real estate assets 28,412,089 29,119,629
Cash and cash equivalents 907,778 1,088,438
Accounts receivable 504,608 389,347
Prepaid expenses and other assets 209,329 237,710
----------- -----------
Total assets $30,033,804 $30,835,124
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 189,141 $ 388,723
Due to affiliates 26,627 20,399
Partnership distributions payable 706,250 670,784
----------- -----------
Total liabilities 922,018 1,079,906
----------- -----------
Partners' capital:
Wells Real Estate Fund VIII 15,952,307 14,906,093
Wells Real Estate Fund IX 13,159,479 14,849,125
----------- -----------
Total partners' capital 29,111,786 29,755,218
----------- -----------
Total liabilities and partners' capital $30,033,804 $30,835,124
=========== ===========
F-13
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1998 and 1997 and
for the Period From Inception (June 10, 1996) to December 31, 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Revenues:
Rental income $3,146,201 $2,203,332 $101,277
Interest income 32,194 29,520 0
Other income 0 4,479 0
---------- ---------- --------
3,178,395 2,237,331 101,277
---------- ---------- --------
Expenses:
Depreciation 1,274,836 894,880 50,444
Management and leasing fees 221,794 121,930 3,884
Property administration 29,299 21,006 1,050
Legal and accounting 22,806 13,602 0
Operating costs, net of reimbursements (82,660) (24,106) 0
---------- ---------- --------
1,466,075 1,027,312 55,378
---------- ---------- --------
Net income $1,712,320 $1,210,019 $ 45,899
========== ========== ========
Net income allocated to Wells Real Estate Fund VIII $ 922,567 $ 605,960 $ 22,892
========== ========== ========
Net income allocated to Wells Real Estate Fund IX $ 789,753 $ 604,059 $ 23,007
========== ========== ========
</TABLE>
F-14
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1998 and 1997 and
for the Period From Inception (June 10, 1996) to December 31, 1996
Wells Real Wells Real Total
Estate Estate Partners'
Fund VIII Fund IX Capital
----------- ----------- -----------
Balance, June 10, 1996 $ 0 $ 0 $ 0
Net income 22,892 23,007 45,899
Partnership contributions 4,928,555 4,952,919 9,881,474
Partnership distributions (45,965) (46,198) (92,163)
----------- ----------- -----------
Balance, December 31, 1996 4,905,482 4,929,728 9,835,210
Net income 605,960 604,059 1,210,019
Partnership contributions 10,213,894 10,132,043 20,345,937
Partnership distributions (819,243) (816,705) (1,635,948)
----------- ----------- -----------
Balance, December 31, 1997 14,906,093 14,849,125 29,755,218
Net income 922,567 789,753 1,712,320
Transfer of joint venture
interest 1,156,101 (1,156,101) 0
Partnership contributions 518,450 0 518,450
Partnership distributions (1,550,904) (1,323,298) (2,874,202)
----------- ----------- -----------
Balance, December 31, 1998 $15,952,307 $13,159,479 $29,111,786
=========== =========== ===========
F-15
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1998 and 1997 and
for the Period From Inception (June 10, 1996) to December 31, 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,712,320 $ 1,210,019 $ 45,899
----------- ------------ -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,274,836 894,880 50,444
Changes in assets and liabilities:
Accounts receivable (115,261) (381,858) (7,489)
Prepaid expenses and other assets 28,381 (237,710) 0
Accounts payable 49,288 115,507 520
Due to affiliates 6,228 20,399 0
----------- ------------ -----------
Total adjustments 1,243,472 411,218 43,475
----------- ------------ -----------
Net cash provided by operating activities 2,955,792 1,621,237 89,374
----------- ------------ -----------
Cash flows from investing activities:
(Decrease) increase in construction payables (248,870) (335,406) 608,102
Investment in real estate (534,944) (19,131,612) (9,489,739)
----------- ------------ -----------
Net cash used in investing activities (783,814) (19,467,018) (8,881,637)
----------- ------------ -----------
Cash flows from financing activities:
Contributions from joint venture partners 486,098 19,316,193 9,467,616
Distributions to joint venture partners (2,838,736) (1,057,327) 0
----------- ------------ -----------
Net cash provided by financing activities (2,352,638) 18,258,866 9,467,616
----------- ------------ -----------
Net (decrease) increase in cash and cash equivalents (180,660) 413,085 675,353
Cash and cash equivalents, beginning of year 1,088,438 675,353 0
----------- ------------ -----------
Cash and cash equivalents, end of year $ 907,778 $ 1,088,438 $ 675,353
=========== ============ ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 32,352 $ 1,029,744 $ 413,858
=========== ============ ===========
</TABLE>
Fund IX, X, XI, and REIT Joint Venture
On March 20, 1997, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund X, L.P. ("Wells Fund X"). The joint venture,
Fund IX and X Associates, was formed to acquire, develop, operate, and sell
real properties. On March 20, 1997, the Partnership contributed a 5.62-acre
tract of real property in Knoxville, Tennessee, and improvements thereon,
known as the ABB Building, to the Fund IX and X Associates joint venture. A
83,885-square-foot, three-story office building was constructed and commenced
operations at the end of 1997.
On February 13, 1998, the joint venture purchased a two-story office
building, known as the Ohmeda Building, in Louisville, Colorado. On March
20, 1998, the joint venture purchased a three-story office building, known as
the 360 Interlocken Building, in Broomfield, Colorado. On June 11, 1998,
Fund IX and X Associates was amended and restated to admit Wells Real Estate
Fund XI, L.P. and Wells Operating Partnership, L.P. (the "Operating
Partnership"), a Delaware limited partnership having Wells Real Estate
Investment Trust, Inc. ("Wells REIT"), a Maryland corporation, as its general
partner. The joint venture was renamed Fund IX, X, XI, and REIT Joint
Venture. On June 24, 1998, the new joint venture purchased a one-story
office building, know as the Lucent Technologies Building, in Oklahoma City,
Oklahoma. On April 1, 1998, Wells Fund X purchased a one-story warehouse
facility, known as the Iomega Corporation Building, in Ogden, Utah. On July
1, 1998, Wells Fund X contributed the Iomega Corporation Building to Fund IX,
X, XI, and REIT Joint Venture.
F-16
<PAGE>
Following are the financial statements for the Fund IX, X, XI, and REIT Joint
Venture:
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
1998 1997
----------- ----------
Real estate assets, at cost:
Land $ 6,454,213 $ 607,930
Building and improvements, less
accumulated depreciation of
$1,253,156 in 1998 and $36,863
in 1997 30,686,845 6,445,300
Construction in progress 990 35,622
----------- ----------
Total real estate assets 37,142,048 7,088,852
Cash and cash equivalents 1,329,457 289,171
Accounts receivable 133,257 40,512
Prepaid expenses and other assets 441,128 329,310
----------- ----------
Total assets $39,045,890 $7,747,845
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 409,737 $ 379,770
Due to affiliates 4,406 2,479
Partnership distributions payable 1,000,127 0
----------- ----------
Total liabilities 1,414,270 382,249
----------- ----------
Partners' capital:
Wells Real Estate Fund IX 14,960,100 3,702,793
Wells Real Estate Fund X 18,707,139 3,662,803
Wells Real Estate Fund XI 2,521,003 0
Wells Operating Partnership, L.P. 1,443,378 0
----------- ----------
Total partners' capital 37,631,620 7,365,596
----------- ----------
Total liabilities and partners' capital $39,045,890 $7,747,845
=========== ==========
F-17
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Revenues:
Rental income $2,945,980 $ 28,512
Interest income 20,438 0
---------- --------
2,966,418 28,512
---------- --------
Expenses:
Depreciation 1,216,293 36,863
Management and leasing fees 226,643 1,711
Operating costs, net of reimbursements (140,506) 10,118
Property administration 34,821 0
Legal and accounting 15,351 0
---------- --------
1,352,602 48,692
---------- --------
Net income (loss) $1,613,816 $(20,180)
========== ========
Net income (loss) allocated to Wells Real Estate Fund IX $ 692,116 $(10,145)
========== ========
Net income (loss) allocated to Wells Real Estate Fund X $ 787,481 $(10,035)
========== ========
Net income allocated to Wells Real Estate Fund XI $ 85,352 $ 0
========== ========
Net income allocated to Wells Operating Partnership, L.P. $ 48,867 $ 0
========== ========
</TABLE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Wells Total
Estate Estate Estate Operating Partners'
Fund IX Fund X Fund XI Partnership, L.P. Capital
----------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 0 $ 0 $ 0 $ 0 $ 0
Net loss (10,145) (10,035) 0 0 (20,180)
Partnership contributions 3,712,938 3,672,838 0 0 7,385,776
----------- ----------- ---------- ---------- -----------
Balance, December 31, 1997 3,702,793 3,662,803 0 0 7,365,596
Net income 692,116 787,481 85,352 48,867 1,613,816
Partnership contributions 11,771,312 15,613,477 2,586,262 1,480,741 31,451,792
Partnership distributions (1,206,121) (1,356,622) (150,611) (86,230) (2,799,584)
----------- ----------- ---------- ---------- -----------
Balance, December 31, 1998 $14,960,100 $18,707,139 $2,521,003 $1,443,378 $37,631,620
=========== =========== ========== ========== ===========
</TABLE>
F-18
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,613,816 $ (20,180)
------------ -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 1,216,293 36,863
Changes in assets and liabilities:
Accounts receivable (92,745) (40,512)
Prepaid expenses and other assets (111,818) (329,310)
Accounts payable 29,967 379,770
Due to affiliates 1,927 2,479
------------ -----------
Total adjustments 1,043,624 49,290
------------ -----------
Net cash provided by operating activities 2,657,440 29,110
------------ -----------
Cash flows from investing activities:
Investment in real estate (24,788,070) (5,715,847)
------------ -----------
Cash flows from financing activities:
Distributions to joint venture partners (1,799,457) 0
Contributions received from partners 24,970,373 5,975,908
------------ -----------
Net cash provided by financing activities 23,170,916 5,975,908
------------ -----------
Net increase in cash and cash equivalents 1,040,286 289,171
Cash and cash equivalents, beginning of period 289,171 0
------------ -----------
Cash and cash equivalents, end of year $ 1,329,457 $ 289,171
============ ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 1,470,780 $ 318,981
============ ===========
Contribution of real estate assets $ 5,010,639 $ 1,090,887
============ ===========
</TABLE>
F-19
<PAGE>
5. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1998, 1997, and 1996 is calculated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
Financial statement net income $1,449,955 $1,091,766 $298,756
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income
tax purposes 519,485 193,418 7,891
Rental income accrued for financial reporting
purposes in excess of amounts for income
tax purposes (67,452) (221,689) (2,095)
Expenses deductible when paid for income tax
purposes, accrued for financial reporting
purposes 4,023 10,184 0
Expenses capitalized for income tax purposes,
deducted for financial reporting purposes 0 10,145 0
---------- ---------- --------
Income tax basis net income $1,906,011 $1,083,824 $304,552
========== ========== ========
</TABLE>
F-20
<PAGE>
The Partnership's income tax basis partners' capital at December 31, 1998,
1997, and 1996 is computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Financial statement partners' capital $28,526,460 $29,508,718 $29,752,408
Increase (decrease) in partners' capital
resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 720,794 201,309 7,891
Capitalization of syndication costs for income
tax purposes, which are accounted for as cost
of capital for financial reporting purposes 5,223,360 5,223,360 5,218,752
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (291,236) (223,784) (2,095)
Accumulated expenses deductible when paid for
income tax purposes, accrued for financial
reporting purposes 14,207 10,184 0
Accumulated expenses capitalized for income tax
purposes, deducted for financial reporting
purposes 10,145 10,145 0
Partnership's distributions payable 681,204 437,180 178,771
----------- ----------- -----------
Income tax basis partners' capital $34,884,934 $35,167,112 $35,155,727
=========== =========== ===========
</TABLE>
6. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interest in the joint ventures under noncancelable operating leases
at December 31, 1998 is as follows:
Year ending December 31:
1999 $ 2,841,850
2000 2,818,452
2001 2,799,193
2002 2,705,072
2003 2,525,195
Thereafter 7,396,707
-----------
$21,086,469
===========
Five significant tenants contributed approximately 16%, 13%, 11%, 14%, and
12% of rental income, which is included in equity in income of joint ventures
for the year ended December 31, 1998. In addition, five significant tenants
will contribute approximately 21%, 17%, 13%, 12%, and 12% of future minimum
rental income.
F-21
<PAGE>
The future minimum rental income due Fund VIII and IX Associates under
noncancelable operating leases at December 31, 1998 is as follows:
Year ending December 31:
1999 $ 3,042,420
2000 3,056,160
2001 3,077,130
2002 3,225,470
2003 2,775,782
Thereafter 9,129,962
-----------
$24,306,924
===========
Five significant tenants contributed 14%, 30%, 23%, 21%, and 10% of rental
income for the year ended December 31, 1998. In addition, four significant
tenants will contribute approximately 41%, 34%, 24%, and 15% of future
minimum rental income.
The future minimum rental income due Fund IX, X, XI, and REIT Joint Venture
under noncancelable operating leases at December 31, 1998 is as follows:
Year ending December 31:
1999 $ 3,689,498
2000 3,615,011
2001 3,542,714
2002 3,137,241
2003 3,196,100
Thereafter 8,225,566
-----------
$25,406,130
===========
Three significant tenants contributed 31%, 26%, and 13% of rental income for
the year ended December 31, 1998. In addition, four significant tenants will
contribute 27%, 25%, 21%, and 15% of future minimum rental income.
F-22
<PAGE>
7. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 Quarters Ended
-------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 365,560 $ 367,844 $ 354,454 $ 473,598
Net income 343,181 329,815 333,114 443,845
Net income allocated to Class A
limited partners 577,869 624,360 658,410 737,299
Net loss allocated to Class B
limited partners (234,688) (294,544) (325,296) (293,455)
Net income per weighted average
Class A limited partner unit $ 0.20 $ 0.21 $ 0.22 $ 0.25
Net loss per weighted average
Class B limited partner unit (0.43) (0.55) (0.62) (0.58)
Cash distribution per weighted
average Class A limited partner unit 0.17 0.21 0.21 0.23
1997 Quarters Ended
-------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------ ------------
Revenues $ 238,614 $ 277,454 $ 385,988 $ 297,244
Net income 190,050 245,375 373,040 283,302
Net (loss) income allocated to general
partners (206) 0 0 0
Net income allocated to Class A limited
partners 249,937 287,969 577,831 449,041
Net (loss) income allocated to Class B
limited partners (59,681) (42,594) (204,791) (165,740)
Net income per weighted average Class A
limited partner unit $ 0.09 $ 0.09 $ 0.20 $ 0.15
Net (loss) income per weighted average
Class B limited partner unit (0.10) (0.08) (0.37) (0.22)
Cash distribution per weighted average
Class A limited partner unit 0.09 0.09 0.13 0.15
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund IX, L.P.,
Wells Real Estate Fund X, L.P.
Wells Real Estate Fund XI, L.P.
Wells Real Estate Investment
Trust, Inc. and Subsidiary:
We have audited the accompanying balance sheet of THE OHMEDA BUILDING as of
December 31, 1998 and the related statements of income, partners' capital, and
cash flows for the period from inception (February 13,1998) to December 31,
1998. These financial statements are the responsibility of the building's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation,
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Ohmeda Building as of
December 31, 1999 and the results of its operations and its cash flows for the
period from inception (February 13, 1998) to December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE>
THE OHMEDA BUILDING
BALANCE SHEET
DECEMBER 31,1998
ASSETS
REAL ESTATE ASSETS:
Land $ 2,746,894
Building and improvements, less
accumulated depreciation of $299,112 7,858,490
-----------
Total real estate assets 10,605,384
CASH AND CASH EQUIVALENTS 983,061
ACCOUNTS RECEIVABLE 13,969
-----------
Total assets $11,602,414
===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses 157,691
Due to affiliates 825,380
-----------
Total liabilities 983,071
-----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Wells Real Estate Fund IX, L.P. 3,519,869
Wells Real Estate Fund X, L.P. 7,119,063
Wells Real Estate Fund XI, L.P. (12,456)
Wells Real Estate Investment Trust,
Inc. and Subsidiary (7,133)
-----------
Total partners' capital 10,619,343
-----------
Total liabilities and partners' capital $11,602,414
===========
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
REVENUES:
Rental income $898,901
--------
EXPENSES:
Depreciation 299,112
Operating costs, net of reimbursements 663
Management and leasing fees 41,688
Legal and accounting 2,200
--------
343,663
--------
NET INCOME $555,238
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND IX, L.P. $243,597
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND X, L.P. $271,294
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND XI, L.P. $ 25,656
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARY $ 14,691
========
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Wells Real
Wells Real Wells Real Wells Real Estate Investment Total
Estate Estate Estate Trust, Inc. and Partners'
Fund IX, L.P. Fund X, L.P. Fund XI, L.P. Subsidiary Capital
------------- ------------ ------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,1997 $ 0 $ 0 $ 0 $ 0 $ 0
Contributions 3,636,662 7,252,823 0 0 10,889,485
Net income 243,597 271,294 25,656 14,691 555,238
Distributions (360,390) (405,054) (38,112) (21,824) (825,380)
---------- ---------- ---------- -------- -----------
BALANCE, December 31,1998 $3,519,869 $7,119,063 $ (12,456) $ (7,133) $10,619,343
========== ========== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 555,238
------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 299,112
Changes in assets and liabilities:
Accounts receivable (13,969)
Accounts payable and accrued expenses 157,691
------------
Total adjustments 442,834
------------
Net cash provided by operating activities 998,072
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate (10,904,496)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions received from partners 10,889,485
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 983,061
CASH AND CASH EQUIVALENTS, beginning of period 0
------------
CASH AND CASH EQUIVALENTS, end of year $ 983,061
============
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
THE OHMEDA BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Ohmeda Building ("Ohmeda") is a two-story office building located in
Louisville, Colorado. The building is owned by Fund IX, X, XI, and REIT
Associates, a joint venture between Wells Real Estate Fund IX, L.P. ("Fund
IV"), Wells Real Estate Fund X, L.P. ("Fund V"), Wells Real Estate Fund XI,
L.P. ("Fund XI"), and Wells Real Estate Investment Trust, Inc. ("REIT"). As
of December 31, 1998, Fund IX, Fund X, Fund XI, and REIT owned 40%, 50%, 6%,
and 4% of Ohmeda, respectively. Allocation of net income and distributions
are made in accordance with ownership percentages.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
Ohmeda is not deemed to be a taxable entity for federal income tax purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful life
of the related asset. All repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of Ohmeda as of December 31, 1998.
F-7
<PAGE>
Depreciation is calculated using the straight-line method over 25 years.
Revenue Recognition
The lease on Ohmeda is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the terms of the
lease.
2. RENTAL INCOME
The future minimum rental income due Ohmeda under noncancelable operating
leases at December 31, 1998 is as follows:
Year ending December 31:
1999 $1,004,517
2000 1,004,517
2001 1,004,517
2002 1,004,517
2003 1,050,509
Thereafter 1,194,889
----------
$6,263,466
==========
One tenant contributed 100% of rental income for the year ended December 31,
1998 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund IX, Fund X, Fund XI, and REIT entered into a property management
agreement with Wells Management Company, Inc. ("Wells Management"), an
affiliate of Fund IX, Fund X, Fund XI, and REIT. In consideration for
supervising management of the property, Fund IX, Fund X, Fund X1, and REIT
will generally pay Wells Management management and leasing fees equal to (a)
3% of the gross revenues for management and 3% of the gross revenues for
leasing (aggregate maximum of 6%) plus a separate fee for the one-time
initial lease-up of newly constructed properties in an amount not to exceed
the fee customarily charged in arm's-length transactions by others rendering
similar services in the same geographic area for similar properties or (b) in
the case of commercial properties which are leased on a long-term net basis
(ten or more years), 1% of the gross revenues except for initial leasing fees
equal to 3% of the gross revenues over the first five years of the lease
term.
Ohmeda incurred management and leasing fees of $41,688 for the year ended
December 31, 1998 which were paid to Wells Management.
F-8
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Initial Cost
----------------------- Costs of
Buildings and Capitalized
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------- ------------
<S> <C> <C> <C> <C>
ABB PROPERTY (a) None $ 582,897 $ 744,164 $ 6,542,818
TCI-DALLAS PROPERTY (b) None 650,000 0 4,016,866
U.S. CELLULAR PROPERTY (c) None 833,942 0 10,052,063
MATSUSHITA PROPERTY (d) None 2,108,304 5,120,835 383,594
CIRRUS LOGIC PROPERTY (e) None 881,840 6,182,710 402,096
LUCENT TECHNOLOGIES (f) None 1,002,723 4,386,374 237,971
360 INTERLOCKEN (g) None 1,570,000 6,733,500 437,266
IOMEGA PROPERTY (h) None 385,000 4,674,624 193,372
OHMEDA PROPERTY (i) None 2,613,600 7,762,481 528,415
----------- ----------- -----------
Total $10,628,306 $35,604,688 $22,794,461
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at December 31, 1998
-------------------------------------------------------
Buildings and Construction
Land Improvements in Progress Total
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
ABB PROPERTY (a) $ 607,930 $ 7,261,949 $ 0 $ 7,869,879
TCI-DALLAS PROPERTY (b) 677,914 3,988,952 0 4,666,866
U.S. CELLULAR PROPERTY (c) 896,698 9,989,307 0 10,886,005
MATSUSHITA PROPERTY (d) 2,220,993 5,391,740 0 7,612,733
CIRRUS LOGIC PROPERTY (e) 928,974 6,537,672 0 7,466,646
LUCENT TECHNOLOGIES (f) 1,045,878 4,580,200 990 5,627,068
360 INTERLOCKEN (g) 1,650,070 7,090,696 0 8,740,766
IOMEGA PROPERTY (h) 403,442 4,849,554 0 5,252,996
OHMEDA PROPERTY (i) 2,746,894 8,157,602 0 10,904,496
----------- ----------- ---- -----------
Total $11,178,793 $57,847,672 $990 $69,027,455
=========== =========== ==== ===========
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Accumulated Date of Date Depreciation
Depreciation Construction Acquired Is Computed (j)
------------ ------------ -------- --------------
<S> <C> <C> <C> <C>
ABB PROPERTY (a) $ 511,883 1997 12/10/96 20 to 25 years
TCI-DALLAS PROPERTY (b) 393,633 1996 10/10/96 20 to 25 years
U.S. CELLULAR PROPERTY (c) 878,075 1997 06/17/96 20 to 25 years
MATSUSHITA PROPERTY (d) 431,339 1997 01/10/97 20 to 25 years
CIRRUS LOGIC PROPERTY (e) 527,113 1997 02/20/97 20 to 25 years
LUCENT TECHNOLOGIES (f) 106,871 1998 06/24/98 20 to 25 years
360 INTERLOCKEN (g) 238,299 1996 03/20/98 20 to 25 years
IOMEGA PROPERTY (h) 96,991 1998 07/01/98 20 to 25 years
OHMEDA PROPERTY (i) 299,112 1998 02/13/98 20 to 25 years
----------
Total $3,483,316
==========
</TABLE>
(a) The Knoxville Property consist of a three-story office building located
in Knoxville, Tennessee. It is owned by Fund IX, X, XI, and REIT Joint
Venture. The Partnership owned a 40% interest in Fund IX, X, XI, and REIT
Joint Venture at December 31, 1998.
(b) The TCI-Dallas Property consists of a one-story office building located in
Farmers Branch, Texas. It is owned by Fund VIII and IX Associates. The
Partnership owned a 45% interest in Fund VIII and IX Associates at December
31, 1998.
(c) The U.S. Cellular Property consists of a four-story office building located
in Madison, Wisconsin. It is owned by Fund VIII and IX Associates. The
Partnership owned a 45% interest in Fund VIII and IX Associates at December
31, 1998.
(d) The Matsushita Property consists of a two-story office building located in
Irvine, California. It is owned by Fund VIII and IX Associates. The
Partnership owned a 45% interest in Fund VIII and IX Associates at December
31, 1998.
(e) The Cirrus Logic Property consists of a two-story office building located in
Broomfield, Colorado. It is owned by Fund VIII and IX Associates. The
Partnership owned a 45% interest in Fund VIII and IX Associates at December
31, 1998.
(f) The Lucent Technologies Property consists of a one-story office building
located in Oklahoma City, Oklahoma. It is owned by Fund IX-X-XI-REIT Joint
Venture. The Partnership owned a 40% interest in Fund IX-X-XI-REIT Joint
Venture at December 31, 1998.
(g) The 360 Interlocken Property consists of one tree-story multi-tenant office
building located in Broomfield, Colorado. It is owned by Fund IX-X-XI-REIT
Joint Venture. The Partnership owned a 40% interest in Fund IX-X-XI-REIT
Joint Venture at December 31, 1998.
(h) The Iomega Property consists of a one-story warehouse and office building
located in Ogden, Utah. It is owned by Fund IX-X-XI-REIT Joint Venture. The
Partnership owned a 40% interest in Fund IX-X-XI-REIT Joint Venture at
December 31, 1998.
(i) The Ohmeda Property consists of a two-story office building located in
Louisville, Colorado. It is owned by Fund IX-X-XI-REIT Joint Venture. The
Partnership owned a 40% interest in Fund IX-X-XI-REIT Joint Venture at
December 31, 1998.
(j) Depreciation lives used for buildings are 25 years. Depreciation lives used
for land improvements are 20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
Accumulated
Depreciation
Cost
----------- ------------
BALANCE AT DECEMBER 31, 1996 $10,994,486 $ 50,444
1997 additions 26,196,182 931,743
----------- ----------
BALANCE AT DECEMBER 31, 1997 37,190,668 982,187
1998 additions 31,836,787 2,501,129
----------- ----------
BALANCE AT DECEMBER 31, 1998 $69,027,455 $3,483,316
=========== ==========
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund IX, L.P.)
The following documents are filed as exhibits to this report. Those exhibits
previously filed and incorporated herein by reference are identified below by an
asterisk. For each such asterisked exhibit, there is shown below the
description of the previous filing. Exhibits which are not required for this
report are omitted.
Exhibit
Number Description of Document
- ------ -----------------------
*3(a) Amended and Restated Agreement of Limited Partnership of Wells Real
Estate Fund IX, L.P. (Exhibit 3(a) to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund IX, L.P.
(Exhibit 3(c) to Form S-11 Registration Statement of Wells Real Estate
Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(a) Leasing and Tenant Coordinating Agreement between Wells Real Estate
Fund IX, L.P. and Wells Management Company, Inc. (Exhibit 10(d) to Form
S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(b) Management Agreement between Wells Real Estate Fund IX, L.P. and Wells
Management Company, Inc. (Exhibit 10(e) to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(c) Amended and Restated Custodial Agency Agreement between Wells Real
Estate Fund IX, L.P. and NationsBank of Georgia, N.A. (Exhibit 10(f) to
Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(d) Joint Venture Agreement of Fund VIII and Fund IX Associates dated June
10, 1996 (Exhibit 10(aa) to Post-Effective Amendment No. 11 to Form S-
11 Registration Statement of Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(e) Agreement for the Purchase and Sale of Real Property dated April 23,
1996, between American Family Mutual Insurance Company and Wells
Capital, Inc. (Exhibit 10(bb) to Post-Effective Amendment No. 11 to
Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
<PAGE>
*10(f) Agreement to Lease dated June 18, 1996, between Fund VIII and IX
Associates and Westel-Milwaukee, Inc., d/b/a Cellular One (Exhibit
10(cc) to Post-Effective Amendment No. 11 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(g) Development Agreement dated June 18, 1996, between Fund VIII and Fund
IX Associates and ADEVCO Corporation (Exhibit 10(dd) to Post-Effective
Amendment No. 11 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(h) Owner-Contractor Agreement dated June 18, 1996, with Kraemer Brothers,
Inc. (Exhibit 10(ee) to Post-Effective Amendment No. 11 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No. 33-83852)
*10(i) First Amendment to Joint Venture Agreement of Fund VIII and Fund IX
Associates dated October 10, 1996 (Exhibit 10(ii) to Post-Effective
Amendment No. 12 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(j) Agreement for the Purchase and Sale of Property dated October 10, 1996,
between TCI Valwood Limited Partnership I and Fund VIII and Fund IX
Associates (Exhibit 10(ff) to Post-Effective Amendment No. 12 to Form
S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(k) Build to Suite Industrial Lease Agreement dated November 1, 1995,
between Industrial Developments International, Inc. and TCI Central,
Inc., as amended July 16, 1996 and August 29, 1996 (Exhibit 10(gg) to
Post-Effective Amendment No. 12 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P.,
File No. 33-83852)
*10(l) Assignment and Assumption of Lease dated October 10, 1996, between TCI
Valwood Limited Partnership I and The Bank of New York, as Agent for
Fund VIII and Fund IX Associates (Exhibit 10(hh) to Post-Effective
Amendment No. 12 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(m) Real Estate Option Agreement dated December 9, 1996, between The
Development Corporation of Knox County and Wells Real Estate Fund IX,
L.P. (Exhibit 10(jj) to Post-Effective Amendment No. 13 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., File No. 33-83852)
<PAGE>
*10(n) Lease Agreement dated December 10, 1996, between Wells Real Estate Fund
IX, L.P. and ABB Flakt, Inc. (Exhibit 10(kk) to Post-Effective
Amendment No. 13 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(o) Development Agreement dated December 10, 1996, between Wells Real
Estate Fund IX, L.P. and ADEVCO Corporation (Exhibit 10(ll) to Post-
Effective Amendment No. 13 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(p) Owner-Contractor Agreement dated November 1, 1996, between Wells Real
Estate Fund IX, L.P. and Integra Construction, Inc. (Exhibit 10(mm) to
Post-Effective Amendment No. 13 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P.,
File No. 33-83852)
*10(q) Second Amendment to Joint Venture Agreement of Fund VIII and Fund IX
Associates dated January 7, 1997 (Exhibit 10(ii) to Form 10-K of Wells
Real Estate Fund VIII, L.P. for the fiscal year ended December 31,
1997, File No. 0-27888)
*10(r) Agreement for the Purchase and Sale of Property with Magellan Bake
Parkway Limited Partnership dated December, 1996 (Exhibit 10(jj) to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal year
ended December 31, 1997, File No. 0-27888)
*10(s) Office Lease with Matsushita Avionics Systems Corporation dated April
29, 1996 (Exhibit 10(kk) to Form 10-K of Wells Real Estate Fund VIII,
L.P. for the fiscal year ended December 31, 1997, File No. 0-27888)
*10(t) Third Amendment to Joint Venture Agreement of Fund VIII and Fund IX
Associates dated February 18, 1997 (Exhibit 10(ll) to Form 10-K of
Wells Real Estate Fund VIII, L.P. for the fiscal year ended December
31, 1997, File No. 0-27888)
*10(u) Agreement for the Purchase and Sale of Property with Orix Prime West
Bloomfield II Venture dated February 5, 1997 (Exhibit 10(mm) to Form
10-K of Wells Real Estate Fund VIII, L.P. for the fiscal year ended
December 31, 1997, File No. 0-27888)
*10(v) Lease with Cirrus Logic, Inc. dated July 5, 1995 (Exhibit 10(nn) to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal year
ended December 31, 1997, File No. 0-27888)
*10(w) Agreement for the Purchase and Sale of Real Property dated May 30,
1997, between Fund IX and Fund X Associates and Wells Development
Corporation (Exhibit 10(k) to Post-Effective Amendment No. 2 to Form S-
11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., File No. 333-7979)
<PAGE>
*10(x) Net Lease Agreement dated May 30, 1997, between Wells Development
Corporation and Lucent Technologies, Inc. (Exhibit 10(l) to Post-
Effective Amendment No. 2 to Form S-11 Registration Statement of Wells
Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., File No.
333-7979)
*10(y) Development Agreement dated May 30, 1997, between Wells Development
Corporation and ADEVCO Corporation (Exhibit 10(m) to Post-Effective
Amendment No. 2 to Form S-11 Registration Statement of Wells Real
Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., File No. 333-
7979)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 326,022
<SECURITIES> 28,119,579
<RECEIVABLES> 739,442
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,121
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,211,164
<CURRENT-LIABILITIES> 684,704
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,526,460
<TOTAL-LIABILITY-AND-EQUITY> 29,211,164
<SALES> 0
<TOTAL-REVENUES> 1,561,456
<CGS> 0
<TOTAL-COSTS> 111,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,449,955
<INCOME-TAX> 1,449,955
<INCOME-CONTINUING> 1,449,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,449,955
<EPS-PRIMARY> .88
<EPS-DILUTED> 0
</TABLE>
