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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, 1999 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 __________________________
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)
6200 The Corners Parkway
Norcross, Georgia 30092
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(Address of principal executive (Zip Code)
offices)
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:
Class A Units
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(Title of Class)
Class B Units
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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
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Applicable
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PART I
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ITEM 1. BUSINESS
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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
Units, and 564,069 Class B 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, 1999 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.
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., a General Partner of the
Partnership, perform a full range of real estate services including leasing and
property management, accounting, asset management and
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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, 1999.
Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management of
the registrant, the properties are adequately insured.
Competition
The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
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, 1999, these properties were
99.8% occupied, up from 99.43% at December 31, 1998, and 84.42% at December 31,
1997.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1999, assuming no exercise of renewal options
or termination rights:
<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>
2000 - - - - - -
2001 2 20,739 $ 328,620 $ 128,382 3.8% 5.5%
2002 3 12,606 248,508 97,084 2.3% 4.1%
2003(2) 2 82,152 998,076 389,917 14.9% 16.6%
2004 1 2,581 43,104 16,839 0.5% 0.7%
2005(3) 1 106,750 1,107,000 432,471 19.4% 18.4%
2006(4) 1 76,276 $ 902,418 $ 352,547 13.9% 15.0%
2007(5) 1 83,520 $1,060,426 $ 414,276 15.2% 17.7%
2008(6) 1 57,186 $ 632,752 $ 243,290 10.4% 10.4%
2009(7) 1 108,250 $ 696,876 $ 272,248 19.6% 11.6%
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13 550,060 6,007,780 2,347,053 100% 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
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(4) Expiration of US Cellular lease, Madison, Wisconsin
(5) Expiration of ABB lease, Knoxville, Tennessee
(6) Expiration of Lucent Technologies lease, Oklahoma City, Oklahoma
(7) Expiration of Iomega lease, Ogden, Utah
The following describes the properties in which the Partnership owns an interest
as of December 31, 1999:
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, 1999, Fund VIII had contributed $15,987,323
for an approximately 55% equity interest, and the Partnership 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 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.
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 $10,650,000.
The average effective annual rental per square foot at the US Cellular Building
was $12.60 for 1999 and 1998 and $8.87 for 1997, the first year of occupancy.
The occupancy rate at year end was 100% in 1999 and 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").
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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 1999, 1998 and
1997. The average effective rental per square foot in the TCI Building is $11.38
for 1999 and $11.49 for 1998, 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 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 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
$10.11 for 1999, $10.32 for 1998 and $9.91 for 1997, the first year of
ownership. The occupancy rate at year end was 100% in 1999, 1998 and 1997.
On March 15, 1999, Wells OP purchased an 8.8 tract of land in Lake Forest,
Orange County, California, for a purchase price of $4,450,230. On February 18,
1999, Wells Operating Partners, L.P., a Delaware limited partnership having
Wells Real Estate Investment Trust, Inc., (the "Wells REIT"), a Maryland
Corporation, entered into an office lease with Matsushita Avionics Systems
Corporation ("Matsushita Avionics") for the occupancy of a to be constructed
two-story office building containing approximately 150,000 rentable square feet
on this tract (the "Matsushita
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Project"). Matsushita Avionics currently occupies an existing building owned by
Fund VIII and Fund IX Joint Venture, a joint venture between Wells Real Estate
Fund VIII, L.P. and Wells Real Estate Fund IX, L.P. - related parties to Wells
OP.
On February 18, 1999, Wells OP entered into a rental income guaranty agreement
with Fund VIII and IX Joint Venture, whereby Wells OP guaranteed the Fund VIII -
Fund IX Joint Venture that the joint venture would receive rental income on the
existing building at least equal to the rent and building expenses that the Fund
VIII - Fund IX Joint Venture would have received over the remaining term of the
existing lease. Matsushita Avionics will vacate the existing building in
December 1999, with the existing lease term ending in September 2003. Current
rental and building expenses are approximately $90,000 per month.
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 49,460 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.
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
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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 $14.92 for 1999 and 1998 and $13.25 for 1997, the first year of occupancy.
The occupancy rate at year end was 100% in 1999, 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 XI, 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 IX-X 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 108,250
rentable square feet (the "Iomega Building") to the Fund IX-X-XI-REIT Joint
Venture as a capital contribution.
As of December 31, 1999, the Partnership held an approximately 39.1% equity
interest in the Fund IX-X-XI-REIT Joint Venture. As of December 31, 1999, Wells
Fund X held an approximate 48.3% equity interest, Wells Fund XI held an
approximate 8.9% equity interest, and Wells OP held an approximate 3.7% equity
interest in the Fund IX-X-XI-REIT Joint Venture.
The ABB Knoxville Building
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On March 20, 1997, the Fund IX-X Joint Venture began construction on a three-
story office building containing approximately 83,520 rentable square feet (the
"ABB Building") on a 5.62 acre tract of real property in Knoxville, Knox County,
Tennessee. The land purchase and construction costs totaling approximately
$8,012,711 were funded by capital contributions of $4,177,711 by the Partnership
and $3,835,000 by Wells Fund X.
ABB Environmental Systems, a subsidiary of ABB, Inc., occupied its lease 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 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.
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Commencing December 1, 1999, ABB Environmental exercised its right of first
refusal to lease an additional 23,992 square feet of space vacated by The
Associates in September, 1999. This addition increases their rentable floor area
from 57,831 square feet to 81,823 square feet. ABB will pay base rent at the
same terms and conditions of their original lease.
It is currently anticipated that the remaining cost to complete the project
which includes the final build out of remaining space will be approximately
$89,000, which is anticipated will be contributed by the Partnership.
The average effective annual rental per square foot at the ABB Building was
$11.77 for 1999, $9.97 for 1998 and $8.16 for 1997, the first year of occupancy.
The occupancy rate at year end was 98% for 1999, 95% for 1998 and 67% for 1997.
Ohmeda Building
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On February 13, 1998, the Fund IX-X 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
County, Colorado. The purchase price for the Ohmeda Building was $10,325,000.
The Fund IX-X 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. As of December 31, 1999, the Partnership
had contributed $3,460,192 and Wells Fund X had contributed $6,900,878 to this
property.
The entire 106,750 rentable square feet of the Ohmeda Building is currently
under a net lease dated 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 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.
The average effective annual rental rate per square foot at the Ohmeda Building
was $9.62 for 1999 and 1998, the first year of occupancy. The occupancy rate at
year end was 100% for 1999 and 1998.
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360 Interlocken Building
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On March 20, 1998, the Fund IX-X 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 project was funded by capital contributions of $6,642,466 by the
Partnership and $1,674,271 by Wells Fund X.
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.
As stated, the entire third floor of the Interlocken Building containing 19,229
rentable square feet is currently under lease to Transecon and expires in
October 2001, subject to Transecon's right to extend for one additional term of
five years upon 180 days notice. The monthly lease rent payable under the
Transecon lease is approximately $24,000 for the initial term of the lease.
Under the lease, Transecon is responsible for its share of utilities, taxes,
insurance and other operating expenses with respect to the Interlocken Building.
In addition, Transecon has a right of first refusal under the lease for any
second floor space proposed to be leased by the landlord.
The entire second floor of the Interlocken building containing 17,146 rentable
square feet is currently under lease to ODS and expires in September, 2003,
subject to ODS's right to extend for one additional term of three years. The
monthly lease is $22,100 through January 1998; $22,150 through January, 1999;
$22,600 through January 2000; $23,100 through January 2001; $23,550 through
January 2002; $24,050 through January 2003 and $24,550 through September, 2003.
The rental payments to be made by the tenant under the ODS lease and also
secured by the assignment of a $275,000 letter of credit which may be drawn upon
by the landlord in the event of a tenant default under the lease. Under the
lease, ODS is responsible for its share of utilities, taxes, insurance and other
operating costs with respect to the Interlocken Building.
The average effective annual rental rate per square foot at the 360 Interlocken
Building was $15.97 for 1999 and $16.31 for 1998, the first year of occupancy.
The occupancy rate at year-end was 100% for 1999 and 1998.
Lucent Technologies Building
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On May 30, 1997, the Fund IX-X 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. The purchase price was funded by capital contributions of
$657,804 by the Partnership, $950,392 by Fund X, $2,482,810 by Fund XI and
$1,421,466 by Wells OP.
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
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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 $10.19 for 1999 and $9.69 for 1998, the first year of occupancy.
The occupancy rate at year end was 100% for 1999 and 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 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 40/th/ and 80/th/ 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.
On March 22, 1999, the Fund IX-X-XI-REIT Joint Venture purchased a 4 acre tract
of vacant land adjacent to the Iomega Building located in Ogden, Utah. This site
is being used for additional parking and loading dock area which includes at
least 400 new parking stalls and new site work for truck maneuver space, in
accordance with the requirements of the tenants and City of Ogden. The project
was completed on July 1, 1999. The tenant, Iomega Corporation, has agreed to
extend the term of its lease to April 30, 2009 and will pay an additional base
rent, an amount equal to thirteen percent (13%) per annum payable in monthly
installments of the direct and indirect cost of acquiring the property and
constructing the improvements. This additional base rent commenced on May 1,
1999.
The land was purchased at a cost of $212,000, excluding acquisition costs. The
funds used to acquire the land and for the improvements are being funded
entirely out of capital contributions from Wells Fund XI to the Fund
IX-X-XI-REIT Joint Venture in the amount of $874,625. The project was completed
at a total cost of $874,625.
The average effective annual rental per square foot at the Iomega Building was
$5.18 for 1999 and $4.60 for 1998, the first year of occupancy. The occupancy
rate at year end was 100% for 1999 and 1998.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners during the year
1999.
PART II
-------
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
- ----------------------------------------------------------------------------
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 Units held
by a total of 1841 Limited Partners and 564,069 outstanding Class B Units held
by a total of 257 Limited Partners. As of February 29, 2000, the Partnership had
3,072,322 outstanding Class A Units held by a total of 1,895 Limited partners
and 427,678 outstanding Class B Units held by a total of 225 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 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 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, 1999.
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:
11
<PAGE>
<TABLE>
<CAPTION>
Per Class A Status Unit
- -----------------------------------------------------------------------------------------------
Distribution for Total Cash Investment Return of
Quarter Ended Distributed Income Capital
------------- ----------- ------ ---------
<S> <C> <C> <C>
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
March 31, 1999 $694,497 $0.23 $0.00
June 30, 1999 $695,564 $0.23 $0.00
September 30, 1999 $687,145 $0.23 $0.00
December 31, 1999 $623,076 $0.20 $0.00
</TABLE>
The fourth quarter distribution was accrued for accounting purposes in 1999, and
was not actually paid to Limited Partners until February, 2000. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Class A Status Units will continue in 2000 at a level
at least comparable with 1999 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.
The following sets forth a summary of the selected financial data for the fiscal
year ended December 31, 1999, 1998 and 1997:
12
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Total assets $27,944,553 $29,211,164 $29,945,898
Total revenues 1,593,734 1,561,456 1,199,300
Net income 1,490,331 1,449,955 1,091,766
Net loss allocated
to General Partners $ 0 $ 0 $ (206)
Net income allocated to
Class A Limited Partners $ 2,713,636 $ 2,597,938 $ 1,564,778
Net loss allocated to
Class B Limited Partners $(1,223,305) $(1,147,983) $ (472,806)
Net income per weighted
average (1) Class A
Limited Partner Unit $ 0.89 $ 0.88 $ 0.53
Net loss per weighted
average (1) Class B
Limited Partner Unit $ (2.72) $ (2.18) $ (0.77)
Cash Distributions per
Weighted average (1)
Class A Limited Partner Unit:
Investment Income $ 0.89 $ 0.82 $ 0.46
Return of Capital $ 0.00 $ 0.00 $ 0.00
</TABLE>
(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
$13,289,358 in the Fund VIII - Fund IX Joint Venture, and the investment of
$14,938,173 in the Fund IX-X-XI-REIT Joint Venture, as December 31, 1999, the
Partnership was holding net offering proceeds of $117,866 available for
investments in properties, of which $89,000 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 $1,593,734 for the year ended December
31, 1999, $1,561,456 for the year ended December 31, 1998 and $1,199,300 for the
year ended December 31, 1997. This increase was attributable primarily to
increased investments in joint ventures. Expenses of the Partnership were
$103,403 for 1999, $111,501 for 1998 and $107,534 for 1997, and consisted
primarily of legal, accounting and partnership administrative costs. Net income
of the Partnership was $1,490,331 for the year ended December 31, 1999,
$1,449,955 for the year ended December 31, 1998 and $1,091,766 for the year
ended December 31, 1997.
The Partnership made cash distributions of investment income to Limited Partners
holding Class A Status Units of $0.89 for Class A Status Unit for the year ended
December 31, 1999, $0.82 per Class A Status Unit for the year ended December 31,
1998 and $0.46 per Class A Status Unit for the year ended December 31, 1997. The
General Partners anticipate distributions per Unit to Limited Partners holding
Class A Status Units will continue in 2000 at a level at least comparable with
1999 cash distributions on an annual basis. Distributions accrued for the fourth
quarter of 1999 to the Limited partners holding Class A Status Units were paid
in February, 2000. No cash distributions were made to Limited Partners holding
Class B Status Units.
14
<PAGE>
Property Operations
- -------------------
The Partnership's 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 39.1%
As of December 31, 1999, the Partnership owned interests in the following
operational properties:
The TCI Building - Fund VIII -Fund IX Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 455,178 $ 455,177 $ 455,177
Interest income 25,995 32,194 6,607
Other income 0 0 4,479
-------------- ------------- ---------------
481,173 487,371 466,263
-------------- ------------- ---------------
Expenses:
Depreciation 166,593 166,594 166,595
Management & leasing expenses 17,370 17,199 17,496
Other operating expenses 10,044 9,236 10,082
-------------- ------------- ---------------
194,007 193,029 194,173
-------------- ------------- ---------------
Net income $ 287,166 $ 294,342 $ 272,090
============== ============= ===============
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund VIII - Fund IX Joint Venture 45.2% 45.2% 49.9%
Cash distribution to Partnership $ 193,733 $ 200,708 $ 206,543
Net income allocated to the Partnership $ 129,808 $ 135,548 $ 135,904
</TABLE>
Rental income and expenses remained relatively constant. Total revenue increased
in 1998, but decreased in 1999, due to fluctuations in interest income.
Net income and cash distribution allocated to the Partnership have decreased in
1999 and 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.
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.
15
<PAGE>
The US Cellular Building/Fund VIII - Fund IX Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Seven Months Ended
-------------------------- ------------------
1999 1998 December 31, 1997
---- ---- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $1,282,078 $1,282,076 $519,542
---------- ---------- --------
Expenses:
Depreciation 601,652 601,509 276,566
Management & leasing expense 129,474 139,396 47,957
Other operating expenses 84,345 (118,009) (8,883)
---------- ---------- --------
815,471 622,896 315,640
---------- ---------- --------
$ 466,607 $ 659,180 $203,902
========== ========== ========
Occupied % 100% 100% 75%
Partnership's Ownership % 45.2% 45.2% 49.9%
Cash distribution to Partnership $ 469,668 $ 550,715 $191,052
Net income allocated to Partnership $ 210,922 $ 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.
Net income decreased for the year ended December 31, 1999, as compared to 1998,
due to a decreased in common area maintenance reimbursements billed to tenants
in 1999, due to overbilling of property tax in 1998. Tenants are billed an
estimated amount for the current year common area maintenance which is then
reconciled in the following year and the difference billed to the tenant. The
building incurred property taxes of $60,096 for 1999, $50,825 for 1998 and
$93,865 for 1997, the first year of occupancy. Since the US Cellular Building
opened June 15, 1997, comparative income and expenses figures are not available
for 1997.
The Partnership's ownership in the Fund VIII - Fund IX Joint Venture decreased
in 1998 from 1997, due to additional funding by Wells Fund VIII in 1998 on the
US Cellular Building.
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.
16
<PAGE>
The Matsushita Building/Fund VIII - Fund IX Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $657,513 $670,792 $644,240
Interest income 0 0 1,511
-------- -------- --------
657,513 670,792 645,751
-------- -------- --------
Expenses:
Depreciation 215,670 215,669 215,670
Management & leasing expense 24,902 26,050 30,872
Other operating expenses 9,388 16,180 3,973
-------- -------- --------
249,960 257,899 250,515
-------- -------- --------
Net income $407,553 $412,893 $395,236
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % 45.2% 45.2% 49.9%
Cash distribution to Partnership $311,420 $306,434 $185,783
Net income allocated to Partnership $184,227 $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.
Rental income decreased as compared to 1998, due primarily to an adjustment to
straight-line rent in 1998. Other operating expenses have decreased for the year
ended December 31, 1999, as compared to 1998 due primarily to a billing of 1998
common-area maintenance expenses to the tenant in 1999. Tenants are billed an
estimated amount for the current year common area maintenance which is then
reconciled in the following year and the difference billed to the tenants.
On March 15, 1999, Wells Operating Partnership, L.P. ("Wells OP") purchased an
8.8 acre tract of land located in Lake Forest, Orange County, California for a
purchase price of $4,450,230. Wells OP entered into a development agreement for
the construction of a two-story office building containing approximately 150,000
rentable square feet to be erected on the Matsushita property. Wells OP entered
into an office lease with Matsushita Avionics Systems Corporation ("Matsushita
Avionics"), pursuant to which Matsushita Avionics agreed to lease all of the
Matsushita property upon its completion. Matsushita Avionics vacated its current
space in January 2000.
Matsushita Avionics and the Fund VIII - Fund IX Joint Venture have entered into
a lease and guaranty termination agreement dated February 18, 1999, pursuant to
which Matsushita Avionics vacated the existing building and be relieved of any
of its obligations under the existing lease
17
<PAGE>
upon the commencement date of the new Matsushita lease. In consideration for the
Fund VIII - Fund IX Joint Venture releasing Matsushita Avionics from the
existing lease and thereby allowing Wells OP to enter into the Matsushita lease
with Matsushita Avionics, Wells OP entered into a rental income guaranty
agreement dated as of February 18, 1999, whereby Wells OP guaranteed the Fund
VIII - Fund IX Joint Venture that it will receive rental income on the existing
building at least equal to the rent and building expenses that the Fund VIII -
Fund IX Joint Venture would have received over the remaining term of the
existing lease.
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 Cirrus Logic Building/Fund VIII - Fund IX Joint Venture
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months Ended
----------------
For the Year Ended December 31, December 31,
------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $738,156 $738,156 $584,373
Interest income 0 0 21,402
-------- -------- --------
738,156 738,156 605,775
-------- -------- --------
Expenses:
Depreciation 291,063 291,064 236,049
Management & leasing expense 44,329 39,149 25,605
Other operating expenses (81,061) 62,038 5,330
-------- -------- --------
254,331 392,251 226,984
-------- -------- --------
Net income $483,825 $345,905 $338,791
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % 45.2% 45.2% 49.9%
Cash distribution to Partnership $322,028 $265,441 $234,008
Net income allocated to Partnership $218,705 $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.
Rental income, depreciation, and management and leasing fees remained relatively
stable while other operating expenses decreased for the year ended December 31,
1999, as compared to the same period in 1998, due primarily to an adjustment for
common-area maintenance billing to the tenants. Tenants are billed an estimated
amount for the current year common area maintenance which is then reconciled in
the following year and the difference billed to the tenants. Property taxes
increased substantially in 1998, but the tenant was not billed until the annual
adjustment
18
<PAGE>
was computed in the second quarter of 1999. Management fees reimbursed by the
tenant are also included in other operating expenses.
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. The building incurred property taxes of $215,174 for
1999, $101,229 for 1998 and $44,623 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 in 1998 on the US Cellular Building.
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 ABB Building Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------
<TABLE>
<CAPTION>
For The Year Ended One Month Ended
December 31, 1999 December 31, 1998 December 31,1997
------------------------ ------------------------ ----------------------
<S> <C> <C> <C>
Revenues:
Rental income $ 987,327 $836,746 $ 28,512
Interest Income 58,768 20,192 0
---------- -------- --------
1,046,095 856,938 28,512
---------- -------- --------
Expenses:
Depreciation 537,799 475,020 36,863
Management & leasing expense 120,325 107,338 1,711
Operating costs, net of reimbursements
(2,532) (40,641) 10,118
---------- -------- --------
655,592 541,717 48,692
---------- -------- --------
Net income (loss) $ 390,503 $315,221 $(20,180)
========== ======== ========
Occupied % 98% 95% 67%
Partnership's Ownership % 39.1% 39.8% 50.3%
Cash distribution to partnership $ 364,642 $312,163 $ 0
Net income (loss) allocated to
Partnership $ 152,956 $134,866 $(10,145)
</TABLE>
Rental income increased in 1999, over 1998 due primarily to the increased
occupancy level of the property. Other operating expenses were negative for
1999 and 1998 due to an offset of tenant reimbursements in operating costs, as
well as management and leasing fee reimbursements. Tenants are billed an
estimated amount for current year common area maintenance which is then
reconciled the second quarter of the following year and the difference
19
<PAGE>
billed to the tenant. Total expenses increased for 1999, over 1998, due
to increased depreciation and management and leasing fees as the building
was leased up.
Cash distributions and net income allocated to the Partnership increased in 1999
over prior year levels due to the lease up of the project. The Partnership's
ownership in the Fund IX-X-XI-REIT Joint Venture decreased in 1999, as compared
to 1998, due to additional funding by Wells Fund XI to the IX-X-XI-REIT Joint
Venture in 1999. The ABB Building incurred property taxes of $47,616 for 1999
and $36,771 for 1998.
It is currently anticipated that the Partnership will contribute approximately
$89,000 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.
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.
20
<PAGE>
The Lucent Technologies Building / Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Seven Months Ended
December 31, 1999 December 31, 1998
--------------------- --------------------
<S> <C> <C>
Revenues:
Rental income $583,009 $291,508
-------- --------
Expenses:
Depreciation 183,204 106,871
Management & leasing expenses 21,479 11,281
Other operating expenses, net of
reimbursement 15,809 9,883
-------- --------
220,492 128,035
-------- --------
Net Income $362,517 $163,473
======== ========
Occupied % 100% 100%
Partnership's Ownership % 39.1% 39.8%
Cash distribution to Partnership $195,545 $157,332
Net income allocated to the
Partnership $141,870 $ 65,200
</TABLE>
The Lucent Technologies Building was completed in June, 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 available for only seven months.
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.
21
<PAGE>
The Ohmeda Building / Fund IX-X-XI-REIT Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Eleven Months Ended
December 31, 1999 December 31, 1998
------------------ -------------------
<S> <C> <C>
Revenues:
Rental income $1,027,314 $898,901
---------- --------
Expenses:
Depreciation 326,304 299,112
Management & leasing expenses 46,911 41,688
Other operating expenses, net of
Reimbursement (15,183) 2,863
---------- --------
358,032 343,663
---------- --------
Net Income $ 669,282 $555,238
========== ========
Occupied % 100% 100%
Partnership's Ownership % 39.1% 39.8%
Cash distribution to Partnership $ 380,627 $360,390
Net income allocated to the
Partnership $ 261,867 $243,597
</TABLE>
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.
Since the Ohmeda Building was purchased in February 1998, comparative income and
expense figures are available for only eleven months of the prior year. Other
operating expenses are negative due to tenant reimbursements reflected in this
category which includes management and leasing expense reimbursement. Tenants
are billed an estimated amount for current year common area maintenance which is
then reconciled during the second quarter of the following year and the
difference billed to the tenants. The Ohmeda building incurred property taxes
of $249,707 for 1999 and $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.
22
<PAGE>
The 360 Interlocken Building / Fund IX-X-XI-REIT Joint Venture
- --------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Ten Months Ended
December 31, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Revenues:
Rental income $829,827 $665,405
Interest Income 0 246
-------- --------
829,827 665,651
-------- --------
Expenses:
Depreciation 286,680 238,299
Management & leasing expenses 73,129 55,130
Other operating expenses, net of
Reimbursement 42,431 (55,654)
-------- --------
402,240 237,775
-------- --------
Net Income $427,587 $427,876
======== ========
Occupied % 100% 100%
Partnership's Ownership % 39.1% 39.8%
Cash distribution to Partnership $277,124 $282,781
Net income allocated to the Partnership $167,284 $188,147
</TABLE>
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 available for only ten
months. Other operating expenses for 1998 are negative due to tenant
reimbursements reflected in this category which includes management and leasing
expense reimbursements. Tenants are billed an estimated amount for current year
common area maintenance which is then reconciled during the second quarter of
the following year and the difference billed to the tenants. The 360
Interlocken Building incurred property taxes of $244,025 for 1999 and $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.
23
<PAGE>
The Iomega Building / Fund IX-X-XI-REIT Joint Venture
- -----------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Nine Months Ended
December 31, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Revenues:
Rental income $560,906 $373,420
-------- --------
Expenses:
Depreciation 204,925 145,975
Management & leasing expenses 24,295 23,058
Other operating expenses, net of
Reimbursement 9,368 (4,579)
-------- --------
238,588 164,454
-------- --------
Net Income $322,318 $208,966
-------- --------
Occupied % 100% 100%
Partnership's Ownership % 39.1% 39.8%
Cash distribution to Partnership $200,208 $ 93,461
Net income allocated to the Partnership $126,095 $ 60,311
</TABLE>
Since the Iomega Building was purchased in April 1998, comparable income and
expense figures for the prior year are available for only nine months. Other
operating expenses for 1998 are negative due to tenant reimbursement reflected
in this category which includes management and leasing expense reimbursement.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled during the second quarter of the following
year and the difference billed to the tenants. The Iomega Building incurred
property taxes of $73,020 for 1999 and $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.
24
<PAGE>
The Partnership had net cash (used in) provided by operating activities in 1999
of ($94,403), 1998 of $80,147 and 1997 of $501,390. Net cash (used in) provided
by investing activities of $2,624,017 in 1999 decreased to ($7,330,065) in 1998
down from 1997 amount of ($12,899,768). This was primarily the result of
reducing the Partnership's investment in the joint ventures and receiving
distributions from its investments in Joint Venture. Net cash used in financing
activities of $2,753,442 in 1999, $2,188,189 in 1998 and $1,395,478 in 1997.
The Partnership's distributions paid and payable through the fourth quarter of
1999 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
1999. 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, 1999, has reserved approximately $89,000
needed to complete the ABB Building which is owned by the Fund IX-X-XI-REIT
Joint Venture.
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. Most 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 made the transition into the year 2000 without any information
systems, business operations or facilities related system problems. Management
believes that there are no other Y2K related issues that may require disclosure.
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 1999.
25
<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 6200 The Corners Parkway, Norcross,
Georgia 30092.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 56 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, 1999.
CASH COMPENSATION TABLE
-----------------------
<TABLE>
<CAPTION>
( A ) ( B ) ( C )
<S> <C> <C>
Name of Individual or Number in Capacities in which served Form of
Group Compensation Cash Compensation
__________________________________________________________________________________________________
Wells Management Company, Inc. Property Manager - $184,427
Management & Leasing Fees
</TABLE>
(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 1999 but not actually
paid until January, 2000.
26
<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, 2000.
<TABLE>
<CAPTION>
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------- -------------------- ----------------
<S> <C> <C> <C>
Class A Units Leo F. Wells, III 128.70 Units Less than 1%
(IRA, 401 (k) Plan)
</TABLE>
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, 1999.
27
<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.
Wells Management Company, Inc. accrued $184,427 in cash compensations for the
year ended December 31, 1999.
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, 1999.
28
<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 year
of 1999.
(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.
29
<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 27th day of March,
2000.
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 Individual General Partner, March 27, 2000
- --------------------- President and Sole Director of
Leo F. Wells, III 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.
30
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements Page
- -------------------- ----
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1999, 1998 and 1997 F-3
Statements of Income for the Year Ended December 31, 1999, 1998 F-4
Statements of Partners' Capital for the Year Ended December 31, 1999,
1998, and 1997 F-5
Statements of Cash Flows for the Year Ended December 31, 1999, 1998,
and 1997 F-6
Notes to Financial Statements for December 31, 1999, 1998 and 1997 F-7
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, 1999 and 1998 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
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, 1999 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 20, 2000
F-2
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
INVESTMENT IN JOINT VENTURES $27,196,918 $28,119,579
CASH AND CASH EQUIVALENTS 102,194 326,022
DUE FROM AFFILIATES 639,956 739,442
DEFERRED PROJECT COSTS 5,485 13,621
ORGANIZATIONAL COSTS, less accumulated amortization of $25,000 in 1999 and 0 12,500
$12,500 in 1998
------------ -----------
Total assets $27,944,553 $29,211,164
============ ===========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIABILITIES:
<S> <C> <C>
Accounts payable and accrued expenses $ 0 $ 3,500
Partnership distributions payable 628,046 681,204
---------- -----------
Total liabilities 628,046 684,704
========== ===========
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A--3,072,322 units and 2,989,875 units as of December 31, 1999 and 26,114,657 25,646,950
1998, respectively
Class B--427,678 units and 510,125 units as of December 31, 1999 and 1,201,850 2,879,510
1998, respectively
----------- -----------
Total partners' capital 27,316,507 28,526,460
----------- -----------
Total liabilities and partners' capital $27,944,553 $29,211,164
=========== ===========
</TABLE>
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, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
REVENUES:
<S> <C> <C> <C>
Equity in income of joint ventures $ 1,593,734 $ 1,481,869 $ 593,914
Interest income 0 79,587 605,386
----------- ----------- ----------
1,593,734 1,561,456 1,199,300
----------- ----------- ----------
EXPENSES:
Partnership administration 60,020 63,643 61,885
Legal and accounting 20,897 33,673 31,125
Amortization of organization costs 12,500 6,250 6,250
Computer costs 9,986 7,935 8,274
----------- ----------- ----------
103,403 111,501 107,534
----------- ----------- ----------
NET INCOME $ 1,490,331 $ 1,449,955 $1,091,766
=========== =========== ==========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ 0 $ 0 $ (206)
=========== =========== ==========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 2,713,636 $ 2,597,938 $1,564,778
=========== =========== ==========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $(1,223,305) $(1,147,983) $ (472,806)
=========== =========== ==========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED
PARTNER UNIT $ 0.89 $ 0.88 $ 0.53
=========== =========== ==========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER
UNIT $ (2.72) $ (2.18) $ (0.77)
=========== =========== ==========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A LIMITED
PARTNER UNIT 0.89 $ 0.82 $ 0.46
=========== =========== ==========
</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, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Limited Partners
-----------------------------------------------------------------------------
Class A Class B
-------------------------------- --------------------------
Original Units Amount Units Amount
---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, December31, 1996 $ 100 2,927,443 $24,911,231 572,557 $4,840,871
Net income (loss) 0 0 1,564,778 0 (472,806)
Partnership distributions 0 0 (1,330,748) 0 0
Sales commission 0 0 (4,608) 0 0
Class B conversion elections 0 22,333 181,938 (22,333) (181,938)
Return of capital (100) 0 0 0 0
---------- ------------ ----------- ----------- ------------
BALANCE, December 31, 1997 0 2,949,776 25,322,591 550,224 4,186,127
Net income (loss) 0 0 2,597,938 0 (1,147,983)
Partnership distributions 0 0 (2,432,213) 0 0
Class B conversion elections 0 40,099 158,634 (40,099) (158,634)
---------- ------------ ----------- ----------- ------------
BALANCE, December 31, 1998 0 2,989,875 25,646,950 510,125 2,879,510
Net income (loss) 0 0 2,713,636 0 (1,223,305)
Partnership distributions 0 0 (2,700,284) 0 0
Class B conversion elections 0 82,447 454,355 (82,447) (454,355)
---------- ------------ ----------- ----------- ------------
BALANCE, December 31, 1999 $ 0 3,072,322 $26,114,657 427,678 $ 1,201,850
========== ============ =========== =========== ============
<CAPTION>
Total
General Partners'
Partners Capital
---------- -----------
<S> <C> <C>
BALANCE, December31, 1996 206 $29,752,408
Net income (loss) (206) 1,091,766
Partnership distributions 0 (1,330,748)
Sales commission 0 (4,608)
Class B conversion elections 0 0
Return of capital 0 (100)
---------- -------------
BALANCE, December 31, 1997 0 29,508,718
Net income (loss) 0 1,449,955
Partnership distributions 0 (2,432,213)
Class B conversion elections 0 0
---------- -------------
BALANCE, December 31, 1998 0 28,526,460
Net income (loss) 0 1,490,331
Partnership distributions 0 (2,700,284)
Class B conversion elections 0 0
---------- -------------
BALANCE, December 31, 1999 $ 0 $27,316,507
========== =============
</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, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,490,331 $ 1,449,955 $ 1,091,766
----------- ------------ ------------
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Equity in income of joint ventures (1,593,734) (1,481,869) (593,914)
Amortization of organizational costs 12,500 6,250 6,250
Changes in assets and liabilities: 0
Other assets 0 102,311 689
Accounts payable and accrued expenses (3,500) 3,500 (3,401)
----------- ------------ ------------
Total adjustments (1,584,734) (1,369,808) (590,376)
----------- ------------ ------------
Net cash (used in) provided by operating activities (94,403) 80,147 501,390
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture (190,853) (10,611,655) (12,116,292)
Sale of joint venture interest 0 1,156,101 0
Distributions received from joint ventures 2,814,870 2,125,489 527,390
Deferred project costs paid 0 0 (271,266)
(Decrease) increase in construction payable 0 0 (389,600)
Earnest money deposit 0 0 (650,000)
----------- ------------ ------------
Net cash provided by (used in) investing activities 2,624,017 (7,330,065) (12,899,768)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated earnings (2,753,442) (2,188,189) (1,072,339)
Sales commissions and discounts paid 0 0 (171,304)
Offering costs paid 0 0 (151,735)
Return of capital 0 0 (100)
----------- ------------ ------------
Net cash used in financing activities (2,753,442) (2,188,189) (1,395,478)
----------- ------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (223,828) (9,438,107) (13,793,856)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 326,022 9,764,129 23,557,985
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 102,194 $ 326,022 $ 9,764,129
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint ventures $ 8,136 $ 509,657 $ 637,800
=========== ============ ============
Contribution of real estate assets to joint venture $ 0 $ 0 $ 1,090,889
=========== ============ ============
Earnest money deposit applied to investment in joint venture $ 0 $ 650,000 $ 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, 1999, 1998, AND 1997
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 real estate 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 the ability to realize the
F-7
<PAGE>
investment in its assets will be dependent on the Partnership's ability to
maintain rental rates, occupancy, and an appropriate level of 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
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
F-8
<PAGE>
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, 1999.
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 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.
F-9
<PAGE>
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, 1999, 1998, and 1997 is computed based on the weighted
average number of units outstanding during the period.
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, 1999 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, 1999 and 1998 represent
fees not yet applied to properties.
3. RELATED-PARTY TRANSACTIONS
Due from affiliate at December 31, 1999 and 1998 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarters of 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Fund VIII and IX Associates $304,441 $341,850
Fund IX, X, XI, and REIT Joint Venture 335,515 397,592
----------- ------------
$639,956 $739,442
=========== ============
</TABLE>
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 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.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $184,427, $166,317, and $61,979 for
the years ended December 31, 1999, 1998, and 1997, respectively, which were
paid to Wells Management.
F-10
<PAGE>
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, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- --------------------------
Amount Percent Amount Percent
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Fund VIII and IX Associates $12,606,292 45% $13,159,479 45%
Fund IX, X, XI, and REIT Joint 14,590,626 39 14,960,100 40
Venture ------------- -------------
$27,196,918 $28,119,579
------------- -------------
</TABLE>
The following is a rollforward of the Partnership's investment in the joint
ventures for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------- -----------------
<S> <C> <C>
Investment in joint ventures, beginning of year $28,119,579 $18,551,918
Equity in income of joint ventures 1,593,734 1,481,869
Contributions to joint ventures 198,989 11,771,312
Sale of joint venture interest 0 (1,156,101)
Distributions from joint ventures (2,715,384) (2,529,419)
---------------- -----------------
Investment in joint ventures, end of year $27,196,918 $28,119,579
================ =================
</TABLE>
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 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
F-11
<PAGE>
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. Ownership percentage interests
were recomputed accordingly.
Following are the financial statements for Fund VIII and IX Associates:
Fund VIII and IX Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 4,724,579 $ 4,724,579
Building and improvements, less accumulated depreciation of
$3,495,138 in 1999 and $2,220,160 in 1998 22,416,032 23,687,510
----------- -----------
Total real estate assets 27,140,611 28,412,089
Cash and cash equivalents 866,510 907,778
Accounts receivable 691,752 504,608
Prepaid expenses and other assets 176,723 209,329
----------- -----------
Total assets $28,875,596 $30,033,804
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 283,548 $ 189,141
Due to affiliates 30,547 26,627
Partnership distributions payable 673,493 706,250
----------- -----------
Total liabilities 987,588 922,018
----------- -----------
Partners' capital:
Wells Real Estate Fund VIII 15,281,716 15,952,307
Wells Real Estate Fund IX 12,606,292 13,159,479
----------- -----------
Total partners' capital 27,888,008 29,111,786
----------- -----------
Total liabilities and partners' capital $28,875,596 $30,033,804
=========== ===========
</TABLE>
F-12
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Rental income $3,132,925 $3,146,201 $2,203,332
Interest income 25,995 32,194 29,520
Other income 0 0 4,479
------------- -------------- --------------
3,158,920 3,178,395 2,237,331
------------- -------------- --------------
Expenses:
Depreciation 1,274,978 1,274,836 894,880
Management and leasing fees 216,075 221,794 121,930
Property administration expenses 30,249 29,299 21,006
Legal and accounting 15,632 22,806 13,602
Operating costs, net of reimbursements (23,165) (82,660) (24,106)
------------- -------------- --------------
1,513,769 1,466,075 1,027,312
------------- -------------- --------------
Net income $1,645,151 $1,712,320 $1,210,019
============= ============== ==============
Net income allocated to Wells Real Estate Fund VIII $ 901,489 $ 922,567 $ 605,960
============= ============== ==============
Net income allocated to Wells Real Estate Fund IX $ 743,662 $ 789,753 $ 604,059
============= ============== ==============
</TABLE>
F-13
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund VIII Fund IX Capital
----------------- ----------------- -----------------
<S> <C> <C> <C>
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
Net income 901,489 743,662 1,645,151
Partnership distributions (1,572,080) (1,296,849) (2,868,929)
----------------- ----------------- -----------------
Balance, December 31, 1999 $ 15,281,716 $ 12,606,292 $ 27,888,008
================= ================= =================
</TABLE>
F-14
<PAGE>
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,645,151 $ 1,712,320 $ 1,210,019
----------- ----------- ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 1,274,978 1,274,836 894,880
Changes in assets and liabilities:
Accounts receivable (187,144) (115,261) (381,858)
Prepaid expenses and other assets 32,606 28,381 (237,710)
Accounts payable 94,407 49,288 115,507
Due to affiliates 3,920 6,228 20,399
----------- ----------- ------------
Total adjustments 1,218,767 1,243,472 411,218
----------- ----------- ------------
Net cash provided by operating activities 2,863,918 2,955,792 1,621,237
----------- ----------- ------------
Cash flows from investing activities:
Decrease in construction payables 0 (248,870) (335,406)
Investment in real estate (3,500) (534,944) (19,131,612)
----------- ----------- ------------
Net cash used in investing activities (3,500) (783,814) (19,467,018)
----------- ----------- ------------
Cash flows from financing activities:
Contributions from joint venture partners 0 486,098 19,316,193
Distributions to joint venture partners (2,901,686) (2,838,736) (1,057,327)
----------- ----------- ------------
Net cash (used in) provided by financing activities (2,901,686) (2,352,638) 18,258,866
----------- ----------- ------------
Net (decrease) increase in cash and cash equivalents (41,268) (180,660) 413,085
Cash and cash equivalents, beginning of year 907,778 1,088,438 675,353
----------- ----------- ------------
Cash and cash equivalents, end of year $ 866,510 $ 907,778 $ 1,088,438
=========== =========== ============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 32,352 $ 1,029,744
=========== =========== ============
</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-15
<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, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 6,698,020 $ 6,454,213
Building and improvements, less accumulated depreciation of
$2,792,068 in 1999 and $1,253,156 in 1998 29,878,541 30,686,845
Construction in progress 0 990
----------- -----------
Total real estate assets 36,576,561 37,142,048
Cash and cash equivalents 1,146,874 1,329,457
Accounts receivable 554,965 133,257
Prepaid expenses and other assets 526,409 441,128
----------- -----------
Total assets $38,804,809 $39,045,890
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 704,914 $ 409,737
Due to affiliates 6,379 4,406
Partnership distributions payable 804,734 1,000,127
----------- -----------
Total liabilities 1,516,027 1,414,270
----------- -----------
Partners' capital:
Wells Real Estate Fund IX 14,590,626 14,960,100
Wells Real Estate Fund X 18,000,869 18,707,139
Wells Real Estate Fund XI 3,308,403 2,521,003
Wells Operating Partnership, L.P. 1,388,884 1,443,378
----------- -----------
Total partners' capital 37,288,782 37,631,620
----------- -----------
Total liabilities and partners' capital $38,804,809 $39,045,890
=========== ===========
</TABLE>
F-16
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- -----------
<S> <C> <C> <C>
Revenues:
Rental income $3,932,962 $2,945,980 $ 28,512
Interest income 120,080 20,438 0
------------ ------------- -----------
4,053,042 2,966,418 28,512
------------ ------------- -----------
Expenses:
Depreciation 1,538,912 1,216,293 36,863
Management and leasing fees 286,139 226,643 1,711
Operating costs, net of reimbursements (43,501) (140,506) 10,118
Property administration expense 63,311 34,821 0
Legal and accounting 35,937 15,351 0
------------ ------------- -----------
1,880,798 1,352,602 48,692
------------ ------------- -----------
Net income (loss) $2,172,244 $1,613,816 $(20,180)
============ ============= ===========
Net income (loss) allocated to Wells Real Estate
Fund IX $ 850,072 $ 692,116 $(10,145)
============ ============= ===========
Net income (loss) allocated to Wells Real Estate
Fund X $1,056,316 $ 787,481 $(10,035)
============ ============= ===========
Net income allocated to Wells Real Estate Fund XI $ 184,355 $ 85,352 $ 0
============ ============= ===========
Net income allocated to Wells Operating Partnership,
L.P. $ 81,501 $ 48,867 $ 0
============ ============= ===========
</TABLE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 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
Net income 850,072 1,056,316 184,355 81,501 2,172,244
Partnership contributions 198,989 0 911,027 0 1,110,016
Partnership distributions (1,418,535) (1,762,586) (307,982) (135,995) (3,625,098)
----------- ----------- ---------- ----------------- ------------
Balance, December 31, 1999 $14,590,626 $18,000,869 $3,308,403 $1,388,884 $37,288,782
=========== =========== ========== ================= ============
</TABLE>
F-17
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,172,244 $ 1,613,816 $ (20,180)
------------- ------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,538,912 1,216,293 36,863
Changes in assets and liabilities:
Accounts receivable (421,708) (92,745) (40,512)
Prepaid expenses and other assets (85,281) (111,818) (329,310)
Accounts payable 295,177 29,967 379,770
Due to affiliates 1,973 1,927 2,479
------------- ------------- -------------
Total adjustments 1,329,073 1,043,624 49,290
------------- ------------- -------------
Net cash provided by operating activities 3,501,317 2,657,440 29,110
------------- ------------- -------------
Cash flows from investing activities:
Investment in real estate (930,401) (24,788,070) (5,715,847)
------------- ------------- -------------
Cash flows from financing activities:
Distributions to joint venture partners (3,820,491) (1,799,457) 0
Contributions received from partners 1,066,992 24,970,373 5,975,908
------------- ------------- -------------
Net cash (used in) provided by financing
activities (2,753,499) 23,170,916 5,975,908
------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents (182,583) 1,040,286 289,171
Cash and cash equivalents, beginning of year 1,329,457 289,171 0
------------- ------------- -------------
Cash and cash equivalents, end of year $ 1,146,874 $ 1,329,457 $ 289,171
============= ============= =============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 43,024 $ 1,470,780 $ 318,981
============= ============= =============
Contribution of real estate assets to joint venture $ 0 $ 5,010,639 $ 1,090,887
============= ============== =============
</TABLE>
F-18
<PAGE>
5. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1999, 1998, and 1997 is calculated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Financial statement net income $1,490,331 $1,449,955 $1,091,766
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 521,336 519,485 193,418
Rental income accrued for financial reporting
purposes in excess of amounts for income tax
purposes (89,669) (67,452) (221,689)
Expenses deductible when paid for income tax
purposes, accrued for financial reporting purposes 2,544 4,023 10,184
Expenses capitalized for income tax purposes,
deducted for financial reporting purposes 0 0 10,145
---------- ---------- ----------
Income tax basis net income $1,924,542 $1,906,011 $1,083,824
========== ========== ==========
</TABLE>
The Partnership's income tax basis partners' capital at December 31, 1999, 1998,
and 1997 is computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Financial statement partners' capital $27,316,507 $28,526,460 $29,508,718
Increase (decrease) in partners' capital
resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 1,242,130 720,794 201,309
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 5,223,360
Accumulated rental income accrued for
financial reporting purposes in excess of
amounts for income tax purposes (380,905) (291,236) (223,784)
Accumulated expenses deductible when paid for
income tax purposes, accrued for financial
reporting purposes 16,751 14,207 10,184
Accumulated expenses capitalized for income
tax purposes, deducted for financial
reporting purposes 10,145 10,145 10,145
Partnership's distributions payable 628,046 681,204 437,180
----------- ----------- ------------
Income tax basis partners' capital $34,056,034 $34,884,934 $35,167,112
=========== =========== ============
</TABLE>
19
<PAGE>
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, 1999 is as follows:
Year ending December 31:
2000 $ 2,813,913
2001 2,795,697
2002 2,700,271
2003 2,520,162
2004 2,187,733
Thereafter 7,147,781
-----------
$20,165,557
===========
Five tenants contributed approximately 13%, 13%, 11%, 10%, and 10% of
rental income. In addition, four tenants will contribute approximately 21%,
16%, 12%, and 12% of future minimum rental income.
The future minimum rental income due Fund VIII and IX Associates under
noncancelable operating leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $ 3,056,160
2001 3,077,130
2002 3,225,470
2003 2,775,782
2004 2,205,354
Thereafter 11,335,317
-----------
$25,675,213
===========
Five tenants contributed 29%, 23%, 21%, 14%, and 10% of rental income. In
addition, four tenants will contribute approximately 36%, 28%, 21%, and 11%
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, 1999 is as follows:
Year ending December 31:
2000 $ 3,666,570
2001 3,595,686
2002 3,179,827
2003 3,239,080
2004 3,048,152
Thereafter 5,181,003
-----------
$21,910,318
===========
Four tenants contributed 25%, 18%, 13%, and 12% of rental income. In
addition, four tenants will contribute 28%, 22%, 15%, and 10% of future
minimum rental income.
20
<PAGE>
7. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 Quarters Ended
--------------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 409,083 $ 420,584 $ 408,547 $ 355,520
Net income 380,224 386,758 390,959 332,390
Net income allocated to Class A limited
partners 685,045 689,221 693,905 645,465
Net loss allocated to Class B limited partners (304,821) (302,463) (302,946) (313,075)
Net income per weighted average Class A
limited partner unit (a) $ 0.23 $ 0.23 $ 0.23 $ 0.21
Net loss per weighted average Class B limited
partner unit (a) (0.66) (0.66) (0.68) (0.73)
Cash distribution per weighted average Class
A limited partner unit 0.23 0.23 0.23 0.20
</TABLE>
(a) The totals of the four quarterly amounts for the year ended
December 31, 1999 do not equal the totals for the year. This
difference results from the use of a weighted average to compute
the number of units outstanding for each quarter and the year.
<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
</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-21
<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., and
Wells Real Estate Investment
Trust, Inc.:
We have audited the accompanying balance sheets of THE OHMEDA BUILDING as of
December 31, 1999 and 1998 and the related statements of income, partners'
capital, and cash flows for the year ended December 31, 1999 and 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 the Ohmeda Building as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the year ended December 31, 1999 and for the period from inception (February
13, 1998) to December 31, 1998 in conformity with accounting principles
generally accepted in the United States.
Atlanta, Georgia
January 20, 2000
F-22
<PAGE>
THE OHMEDA BUILDING
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
REAL ESTATE ASSETS:
Land $ 2,746,894 $ 2,746,894
Building and improvements, less accumulated depreciation of
$625,416 in 1999 and $299,112 in 1998 7,532,186 7,858,490
----------- -----------
Total real estate assets 10,279,080 10,605,384
CASH AND CASH EQUIVALENTS 902,987 983,061
ACCOUNTS RECEIVABLE 198,583 13,969
----------- -----------
Total assets $11,380,650 $11,602,414
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 249,707 $ 157,691
Distributions payable to partners 815,107 825,380
----------- -----------
Total liabilities 1,064,814 983,071
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
Wells Real Estate Fund IX, L.P. 3,401,108 3,519,869
Wells Real Estate Fund X, L.P. 6,971,508 7,119,063
Wells Real Estate Fund XI, L.P. (38,262) (12,456)
Wells Real Estate Investment Trust, Inc. (18,518) (7,133)
----------- -----------
Total partners' capital 10,315,836 10,619,343
----------- -----------
Total liabilities and partners' capital $11,380,650 $11,602,414
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-23
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
REVENUES:
Rental income $1,027,314 $898,901
---------- --------
EXPENSES:
Depreciation 326,304 299,112
Operating costs, net of reimbursements (18,633) 663
Management and leasing fees 46,911 41,688
Legal and accounting 3,450 2,200
---------- --------
358,032 343,663
---------- --------
NET INCOME $ 669,282 $555,238
========== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND IX, L.P. $ 261,867 $243,597
========== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND X, L.P. $ 325,357 $271,294
========== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND XI, L.P. $ 56,955 $ 25,656
========== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE INVESTMENT TRUST, INC. $ 25,103 $ 14,691
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Wells Real
Wells Real Wells Real Wells Real Estate Total
Estate Estate Estate Investment Partners'
Fund IX, L.P. Fund X, L.P. Fund XI, L.P. Trust, Inc. Capital
------------- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ 0 $ 0 $ 0 $ M 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
Net income 261,867 325,357 56,955 25,103 669,282
Distributions (380,628) (472,912) (82,761) (36,488) (972,789)
------------- ------------ ------------- ------------ -----------
BALANCE, December 31, 1999 $ 3,401,108 $ 6,971,508 $ (38,262) $ (18,518) $10,315,836
============= ============ ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
--------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 669,282 $ 555,238
--------- ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 326,304 299,112
Changes in assets and liabilities:
Accounts receivable (184,614) (13,969)
Accounts payable and accrued expenses 92,016 157,691
--------- ------------
Total adjustments 233,706 442,834
--------- ------------
Net cash provided by operating activities 902,988 998,072
--------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate 0 (10,904,496)
--------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions received from partners 0 10,889,485
Distributions paid to partners (983,062) 0
--------- ------------
Net cash (used in) provided by financing activities (983,062) 10,889,485
--------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (80,074) 983,061
CASH AND CASH EQUIVALENTS, beginning of period 983,061 0
--------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 902,987 $ 983,061
========= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-26
<PAGE>
THE OHMEDA BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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
IX"), Wells Real Estate Fund X, L.P. ("Fund X"), Wells Real Estate Fund XI,
L.P. ("Fund XI"), and Wells Real Estate Investment Trust, Inc. ("REIT"). As
of December 31, 1999, Fund IX, Fund X, Fund XI, and REIT owned 39%, 48%,
9%, 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,
1999.
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 term of the
lease.
F-27
<PAGE>
Cash and Cash Equivalents
For the purpose of the statements of cash flow, Ohmeda considers all highly
liquid investments 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.
2. RENTAL INCOME
The future minimum rental income due Ohmeda under noncancelable operating
leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $1,004,517
2001 1,004,517
2002 1,004,517
2003 1,050,509
2004 1,102,639
Thereafter 92,250
-----------
$5,258,949
===========
One tenant contributed 100% of rental income for the year ended December
31, 1999 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund IX, Fund X, Fund XI, and REIT Associates entered into a property
management agreement with Wells Management Company, Inc. ("Wells
Management"), an affiliate of Fund IX, Fund X, Fund XI, and REIT
Associates. In consideration for supervising management of the property,
Fund IX, Fund X, Fund XI, and REIT Associates 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 $46,911 and $41,688 for the
years ended December 31, 1999 and 1998, respectively, which were paid to
Wells Management.
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Ohmeda or its partners. In the
normal course of business, Ohmeda or its partners may become subject to
such litigation or claims.
F-28
<PAGE>
WELLS REAL ESTATE FUND IX, L.P.
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial Cost
--------------------------- Costs of
Building and Capitalized
Description Ownership Encumbrances Land Improvements Improvements
- ------------ --------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
ABB PROPERTY (a) 39% None $ 582,897 $ 744,164 $ 6,616,885
TCI-DALLAS PROPERTY (b) 45 None 650,000 0 4,016,866
U.S. CELLULAR PROPERTY (c) 45 None 833,942 0 10,055,562
MATSUSHITA PROPERTY (d) 45 None 2,108,304 5,120,835 383,594
CIRRUS LOGIC PROPERTY (e) 45 None 881,840 6,182,710 402,096
LUCENT TECHNOLOGIES (f) 39 None 1,002,723 4,386,374 242,241
360 INTERLOCKEN (g) 39 None 1,570,000 6,733,500 437,266
IOMEGA PROPERTY (h) 39 None 597,000 4,674,624 876,459
OHMEDA PROPERTY (i) 39 None 2,613,600 7,762,481 528,415
------------ ------------ ------------
Total $10,840,306 $35,604,688 $23,559,384
------------ ------------ ------------
<CAPTION>
Gross Amount at Which Carried at December 31, 1999
--------------------------------------------------------------------------
Buildings and Construction
Description Land Improvements in Progress Total
- ------------ --------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
ABB PROPERTY (a) $ 607,930 $ 7,336,016 $ 0 $ 7,943,946
TCI-DALLAS PROPERTY (b) 677,914 3,988,952 0 4,666,866
U.S. CELLULAR PROPERTY (c) 896,698 9,992,806 0 10,889,504
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) 1,051,138 4,580,200 0 5,631,338
360 INTERLOCKEN (g) 1,650,070 7,090,696 0 8,740,766
IOMEGA PROPERTY (h) 641,988 5,506,095 0 6,148,083
OHMEDA PROPERTY (i) 2,746,894 8,157,602 0 10,904,496
----------- ------------ -------- -------------
Total $11,422,599 $58,581,779 $ 0 $70,004,378
=========== ============ ======== =============
<CAPTION>
Life on Which
Accumulated Date of Date Depreciation
Description Depreciation Construction Acquired Is Computed (j)
------------ ------------ --------- ---------------
<S> <C> <C> <C> <C>
ABB PROPERTY (a) $1,049,682 1997 12/10/96 20 to 25 years
TCI-DALLAS PROPERTY (b) 550,226 1996 10/10/96 20 to 25 years
U.S. CELLULAR PROPERTY (c) 1,479,727 1997 06/17/96 20 to 25 years
MATSUSHITA PROPERTY (d) 647,009 1997 01/10/97 20 to 25 years
CIRRUS LOGIC PROPERTY (e) 818,176 1997 02/20/97 20 to 25 years
LUCENT TECHNOLOGIES (f) 290,075 1998 06/24/98 20 to 25 years
360 INTERLOCKEN (g) 524,979 1996 03/20/98 20 to 25 years
IOMEGA PROPERTY (h) 301,916 1998 07/01/98 20 to 25 years
OHMEDA PROPERTY (i) 625,416 1998 02/13/98 20 to 25 years
----------
Total $6,287,206
==========
</TABLE>
(a) The Knoxville Property consists of a three-storey office building located
in Knoxville, Tennessee. It is owned by Fund IX, X, XI, and REIT Joint
Venture.
(b) The TCI-Dallas Property consists of a one-storey office building located in
Farmers Branch, Texas. It is owned by Fund VII and IX Associates.
(c) The U.S. Cellular Property consists of a four-storey office building
located in Madison, Wisconsin. It is owned by Fund VII and IX Associates.
(d) The Matsushita Property consists of a two-story office building located in
Irvine, California. It is owned by Fund VIII and IX Associates.
(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.
(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.
(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.
(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.
(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.
(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, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
---------------- -------------
<S> <C> <C>
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
1999 additions 976,923 2,803,890
---------------- -------------
BALANCE AT DECEMBER 31, 1999 $70,004,378 $6,287,206
================ =============
</TABLE>
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., as amended to date, Commission 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., as amended to
date, Commission 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., as amended to date, Commission
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., as amended to date, Commission 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., as amended to date,
Commission 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., as amended to date, Commission File
No. 33-83852)
<PAGE>
*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., as amended to date, Commission
File No. 33-83852)
*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., as amended to date, Commission 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., as amended
to date, Commission 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., as amended to date, Commission 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., as amended
to date, Commission 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., as amended to date, Commission
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.,
as amended to date, Commission File No. 33-83852)
<PAGE>
*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., as amended
to date, Commission 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., as amended to date, Commission File No.
33-83852)
*10(n) Lease Agreement for the ABB Building 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.,
as amended to date, Commission File No. 33-83852)
*10(o) Development Agreement relating to the ABB Building 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., as amended to date, Commission File No.
33-83852)
*10(p) Owner-Contractor Agreement relating to the ABB Building 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., as amended to date,
Commission 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, Commission 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, Commission 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
<PAGE>
Fund VIII, L.P. for the fiscal year ended December 31, 1997,
Commission 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, Commission File No. 0-27888)
*10(u) Agreement for the Purchase and Sale of Property with Orix Prime West
Broomfield 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, Commission 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, Commission File No. 0-27888)
*10(w) Joint Venture Agreement of Fund IX and Fund X Associates dated March
20, 1997 (Exhibit 10(g) to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., as amended to date, Commission File No.
333-7979)
*10(x) Agreement for the Purchase and Sale of Real Property relating to the
Lucent Technologies Building 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., as
amended to date, Commission File No. 333-7979)
*10(y) Net Lease Agreement for the Lucent Technologies Building 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., as amended to date, Commission File No.
333-7979)
*10(z) Development Agreement relating to the Lucent Technologies Building
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., as amended to date, Commission File
No. 333-7979)
*10(aa) First Amendment to Net Lease Agreement for the Lucent Technologies
Building dated March 30, 1998 (Exhibit 10.10(a) to
<PAGE>
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(bb) Amended and Restated Joint Venture Agreement of The Fund IX, Fund X,
Fund XI and REIT Joint Venture (the "IX-X-XI-REIT Joint Venture")
dated July 11, 1998 (Exhibit 10.4 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
*10(cc) Agreement for the Purchase and Sale of Real Property relating to the
Ohmeda Building dated November 14, 1997 between Lincor Centennial,
Ltd. and Wells Real Estate Fund X, L.P. (Exhibit 10.6 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(dd) Agreement for the Purchase and Sale of Property relating to the 360
Interlocken Building dated February 11, 1998 between Orix Prime West
Broomfield Venture and Wells Development Corporation (Exhibit 10.7 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(ee) Purchase and Sale Agreement relating to the Iomega Building dated
February 4, 1998 with SCI Development Services Incorporated (Exhibit
10.11 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10(ff) Lease Agreement for the Iomega Building dated April 9, 1996 (Exhibit
10.12 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10(gg) Temporary Lease Agreement for remainder of the ABB Building dated
September 10, 1998 between the IX-X-XI-REIT Joint Venture and
Associates Housing Finance, LLC (Exhibit 10.35 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(hh) Rental Income Guaranty Agreement relating to the Bake Parkway Building
dated February 18, 1999, between Wells Operating Partnership, L.P. and
Fund VIII and Fund IX Associates (Exhibit 10.53 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
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