ITEM 1. BUSINESS - ------------------
General - -------
Wells Real Estate Fund III, L.P. (the "Partnership") is a Georgia public limited partnership having Leo F. Wells, III and Wells Capital, Inc., a Georgia corporation, as General Partners. The Partnership was formed on July 31, 1988, for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing and otherwise managing for investment purposes income-producing commercial or industrial properties.
On October 24, 1988, the Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on October 23, 1990, and received gross proceeds of $22,206,310 representing subscriptions from 2,700 Limited Partners, composed of two classes of limited partnership interests, Class A and Class B limited partnership units.
The Partnership owns interests in properties directly and through equity ownership in the following joint ventures: (i) the Fund II - Fund III Joint Venture, (ii) the Fund II, III, VI and VII Joint Venture, and (iii) the Fund III - - Fund IV Joint Venture.
As of December 31, 2000, the Partnership owned interest in the following properties: (i) the Greenville Property, an office building in Greenville, North Carolina, owned by the Partnership, (ii) The Atrium, an office building in Houston, Texas, owned by the Fund II - Fund III Joint Venture, (iii) the Brookwood Grill, a restaurant located in Roswell, Georgia, owned by the Fund II - - Fund III Joint Venture, (iv) the Stockbridge Village Shopping Center, a retail shopping center located in Stockbridge, Georgia, owned by the Fund III - Fund IV Joint Venture, (v) the Reciprocal Group Building, previously known as the G.E. Office Building, located in Richmond, Virginia, owned by the Fund III - Fund IV Joint Venture, and (vi) an office/retail center in Roswell, Georgia, owned by the Fund II, III, VI and VII Joint Venture. All of the foregoing properties were acquired on an all cash basis.
Employees - ---------
The Partnership has no direct employees. The employees of Wells Capital, Inc., a General Partner of the Partnership, perform a full range of real estate services including leasing and property management, accounting, asset management and investor relations for the Partnership. See Item 11 - "Compensation of General Partners and Affiliates" for a summary of the compensation and fees paid to the General Partners and their affiliates during the fiscal year ended December 31, 2000.
Insurance - ---------
Wells Management Company, Inc., an affiliate of the General Partner, carries comprehensive liability and extended coverage with respect to all the properties owned directly or indirectly by the Partnership. In the opinion of management, 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.
ITEM 2. PROPERTIES - --------------------
The Partnership owns six properties directly or through its ownership in joint ventures of which three are office buildings, one a restaurant, one a retail center and one a retail/office project. 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, 2000, these properties were 81.5% occupied, compared to 93.7% at December 31, 1999, 98.0% at December 31, 1998, and 96.0% at December 31, 1997.
The following table shows lease expirations during each of the next ten years for all leases as of December 31, 2000, assuming no exercise of renewal options or termination rights:
(1) Average monthly gross rent over the life of the lease, annualized.
(2) Expiration of IBM with 23,322 square feet at the Greenville Property.
(3) Expiration of Boeing at The Atrium with 119,040 square feet.
(4) Expiration of Reciprocal Group with 43,000 square feet.
The following describes the properties in which the Partnership owns an interest as of December 31, 2000:
The Greenville Property/ Fund III - ---------------------------------
On June 30, 1990, the Partnership acquired a 2.34 acre tract of land located in Greenville, North Carolina (the "Greenville Property") for a purchase price of the land of $576,350, including acquisition expenses for the purpose of developing, constructing and operating a two-story office building containing approximately 34,300 rentable square feet. As of December 31, 2000, the Partnership had expended approximately $3,778,000 for the acquisition, development and construction of the Greenville Property.
The occupancy rate at the Greenville Property at year end was 77% in 2000, 76% in 1999, 92% in 1998 and 1997 and 100% in 1996.
The average effective annual rental per square foot at the Greenville Property was $16.79 for 2000, $16.18 for 1999, $16.41 for 1998, $16.66 for 1997 and $17.40 for 1996.
One tenant occupies ten percent or more of the rentable square footage - International Business Machines Corporation ("IBM"), a computer sales and service corporation.
The Partnership entered into a net lease with IBM for a portion of the first floor and the entire second floor of the Greenville Property representing approximately 23,300 rentable square feet or approximately 67% of the Greenville Property. The initial term of the IBM lease is nine years and ten months and commenced in April of 1991. IBM has the option to extend the initial term of the lease for two consecutive five-year periods. The annual base rent payable under the IBM lease is $462,242, net of all expenses of operation, and is payable in monthly installments of $38,520.17. The annual base rent will increase in the sixth year of the initial term of the lease to $478,101 payable in equal monthly installments of $39,841.75 and will remain constant for each of the subsequent years in the initial term of the lease. In addition to the base rent, IBM is required to pay additional rent equal to its share of all operating expenses during the lease term.
The lease provides IBM with the right of first refusal to purchase the Greenville Property should the Partnership receive a bona fide offer from the third party to purchase the Greenville Property during the term of the lease. IBM also has the right of first refusal to lease all or a portion of any space which may from time to time become available. The IBM lease also provides that the Partnership will not lease or consent to any sublease to any entity which, as a major part of its business engages in sales and services similar to those of IBM.
IBM's lease expires in February 28, 2001. IBM has decided not to exercise their option to renew the lease or purchase the building. Management has hired an outside firm to find a replacement tenant.
The Atrium/Fund II - Fund III Joint Venture - -------------------------------------------
On April 3, 1989, the Partnership formed a joint venture (the "Fund II - Fund III Joint Venture") with an existing joint venture (the "Fund II - Fund II-OW Joint Venture") previously formed between Wells Real Estate Fund II ("Wells Fund II") and Wells Real Estate Fund II-OW ("Wells Fund II-OW"). Wells Fund II and Wells Fund II-OW are public limited partnerships affiliated with the Partnership through common general partners with investment objectives substantially identical to those of the Partnership.
In April 1989, the Fund II - Fund III Joint Venture acquired a four-story office building located on a 5.6 acre tract of land adjacent to the Johnson Space Center in metropolitan Houston, in Nassau Bay, Harris County, Texas, known as "The Atrium at Nassau Bay" (the "Atrium").
The funds used by the Fund II - Fund III Joint Venture to acquire the Atrium were derived from capital contributions made to the Fund II - Fund III Joint Venture by the Fund II - Fund II-OW Joint Venture and the Partnership in the amounts of $8,327,856 and $2,538,000, respectively, for total initial capital contributions of $10,865,856. As of December 31, 2000, the Fund II - Fund II-OW Joint Venture and the Partnership had made total capital contributions to the Fund II - Fund III Joint Venture of approximately $8,330,000 and $4,448,000, respectively, for the acquisition and development of the Atrium.
The Atrium was first occupied in 1987 and contains approximately 119,000 net rentable square feet. Each floor of the Atrium was originally under a separate lease to Lockheed Engineering and Science Company, Inc., a wholly-owned subsidiary of the Lockheed Company, each of which leases had terms of approximately eight years and expired on June 30, 1996, and upon which date Lockheed vacated the property.
On March 3, 1997, a lease was signed with The Boeing Company for the entire Atrium building. The lease is for a period of five years with an option to renew for an additional five year term. The rental rate for the first three years of the lease term is $12.25 per square foot and $12.50 per square foot for the final two years of initial lease term. The rate for the optional five year term will be determined based upon then current market rates. Upon 150 day prior written notice, Boeing has the right to cancel its lease in the event that NASA or another prime contractor were to cancel or substantially reduce its contract. In addition, there is a no-cause cancellation provision at the end of the first three year period. This no-cause cancellation was not exercised. The lease also provides that tenant will pay certain operating expenses in excess of $5.50 per square foot on an annual basis.
Boeing began the move-in phase of its occupancy on April 15, 1997, and occupied The Atrium and began paying rent on May 15, 1997. The total cost of completing the required tenant improvements and outside broker commissions of approximately $1.4 million was funded out of reserves and cash
flows of the Partnership, Wells Fund II and Wells Fund II-OW. As of December 31, 2000, the Partnership had contributed approximately $659,810, Fund II had contributed approximately $387,752, Wells Fund II OW had contributed approximately $21,744, and Fund II Fund III Joint Venture had contributed $330,694 to fund the tenant improvements and outside broker commissions required. As of December 31, 2000, the Fund II, Fund II-OW Joint Venture holds an equity interest of approximately 61%, and the Partnership holds an equity interest of approximately 39% in the Atrium Project.
The occupancy rate at the Atrium property was 100% as of December 31, 2000, 1999 and 1998. The average effective rental per square foot at the Atrium is $12.34 for 2000, $12.35 for 1999 and 1998, $7.77 for 1997 and $8.81 for 1996.
The Brookwood Grill Property/Fund II - Fund III Joint Venture - -------------------------------------------------------------
On January 31, 1990, the Fund II - Fund II-OW Joint Venture acquired a 5.8 acre tract of undeveloped real property at the intersection of Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia (the "Holcomb Bridge Road Property"). The Fund II - Fund II-OW Joint Venture paid $1,848,561, including acquisition expenses, for the 5.8 acre tract of undeveloped property.
On September 20, 1991, the Fund II - Fund II-OW Joint Venture contributed approximately 1.5 acres of the Holcomb Bridge Road Property (the "Brookwood Grill Property"), along with its interest as landlord under the lease agreement referred to below, as a capital contribution to the Fund II - Fund III Joint Venture. As of September 20, 1991, the Fund II - Fund II-OW Joint Venture had expended approximately $2,128,000 for the land acquisition and development of the Brookwood Grill Property.
As of September 20, 1991, a lease agreement was entered into with the Brookwood Grill of Roswell, Inc. for the development of approximately 1.5 acres and the construction of a 7,440 square foot restaurant. This restaurant, which opened early in March 1992, similar in concept to Houston's, Ruby Tuesday, and Friday's. The terms of the lease called for an initial term of 9 years and 11 months, with two additional 10-year option periods. In January 2001, the tenant renewed a ten year lease with a base rental of $286,983 per year for years 1 through 5, and $330,030 per year for years 6 through 10. The Fund II - Fund III Joint Venture has expended approximately $1,100,000 for the development and construction of the restaurant building together with parking areas, driveways, landscaping and other improvements. In addition to the base rent described above, the tenant is required to pay "additional rent" in amounts equal to a 12% per annum return on all amounts expended for such improvements.
The occupancy rate for the Brookwood Grill, a sole tenant, was 100% as of December 31, 2000, 1999 and 1998. The average effective annual rental per square foot at the Brookwood Grill is $30.22 for 2000 and 1999, $30.26 for 1998 and 1997, $30.29 for 1996.
As of December 31, 2000, the Partnership and Fund II - Fund II-OW Joint Venture had made total contributions to the Fund II - Fund III Joint Venture of approximately $1,330,000 and
$2,128,000, respectively, for the acquisition and development of the Brookwood Grill. The Fund II - Fund II-OW Joint Venture holds an approximately 62% equity interest in the Brookwood Grill Property, and the Partnership holds an approximately 38% equity interest in the project.
On January 10, 1995, the remaining 4.3 undeveloped acres of land comprising the Holcomb Bridge Road Property was contributed to a new joint venture, Fund II, III, VI and VII Associates by Fund II - Fund III Joint Venture. This property is described below.
Holcomb Bridge Road Property/Fund II, III, VI and VII Associates - ----------------------------------------------------------------
On January 10, 1995, Fund II - Fund III Joint Venture, Wells Real Estate Fund VI, L.P. ("Wells Fund VI"), a Georgia public limited partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia limited partnership, as general partners, and Wells Real Estate Fund VII, L.P. ("Wells Fund VII"), a Georgia public limited partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia limited partnership, as general partners, entered into a Joint Venture Agreement known as Fund II, III, VI and VII Associates ("Fund II, III, VI and VII Joint Venture"). Wells Partners, L.P. is a private limited partnership having Wells Capital, Inc., a General Partner of the Partnership, as its sole general partner. The investment objectives of Wells Fund VI and Wells Fund VII are substantially identical to those of the Partnership.
In January 1995, the Fund II - Fund III Joint Venture contributed to the Fund II-III-VI-VII Joint Venture approximately 4.3 acres of land at the intersection of Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia (the "Holcomb Bridge Road Property") including land improvements for the development and construction of two buildings with a total of 49,500 square feet. Fourteen tenants occupied the Holcomb Bridge Property as of December 31, 2000, for an occupancy rate of 92% in 2000, 100% in 1999 and 94% in 1998. The average effective annual rental per square foot at the Holcomb Bridge Road Property was $17.55 for 2000, $19.26 for 1999, $17.63 for 1998 and $13.71 for 1997.
As of December 31, 2000, Fund II and Fund III Joint Venture had contributed $1,729,116 in land and improvements for an equity interest of approximately 24.1%, Wells Fund VI had contributed $1,929,541 for an equity interest of approximately 26.9%, and Wells Fund VII had contributed $3,525,041 for an equity interest of approximately 49.0%. The total cost to develop the Holcomb Bridge Road Property was approximately $5,454,582, excluding land.
Fund III - Fund IV Joint Venture - --------------------------------
On March 27, 1991, the Partnership and Wells Real Estate Fund IV, L.P. ("Wells Fund IV"), a Georgia public limited partnership having Leo F. Wells, III and Wells Capital, Inc., a Georgia corporation, as General Partners, formed a Joint Venture known as Fund III and Fund IV Associates (the "Fund III - Fund IV Joint Venture"). The investment objectives of Wells Fund IV are substantially identical to those of the Partnership. The Partnership holds an approximate 57.2% of equity interest in the Fund III - Fund IV Joint Venture which includes a multi-tenant retail center and an office building. As of December 31, 2000, the Partnership had contributed $8,357,551 and Wells Fund IV had contributed $6,415,731 for total contributions of $14,773,282
to the Fund III - Fund IV Joint Venture. The Partnership owns interests in the following two properties through the Fund III - Fund IV Joint Venture.
The Stockbridge Village Shopping Center/Fund III and Fund IV Joint Venture - --------------------------------------------------------------------------
On April 4, 1991, the Fund III - Fund IV Joint Venture purchased 13.62 acres of real property located in Clayton County, Georgia, for the purchase price of $3,057,729 including acquisition costs, for the purpose of developing, constructing and operating a shopping center known as the Stockbridge Village Shopping Center ("Stockbridge Property"). The Stockbridge Property consists of a multi-tenant shopping center containing approximately 112,891 square feet of which approximately 64,097 square feet is occupied by the Kroger Company, a retail grocery chain. This is the only tenant which occupies mores than ten percent of the rentable square feet. The lease with the Kroger Company is for an initial term of 20 years commencing November 14, 1991, with an option to extend for four consecutive five-year periods at the same rental rate as the original lease. The annual base rent payable under the Kroger lease during the initial term is $492,692. The remaining 48,794 square feet is composed of 12 separate retail spaces and 3 free-standing buildings. As of December 31, 2000, the Partnership had contributed a total of $4,574,247 and Wells Fund IV had contributed a total of $5,114,502 to fund total costs of approximately $9,688,749 to fund the acquisition and development of the Stockbridge Property.
The occupancy rate at year end for the Stockbridge Property was 100% in 2000, 95% in 1999 and 100% in 1998. The average effective annual rental per square foot at the Stockbridge Property was $11.29 for 2000, $11.23 for 1999, $10.82 for 1998, $9.86 for 1997 and $9.59 for 1996.
The Reciprocal Group Building, formerly known as The G.E. Building/Fund III - - ----------------------------------------------------------------------------- Fund IV Joint Venture - ---------------------
The Reciprocal Group Building is a two-story office building containing approximately 43,000 square feet located in Richmond, Virginia which was acquired by the Fund III - Fund IV Joint Venture on July 1, 1992 for a purchase price of $4,687,600. As of December 31, 2000, a total of $5,084,533 had been incurred for the acquisition of the Reciprocal Group Building. Of this amount, the Partnership contributed $3,783,304 and Wells Fund IV contributed $1,301,229 to the Fund III - Fund IV Joint Venture.
The G.E. lease expired March 31, 2000. On October 4, 2000, a lease was executed for the entire building to the Reciprocal Group for a term of eight years with occupancy expected in February, 2001. The annual base rent payable for 2001 is $520,300. The cost for new tenant buildout is anticipated to be approximately $1,270,000 of which the Partnership has funded $216,684 and has reserved $626,969 for the remaining buildout.
The occupancy rate at the Reciprocal Group Building was 0% at December 31, 2000 and 100% at December 31, 1999 and 1998. The average effective annual rental per square foot at the Reciprocal Group Building is $3.07 for 2000 and $12.27 for 1999, 1998, 1997 and 1996.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS - --------------------------
There were no material pending legal proceedings known to be contemplated by governmental authorities involving the Partnership during 2000.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS - ---------------------------------------------------------------------------
As of February 28, 2001, the Partnership had 19,635,965 outstanding Class A Units held by a total of 2,309 Limited Partners and 2,544,540 outstanding Class B Units held by a total of 199 Limited Partners. The capital contribution per unit is $1.00. 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.
The General Partners have estimated the investment value of properties held by the Partnership as of December 31, 2000 to be $1.00 per Class A unit and $1.15 per Class B unit based on market conditions existing in early December, 2000. The methodology used for this valuation was to estimate the amount a holder of Partnership Units would receive if the Partnership's properties were all sold in the ordinary course of business as of December 31, 2000, and the proceeds from such sales (without reduction for selling expenses), together with Partnership funds held as of such date, were distributed in a liquidation of the Partnership. This value was confirmed as reasonable by an independent MAI appraiser, David L. Beal Company, although no actual MAI appraisal was performed due to the inordinate expense involved with such an undertaking. The valuation does not include any fractional interest valuation.
Class A Unit holders are entitled to an annual 8% non-cumulative distribution preference over Class B Unit holders as to distributions 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, but are initially allocated none of the depreciation, amortization, cost recovery and interest expense. These items are allocated to Class B Unit holders until their capital account balances have been reduced to zero.
Net Cash From Operations to the Limited Partners is distributed on a quarterly basis unless Limited Partners elect to have their cash distributions paid monthly. Cash distributions made to the Limited Partners during the two most recent fiscal years were as follows:
The cash distributions to Limited Partners holding Class A units were substantially reduced in 2000 due to the vacancy at the Reciprocal Group Building, previously known as the G.E. Building and the cost necessary to lease up the property as previously discussed. Distributions have been reserved for the 2nd, 3rd and 4th quarters of 2000 to fund these costs.
(Remainder of this page left intentionally blank) -------------------------------------------------
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. - --------------------------------
The following sets forth a summary of the selected financial data for the fiscal years ended December 31, 2000, 1999, 1998, 1997 and 1996:
ITEM 7.
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 this 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.
Results of Operations and Changes in Financial Conditions - ---------------------------------------------------------
General - -------
Gross revenues of the Partnership were $818,263 for the fiscal year ended December 31, 2000, as compared to $1,136,759 for the fiscal year ended December 31, 1999, and $1,099,102 for the fiscal year ended December 31, 1998. The decrease for 2000 over 1999, is due primarily to a decrease in equity in income of joint ventures, due to the expiration of G.E.'s lease on March 31, 2000. In 2000, increased rental renewal rates at IBM Greenville caused revenues to increase, partially offsetting the decrease in equity in income of joint ventures. The increase in gross revenues for 1999 over 1998, is due to an increase in equity in income of joint ventures as rental renewal rates increased at Stockbridge Village.
Expenses of the Partnership were $483,976 for the fiscal year ended December 31, 2000, as compared to $427,347 for the fiscal year ended December 31, 1999 and $450,095 for the fiscal year ended December 31, 1998. The increase in 2000 as compared to 1999 is due primarily to higher operating costs resulting from a decrease of tenant reimbursements in 2000. The decrease in 1999 as compared to 1998 is due primarily to no bad debt expense in 1999.
Net income of the Partnership was $334,287 for the fiscal year ended December 31, 2000, as compared to $709,412 for the fiscal year ended December 31, 1999, and $649,007 for the fiscal year ended December 31, 1998. The decrease in net income for 2000 is due primarily to reasons discussed above.
The Partnership's cash distributions to the Limited Partners holding Class A Units were $0.02 per unit for the fiscal year ended December 31, 2000 and $0.08 for 1999. The decrease in distributions for 2000 is due to the reserve of second, third and fourth quarter distributions to fund the tenant improvements at the Reciprocal Group Building. Cash distributions to the Limited Partners holding Class B Units were $0.00 for 2000 and $0.01 for 1999. No cash distributions were made to the General Partners.
Property Operations - -------------------
As of December 31, 2000, the Partnership's ownership interest in the Greenville Property is 100%, Fund II - Fund III Joint Venture is 39% and Fund III - Fund IV Joint Venture is 57%.
As of December 31, 2000, the Partnership owned interests in the following properties:
The Greenville Property/Fund III - --------------------------------
Rental income increased in 2000, as compared to 1999, due to an increase in rental renewal rates and occupancy.
Rental income decreased for the period ended December 31, 1999, as compared to the same period in 1998, due to a decline in occupancy from 92% in 1998 to 76% in 1999. The increase in operating expenses in 2000, as compared to 1999 is due to a decrease in tenant reimbursements. The decrease in operating expenses from $115,693 in 1998, to $111,241 in 1999, was due to a decrease in janitorial contract and supplies.
The real estate taxes were $30,108 for 2000 and $29,228 for 1999 and 1998.
The Partnership's ownership percentage remained constant at 100% for 2000, 1999 and 1998.
The Atrium/Fund II - Fund III Joint Venture - -------------------------------------------
Rental income remained stable in 2000, as compared to 1999 and 1998. Management and leasing expenses increased, as compared to 1999, due to a change in estimated fees recorded in 1998, which resulted in decreased fees in 1999. Other operating expenses increased due primarily to increased expenditures in electricity, HVAC repairs, plumbing repairs, and glass maintenance in the building. As a result, net income and cash distribution to the Fund II - Fund II-IOW Joint Venture decreased.
The Atrium Property incurred property taxes of $187,536 for 2000, $175,360 for 1999 and $148,006 for 1998.
For comments on the general conditions to which the property may be subject, see Item 1, Business, page 2. For additional information on the property, tenants, etc., see Item 2, Properties, page 3.
The Brookwood Grill Property/Fund II - Fund III Joint Venture - -------------------------------------------------------------
Although rental income remained relatively stable in 2000, 1999 and 1998, total revenues decreased in 2000 due to the decrease in equity income from Fund II, III, VI, VII Joint Venture, as the Holcomb Bridge Property decreased its occupancy this year.
Management and leasing expenses decreased in 2000 as compared to 1999, due to a change in estimated fees recorded in 1999. Other operating expenses increased due primarily to appraisal fees for this property and an increase in administrative salaries.
The Brookwood Grill Property incurred property taxes of $17,973 for 2000, $18,055 for 1999, and $16,270 for 1998.
This property is currently being marketed for sale by CB Richard Ellis. The marketing piece is being broadly distributed to investors throughout the country. The Partnership's goal is to have this property sold by the end of 2002.
For comments on the general conditions to which the property may be subject, see Item 1, Business, page 2. For additional information on the property, tenants, etc., see Item 2, Properties, page 3.
Holcomb Bridge Road Property / Fund II - III - VI - VII Joint Venture ---------------------------------------------------------------------
* The Partnership holds a 37.61% ownership in the Fund II - Fund III Joint Venture.
Rental income decreased in 2000, as compared to 1999 and 1998, due to decreased occupancy. Depreciation expense was higher in 1999, as compared to 1998 and 2000, due to increased tenant improvements for new tenants for 1999 and some tenant improvements becoming fully depreciated in 1999. Other operating expenses increased due to appraisal fees for this property and a bad debt recorded in this year.
The Holcomb Bridge Property incurred property taxes of $52,877 for 2000, $53,896 for 1999, and $52,162 for 1998.
This property is currently being marketed for sale by CB Richard Ellis. The marketing piece is being broadly distributed to investors throughout the country. The Partnership's goal is to have this property sold by the end of 2002.
For comments on the general competitive conditions to which the property may be subject, see Item, Business page 2. For additional information on tenants, etc. refer to Item 2, Properties, page 3.
The Reciprocal Group Building, previously known as the G.E. Building/Richmond / - ------------------------------------------------------------------------------- Fund III - Fund IV Joint Venture - --------------------------------
Rental income, net income and cash distributions generated from the Reciprocal Group Building decreased in the second, third and fourth quarters of 2000, as compared to the same periods in 1999, due primarily to G.E.'s lease expiration on March 31, 2000. Other operating expenses have increased due to the fact that G.E. no longer reimburses for the buildings operating costs such as property taxes, electricity and various other expenses. As of October 4, 2000, the entire building has been leased to The Reciprocal Group for a term of eight years with occupancy and rental income commencing in early February, 2001. At this time, the cost for new tenant buildout and building maintenance is anticipated to be approximately $1,270,000, of which the Partnership has funded $216,684.
Real estate taxes were $39,972 for 2000. In prior years, G.E. paid the real estate taxes directly.
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 Stockbridge Village Shopping Center/Fund III - Fund IV Joint Venture - ------------------------------------------------------------------------
Rental income increased for the year ended December 31, 2000, as compared to 1999 and 1998, due to increased occupancy and increased rental renewal rates. Other operating expenses increased due primarily to differences in adjustment for prior year common area maintenance billings to tenants and increased expenditures for depreciation and management and leasing expenses. Tenants are billed an estimated amount for the current year common area maintenance which is then reconciled the following year and the difference billed to the tenant.
Distributions were lower in 2000, as compared to 1999 due primarily to the decreased net income and payments of tenant improvements of $47,000 in 2000.
Real estate taxes were $111,481, $109,806 for 1999 and $110,891 for 1998.
The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in 1999, as compared to 1998, due to additional fundings in 1999 by Wells Fund IV, which decreased the Partnership's ownership in the Fund III - Fund IV Joint Venture.
For comments on the general competitive conditions to which the property may be subject, See Item 1, Business, Page 2. For additional information on tenants, etc. refer to Item 2, Properties, Page 3.
Liquidity and Capital Resources - -------------------------------
During its offering, which terminated on October 23, 1990, the Partnership raised a total of $22,206,310 in capital through the sale of 22,206,310 Units. No additional Units will be sold by the Partnership. From the original funds raised, the Partnership has invested a total of $17,983,843 in properties, paid $1,554,442 in acquisition and advisory fees, $2,664,668 in selling commissions and organization and offering expenses, and is maintaining a working capital reserve of $3,357.
Since the Partnership is an investment partnership formed for the purpose of acquiring, owning and operating income-producing real property and has invested all of its funds available for investment, it is unlikely that the Partnership will acquire interests in any additional properties, and the Partnership's capital resources are anticipated to remain relatively stable over the holding period of its investments.
The Partnership's net cash provided by operating activities increased to $292,753 in 2000, as compared to $271,433 in 1999 due to fluctuations in receivables and payables. The decrease in 1999, as compared to 1998, is due to fluctuations in receivable and payables. Net cash provided by investing activities decreased in 2000 as compared 1999 and in 1998 due to fluctuations of investment in joint ventures and distributions from joint ventures each year. Net cash used in financing activities decreased in 2000 from 1999 and increased in 1999 from 1998 as distributions to limited partners fluctuated. As a result, cash and cash equivalents have increased to $409,476 in 2000 from $128,536 in 1999 and decreased from $156,648 in 1998.
The Partnership's distributions paid for 2000 have been paid from net cash from operations and a return of capital. The Partnership anticipates that distributions will likely continue to be paid on a quarterly basis from such sources for the year 2001.
The Partnership is unaware of any additional demands, commitments, events or capital expenditures other than the tenant improvement costs at the Reciprocal Group Building and that which is required for the normal operations of its properties that will result in the Partnership's liquidity increasing or decreasing in any material way. The Partnership has reserved the second, third and fourth quarter 2000 distribution to fund these costs. The Partnership's portion of these costs are expected to be $726,440 of which $216,684 was funded as of December 31, 2000.
Inflation - ---------
Real estate 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 executed by the Partnership to protect the Partnership from the impact of inflation. These leases contain common area maintenance charges (CAM charges), real estate tax and insurance reimbursements on a per square foot basis, or in some cases, annual reimbursements 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. In addition, a number of the Partnership's leases are for terms of less than five years which may permit the Partnership to replace existing leases with new leases at higher base rental rates if the existing leases are below market rate. There is no assurance, however, that the Partnership would be able to replace existing leases with new leases at higher base rentals.
ITEM 8.
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.
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 2000.
PART III
ITEM 10.
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP - -----------------------------------------------
Wells Capital, Inc. Wells Capital, Inc. ("Capital") is a Georgia corporation - ------------------ formed in April 1984. The executive offices of Capital are located at 6200 The Corners Parkway, Suite 250, Norcross, Georgia 30092. Leo F. Wells, III is the sole Director and the President of Capital.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 57 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 Capital. 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.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES - -----------------------------------------------------------
The following table summarizes the compensation and fees paid to the General Partners and their affiliates during the year ended December 31, 2000:
(1) The majority of these fees are not paid directly by the Partnership but are paid by the joint venture entities which own properties for which the property management and leasing services relate and include management and leasing fees, some of which were accrued for accounting purposes in 2000 but not actually paid until January, 2001.
ITEM 12.
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, 2001:
No arrangements exist which would, upon operation, result in a change in control of the Partnership.
ITEM 13.
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 Sale Proceeds - -------------------------------------------------------
The General Partners receive a subordinated participation in net cash flow from operations equal to 10% of net cash flow after the Limited Partners have received preferential distributions equal to 8% of their adjusted capital contribution. For the year ended December 31, 2000, the General Partners received no cash distributions. The General Partners also receive a subordinated participation in net sale proceeds and net financing proceeds equal to 15% of residual proceeds available for distribution after the Limited Partners have received a return of their adjusted capital contribution plus a 12% cumulative return on their adjusted capital contribution. The General Partners received no distribution from net sales proceeds.
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 6% (3% management and 3% leasing) of rental income. For the year ended December 31, 2000, Wells Management Company, Inc's compensation totaled $228,176 in management and leasing fees. In no event will such fees exceed the sum of (i) 6% of the gross receipts of each property, plus (ii) a separate one-time fee for initial rent-up or leasing-up of development 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. With respect to properties leased on a net basis for a period of ten years or longer, property management fees will not exceed 1% of gross revenues from such leases, plus a one-time initial leasing fee of 3% of the gross revenues which are payable over the first five years of the term of such net leases.
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. During 2000, no real estate commissions were paid to the General Partners.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND -------------------------------------------- REPORTS ON FORM 8-K -------------------
(a)1. The Financial Statements are contained on pages through of this Annual Report on Form 10-K, and the list of the Financial Statements contained herein is set forth on page, 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 2000.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
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 27/th/ day of March, 2001.
Wells Real Estate Fund III (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 Corporate General Partner
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, 2001 - --------------------- Leo F. Wells, III President and Sole Director of Wells Capital, Inc., the Corporate General Partner
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.
INDEX TO THE FINANCIAL STATEMENTS ---------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund III, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND III, L.P. (a Georgia public limited partnership) as of December 31, 2000 and 1999 and the related statements of income, partners' capital, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on those financial statements and schedule 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 and schedule 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 III, L.P. as of December 31, 2000 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 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, 2000 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 30, 2001
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
The accompanying notes are an integral part of these balance sheets.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999, AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund III, L.P. (the "Partnership") is a public limited partnership organized on July 31, 1988, under the laws of the state of Georgia. The general partners are Leo F. Wells, III and Wells Capital, Inc. (the "Company"). The Partnership has two classes of limited partnership interests, Class A and Class B units. 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 above 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 directly owns an office building in Greenville, North Carolina. In addition, the Partnership owns an interest in the following properties through joint ventures between the Partnership and other Wells Real Estate Funds: (i) The Atrium of Nassau Bay ("The Atrium"), a four-story office building located in metropolitan Houston, Texas, (ii) the Brookwood Grill, a restaurant located in Roswell, Georgia, (iii) the Stockbridge Village Shopping Center, a retail shopping center located in Stockbridge, Georgia, southeast of Atlanta, Georgia, (iv) the G.E. Lighting National Customer Center, a two-story office building located in Richmond, Virginia, and (v) an office/retail center in Roswell, Georgia.
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 Partnership recently began considering selling its properties. Management estimates that the net realizable value of each of the properties exceeds the carrying value of the corresponding real estate assets; consequently, no impairment loss has been recorded. In the event that the net sales proceeds are less than the carrying value of the property sold, the Partnership would recognize a loss on the sale. Management is not contractually or financially obligated to sell any of its properties, and it is management's current intent to fully realize the Partnership's investment in real estate. The success of the Partnership's future operations and the ability to realize the 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 that 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.
Distribution of Net Cash From Operations
Cash available for distribution is distributed on a cumulative noncompounded basis to limited partners quarterly. In accordance with the partnership agreement, distributions are paid first to limited partners holding Class A units until they have received an 8% per annum return on their adjusted capital contributions, as defined. Cash available for distribution is then distributed to limited partners holding Class B units until they have received an 8% per annum return on their adjusted capital contributions, as defined. If any cash available for distribution remains, the general partners receive an amount equal to 10% of total net cash from operations distributed. Thereafter, amounts are distributed 10% to the general partners and 90% to the limited partners.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds are distributed in the following order:
. To limited partners until all limited partners have received 100% of their adjusted capital contributions, as defined
. To limited partners holding Class B units until they receive an amount equal to the net cash available for distribution received by the limited partners holding Class A units
. To all limited partners until they receive a cumulative 12% per annum return on their adjusted capital contributions, as defined
. To all limited partners until they receive an amount equal to their respective cumulative distributions, as defined
. To all general partners until they have received 100% of their capital contributions, as defined
. Thereafter, 85% to the limited partners and 15% 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 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, (a) allocations made pursuant to a qualified income offset provision in the partnership agreement; (b) allocations to partners having negative accounts until all negative capital accounts have been restored to zero; and (c) allocations to Class B limited partners in amounts equal to 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.
Real Estate Assets
Real estate assets held by the Partnership directly or through investments in affiliated 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 repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances that could indicate 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 Partnership or its affiliated joint ventures as of December 31, 2000.
Depreciation for buildings and improvements is calculated using the straight-line method over 25 years.
Revenue Recognition
All leases on real estate assets held by the Partnership are classified as operating leases, and the related rental income is recognized on a straight-line basis over the terms of the respective leases.
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 lease.
Investment in Joint Ventures
The Partnership does not have control over the operations of the joint ventures; however, it does exercise significant influence. Accordingly, investments in joint ventures are recorded using the equity method of accounting. The joint ventures follow the same significant accounting policies as the Partnership.
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 individual 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.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership 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 accounts.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year financial statement presentation.
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2000 and 1999 represents advances to Wells Management Company, Inc. ("Wells Management"), an affiliate of the general partners, and the Partnership's share of cash to be distributed from its joint venture investments for the fourth quarters of 2000 and 1999, respectively, as follows:
2000 1999 -------- -------- Fund III and IV Associates $101,504 $232,157 Fund II and III Associates--The Atrium 57,749 39,092 Fund II and III Associates--Brookwood Grill 69,161 47,514 Wells Management Company 3,216 0 -------- -------- $231,630 $318,763 ======== ========
The Partnership entered into a property management agreement with Wells Management. 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, both directly and at the joint venture level, of $228,176, $215,168, and $183,589, for the years ended December 31, 2000, 1999, and 1998, respectively, which were paid to Wells Management.
The Company performs certain administrative services for the Partnership, such as accounting and other partnership administration, and incurs the related expenses. Such expenses are allocated among the various Wells Real Estate Funds based on time spent on each fund by individual administrative personnel. In the opinion of management, such allocation is a reasonable estimation of such expenses.
The general partners are also general partners of other Wells Real Estate Funds. As such, there may exist conflicts of interest where the general partners in the capacity as general partners of other Wells Real Estate Funds may be in competition with the Partnership for tenants in similar geographic markets.
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in the joint ventures at December 31, 2000 and 1999 are summarized as follows:
The following is a rollforward of the Partnership's investment in joint ventures for the years ended December 31, 2000 and 1999:
Fund II and III Associates
On April 3, 1989, the Partnership entered into a joint venture agreement with the Fund II and II-OW joint venture. The new joint venture, Fund II and III Associates, was formed for the purpose of investing in commercial real properties. In April 1989, Fund II and III Associates acquired The Atrium. In 1991, the Fund II and II-OW joint venture contributed its interest in a parcel of land known as the 880 Property located in Roswell, Georgia, to Fund II and III Associates. The property is a 5.8 acre tract of land. A restaurant was developed on 1.5 acres of the 880 Property and is currently operating as the Brookwood Grill restaurant ("Fund II and III Associates--Brookwood Grill"). The remaining 4.3 acres of the 880 Property were transferred at cost to the Fund II, III, VI, and VII Associates joint venture during 1995. Fund II and III Associates' investment in this transferred parcel of the 880 Property was $1,305,317 and $1,406,591 at December 31, 2000 and 1999, respectively, which represented a 24% interest for each year.
The Atrium was fully occupied from inception through June 1996, at which time the previous tenant's lease expired. In March 1997, a lease was signed with a new tenant for the entire building and the new tenant began paying rent in May 1997. The lease term is for five years with an option to renew for an additional five years. There is no-cause cancellation provision at the end of the first three-year period. If this no-cause cancellation is exercised, the tenant would be required to pay unamortized, up-front tenant improvement costs. The cost of completing the required tenant improvements and outside broker commissions was funded out of reserves and contributions by the Partnership and Fund II and II-OW.
Following are the financial statements for Fund II and III Associates--The Atrium:
Fund II and III Associates--The Atrium (A Georgia Joint Venture) Balance Sheets December 31, 2000 and 1999
Fund II and III Associates--The Atrium (A Georgia Joint Venture) Statements of Loss for the Years Ended December 31, 2000, 1999, and 1998
Fund II and III Associates--The Atrium (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998
Fund II and III Associates--The Atrium (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998
Following are the financial statements for Fund II and III Associates--Brookwood Grill:
Fund II and III Associates--Brookwood Grill (A Georgia Joint Venture) Balance Sheets December 31, 2000 and 1999
Fund II and III Associates--Brookwood Grill (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2000, 1999, and 1998
Fund II and III Associates--Brookwood Grill (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998
Fund II and III Associates--Brookwood Grill (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998
Fund II, III, VI, and VII Associates--Holcomb Bridge
On January 1, 1995, the Fund II and III Associates joint venture entered into a joint venture agreement with Wells Real Estate Fund VI, L.P. ("Fund VI") and Wells Real Estate Fund VII, L.P. ("Fund VII"). The joint venture, Fund II, III, VI, and VII Associates, was formed for the purpose of acquiring, developing, operating, and selling real properties. During 1995, Fund II and III Associates contributed a 4.3-acre tract of land from its 880 Property--Holcomb Bridge to the Fund II, III, VI, and VII Associates joint venture. During 1998, 1997, and 1996, Fund VI and Fund VII made contributions to the joint venture. Ownership percentage interests were recompleted accordingly. Development was substantially completed in 1996 on two retail and office buildings containing a total of approximately 49,500 square feet.
The following are the financial statements for Fund II, III, VI, and VII Associates:
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Balance Sheets December 31, 2000 and 1999
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2000, 1999, and 1998
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998
Fund III and IV Associates
On March 27, 1991, the Partnership entered into a joint venture with Wells Real Estate Fund IV, L.P. The joint venture, Fund III and IV Associates, was formed for the purpose of developing, constructing, and operating the Stockbridge Village Shopping Center in Stockbridge, Georgia. In addition, in July 1992, Fund III and IV Associates purchased the G.E. Lighting National Customer Center in Richmond, Virginia.
The following are the financial statements for Fund III and IV Associates:
Fund III and IV Associates (A Georgia Joint Venture) Balance Sheets December 31, 2000 and 1999
Fund III and IV Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2000, 1999, and 1998
Fund III and IV Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998
Fund III and IV Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December 31, 2000, 1999, and 1998 is calculated as follows:
The Partnership's income tax basis partners' capital at December 31, 2000, 1999, and 1998 is computed as follows:
5. RENTAL INCOME
The future minimum rental income due from the Partnership's direct investment in real estate or its respective ownership interest in joint ventures under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $ 2,213,498 2002 1,616,689 2003 1,172,520 2004 1,095,438 2005 1,056,484 Thereafter 4,549,577 ------------ $ 11,704,206 ============
Three tenants contributed approximately 27%, 21%, and 13% of revenues. In addition, three tenants will contribute approximately 22%, 18%, and 17% of future minimum rental income.
The future minimum rental income due Fund II and III Associates--The Atrium under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $1,488,000 2002 620,000 ---------- $2,108,000 ==========
One tenant at the Atrium contributed 100% of rental income for the year ended December 31, 2000 and will contribute 100% of future minimum rental income.
The future minimum rental income due Fund II and III Associates--Brookwood Grill under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $ 249,550 2002 25,995 ----------- $ 275,545 ===========
One tenant contributed 100% of rental income for the year ended December 31, 2000 and will contribute 100% of future minimum rental income.
The future minimum rental income due Fund II, III, VI, and VII Associates under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $ 816,533 2002 539,270 2003 255,097 2004 219,319 2005 127,850 Thereafter 21,308 ----------- $ 1,979,377 ===========
Three tenants contributed approximately 15%, 14%, and 13% of rental income for the year ended December 31, 2000. In addition, four tenants will contribute approximately 33%, 13%, 13%, and 11% of future minimum rental income.
The future minimum rental income due Fund III and IV Associates under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $ 2,201,798 2002 2,100,205 2003 1,893,006 2004 1,864,303 2005 1,827,107 Thereafter 7,950,490 ----------- $17,836,909 ===========
Two tenants contributed approximately 35% and 10% of rental income for the year ended December 31, 2000. In addition, one tenant will contribute approximately 30% of future minimum rental income.
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2000 and 1999:
(a) The totals of the four quarterly amounts for the year ended December 31, 2000 do not equal the totals for the year. This difference results from rounding differences between quarters.
7. 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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund II, Wells Real Estate Fund II-OW, and Wells Real Estate Fund III, L.P.:
We have audited the accompanying balance sheets of THE ATRIUM BUILDING as of December 31, 2000 and 1999 and the related statements of loss, partners' capital, and cash flows for each of the three years in the period ended December 31, 2000. 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 Atrium Building as of December 31, 2000 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia January 30, 2001
THE ATRIUM BUILDING
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
The accompanying notes are an integral part of these balance sheets.
THE ATRIUM BUILDING
STATEMENTS OF LOSS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
THE ATRIUM BUILDING
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
THE ATRIUM BUILDING
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
The accompanying notes are an integral part of these statements.
THE ATRIUM BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999, AND 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Atrium Building ("Atrium") is a four-story office building located in Houston, Harris County, Texas. The building is owned by Fund II and III Associates, a joint venture between Wells Real Estate Fund II ("Fund II"), Wells Real Estate Fund II-OW ("Fund II-OW"), and Wells Real Estate Fund III, L.P. ("Fund III). Fund II owns 58% of Atrium, Fund II-OW owns 3% of Atrium, and Fund III owns 39% of Atrium at December 31, 2000. Allocation of net loss 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
Atrium 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 Atrium as of December 31, 2000.
Depreciation is calculated using the straight-line method over 25 years.
Revenue Recognition
The lease on Atrium is classified as an operating lease, and the related rental income is recognized on a straight-line basis over the term of the lease.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are capitalized and amortized on a straight-line basis over the terms of the related leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Atrium 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 accounts.
2. RENTAL INCOME
The future minimum rental income due to Atrium under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31: 2001 $1,488,000 2002 620,000 ---------- $2,108,000 ==========
One tenant contributed 100% of rental income for the year ended December 31, 2000 and represents 100% of the future minimum rental income above. This tenant has the option to renew an additional five-year lease term upon the expiration of the current lease during 2002.
3. RELATED-PARTY TRANSACTIONS
Fund II and II-OW and Fund III entered into a property management agreement with Wells Management Company, Inc. ("Wells Management"), an affiliate of Fund II and II-OW and Fund III. In consideration for supervising the management of Atrium, Fund II and II-OW and Fund III 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.
Atrium incurred management and leasing fees of $95,290, $90,018, and $186,102, for the years ended December 31, 2000, 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 Atrium or its partners. In the normal course of business, Atrium or its partners may become subject to such litigation or claims.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(a) The Atrium at Nassau Bay is a four-story office building located in Houston, Texas. It is owned by Fund II and III Associates.
(b) The Greenville Project is a two-story office building located in Greenville, North Carolina, owned entirely by the Partnership.
(c) The 880 Property--Brookwood Grill is a 7,440-square-foot restaurant located in Fulton County, Georgia. It is owned by Fund II and III Associates.
(d) Stockbridge Village is a 13.62-acre retail shopping center located in Stockbridge, Georgia. It is owned by Fund III and IV Associates.
(e) The Reciprocal Group is a 43,000-square-foot office building located in Richmond, Virginia. It is owned by Fund III and IV Associates.
(f) The 880 Property is an office-retail shopping center located in Roswell, Georgia. It is owned by Fund II, III, VI, and VII Associates.
(g) Depreciation lives used for buildings were 40 years through September 1995, changed to 25 years thereafter. Depreciation lives used for land improvements are 12 to 20 years.
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
S-2
EXHIBIT INDEX -------------
(Wells Real Estate Fund III, 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 Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*4(a) Agreement of Limited Partnership of N/A Wells Real Estate Fund III, L.P. (Registration Statement of Wells Real Estate Fund III, L.P., Exhibit B to the Prospectus, File No. 33-24063)
*4(b) Amendment to Agreement of Limited N/A Partnership of Wells Real Estate Fund III, L.P. (Exhibit 4(a) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund III, L.P., File No. 33-24063)
*4(c) Second Amendment to Agreement of N/A Limited Partnership of Wells Real Estate Fund III, L.P. (Exhibit 4(a) to Post-Effective Amendment No. 5 to Registration Statement of Wells Real Estate Fund III, L.P., File No. 33-24063)
*4(d) Third Amendment to Agreement of N/A Limited Partnership of Wells Real Estate Fund III, L.P. (Exhibit to Post-Effective Amendment No. 7 to Registration Statement of Wells Real Estate Fund III, L.P., File No. 33-24063)
Exhibit Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*10(a) Management Agreement between Registrant N/A and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(b) Leasing and Tenant Coordination Agreement N/A between Registrant and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(c) Purchase Agreement for the Acquisition N/A of the Atrium at Nassau Bay dated March 1, 1989 (Exhibit 10(i) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No. 0-16518)
*10(d) Joint Venture Agreement of Fund II and N/A Fund III Associates dated March 1, 1989 (Exhibit to Post-Effective Amendment No. 2 to Registration Statement of Wells Real Estate Fund III, L.P., File No. 33-24063)
*10(e) First Amendment to Joint Venture Agreement N/A of Fund II and Fund III Associates dated April 1, 1989 (Exhibit 10(k) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No. 0-16518)
*10(f) Leases with Lockheed Engineering and N/A Sciences Company, Inc. (Exhibit 10(l) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No. 0-16518)
Exhibit Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*10(g) Custodial Agency Agreement between N/A Registrant and Citizens and Southern Trust Company (Georgia), National Association dated January 1, 1990 (Exhibit to Post-Effective Amendment No. 5 to Registration Statement of Wells Real Estate Fund III, L.P., File No. 33-24063)
*10(h) Purchase Agreement for the Acquisition N/A of the Greenville Property dated April 10, 1990 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(i) Development Agreement with ADEVCO N/A Corporation dated June 15, 1990 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(j) Construction Contract with McDevitt N/A & Street Company dated May 31, 1990 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(k) Lease with International Business N/A Machines Corporation dated May 15, 1990 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1990, File No. 0-18407)
*10(l) Amended and Restated Joint Venture N/A Agreement of Fund II and Fund III Associates (Exhibit 10(o) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1991, File No. 0-16518)
Exhibit Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*10(m) Land and Building Lease Agreement between N/A Fund II and Fund II-OW and Brookwood Grill of Roswell, Inc. (Exhibit 10(p) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1991, File No. 0-16518)
*10(n) Assignment and Assumption of Lease dated N/A September 20, 1991 between Fund II and Fund II-OW and Fund II and Fund III Associates (Exhibit 10(q) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1991, File No. 0-16518)
*10(o) Fund III and Fund IV Associates Joint N/A Venture Agreement dated March 27, 1991 (Exhibit 10(g) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(p) Agreement of Purchase and Sale dated N/A October 31, 1990 between 675 Industrial Park, Ltd. and The Vlass-Fotos Group, Inc. (Exhibit 10(h) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(q) Lease dated January 31, 1991 between The N/A Vlass-Fotos Group, Inc. and The Kroger Co. (Exhibit 10(i) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
Exhibit Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*10(r) Lease Agreement dated January 31, 1991 N/A between The Vlass-Fotos Group, Inc. and The Kroger Co. (Exhibit 10(j) to Post- Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(s) First Amendment to Lease dated April 3, N/A 1991 between The Vlass-Fotos Group, Inc. and The Kroger Co. (Exhibit 10(k) to Post- Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(t) First Amendment to Lease Agreement dated N/A April 3, 1991 between The Vlass-Fotos Group, Inc. and The Kroger Co. (Exhibit 10(l) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(u) Development Agreement dated April 4, 1991 N/A between Fund III and Fund IV Associates and The Vlass-Fotos Group, Inc. (Exhibit 10(m) to Post-Effective Amendment No. 1 to Registration Statement of Wells Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P., File No. 33-37830)
*10(v) First Amendment to Joint Venture Agreement N/A of Fund III and IV Associates dated July 1, 1992 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1992, File No. 0-18407)
Exhibit Sequential Number Description of Document Page Number - ------ ----------------------- -----------
*10(w) Agreement for the Purchase and Sale of N/A Property between Rowe Properties-Markel, L.P. and Fund III and Fund IV Associates and Addendum to Agreement for the Purchase and Sale of Property (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1992, File No. 0-18407)
*10(x) Office Lease with G.E. Lighting, Rider N/A No. 1 to Lease, Addendum of Lease, Second Addendum of Lease, Third Amendment of Lease and Fourth Amendment to Office Lease (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1992, File No. 0-18407)
*10(y) Amended and Restated Custodial Agency N/A Agreement between Wells Real Estate Fund III, L.P. and NationsBank of Georgia, N.A. dated April 1, 1994 (Exhibit to Form 10-K of Wells Real Estate Fund III, L.P. for the fiscal year ended December 31, 1994, File No. 0-18407)
*10(z) Joint Venture Agreement of Fund II, III, N/A VI and VII Associates (Exhibit to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1995, File No. 0-23656)