ITEM 1. BUSINESS
General
Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia public limited partnership, with Leo F. Wells, III and Wells Partners, L.P. ("Wells Partners"), a Georgia nonpublic limited partnership, serving as General Partners. The Partnership was formed on December 1, 1992 for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income-producing commercial properties for investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B Units. Limited Partners 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) add or 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.
On April 6, 1994, the Partnership commenced an offering of up to $25,000,000 of Class A or Class B limited partnership units ($10 per unit) pursuant to a Registration Statement on Form S-11 filed under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 units on April 26, 1994. The Partnership terminated its offering on January 5, 1995 upon receiving gross proceeds of $24,180,174 representing subscriptions for 1,678,810 Class A Units and 739,207 Class B Units held by 1,591 and 319 Limited Partners, respectively.
Employees
The Company has no direct employees. The employees of Wells Capital, Inc. and Wells Management Company, Inc. perform a full range of real estate services including leasing and property management, accounting, asset management and investor relations for the Company.
Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries comprehensive liability and extended coverage with respect to all of the properties owned by the Partnership through its interests in joint ventures. In the opinion of management, all such 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 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 that 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 interests in properties through the following joint ventures between the Partnership and other affiliated limited partnerships: (i) Fund V, Fund VI, and Fund VII Associates, a joint venture between the Partnership, Wells Real Estate Fund V, L.P. ("Wells Fund V"), and Wells Real Estate Fund VI, L.P. ("Wells Fund VI") (the "Fund V-VI-VII Joint Venture"), (ii) Fund VI and Fund VII Associates, a joint venture between the Partnership and Wells Fund VI (the "Fund VI-VII Joint Venture"), (iii) Fund II, III, VI, and VII Associates, a joint venture among the Partnership, Wells Fund II-III Associates and Wells Fund VI, (the "Fund II-III-VI-VII Joint Venture"), (iv) Fund VII and Fund VIII Associates, a joint venture between the Partnership and Wells Real Estate Fund VIII, L.P. ("Wells Fund VIII") (the "Fund VII-VIII Joint Venture"), (v) Fund VI, Fund VII, and Fund VIII Associates, a joint venture between the Partnership, Wells Fund VI and Wells Fund VIII (the "Fund VI-VII-VIII Joint Venture"), and (vi) Fund I, II, IIOW, VI, and VII Associates, a joint venture between the Partnership, Wells Real Estate Fund I ("Wells Fund I"), the Fund II and Fund IIOW Joint Venture, and Wells Fund VI (the "Fund I-II-IIOW-VI-VII Joint Venture"). The Fund II and Fund IIOW Joint Venture is a joint venture between Wells Real Estate Fund II ("Wells Fund II") and Wells Real Estate Fund II-OW ("Wells Fund IIOW"). Wells Fund II-III Associates is a joint venture between the Fund II and IIOW Joint Venture and Wells Real Estate Fund III, L.P. ("Wells Fund III"). 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.
As of December 31, 2001, the Partnership owned interests in the following properties through its ownership in the foregoing joint ventures: (i) a three-story office building located in Appleton, Wisconsin (the "Marathon Building"), (ii) two retail buildings located in Stockbridge, Georgia ("Stockbridge Village III"), (iii) a retail shopping center expansion located in Stockbridge, Georgia ("Stockbridge Village I Expansion"), (iv) an office/retail center located in Roswell, Georgia ("Holcomb Bridge Property"), (v) a retail center located in Stockbridge, Georgia ("Hannover Center"), (vi) a four-story office building located in Jacksonville, Florida ("BellSouth Building"), (vii) an office building located in Gainesville, Florida ("CH2M Hill at Gainesville Property"), and (viii) a retail center in Clemmons, North Carolina ("Tanglewood Commons").
On October 1, 2001, the Fund I-II-IIOW-VI-VII Joint Venture sold Cherokee Commons for net sale proceeds of $8,434,089 and recognized a gain of $1,725,015 on the sale. The Partnership was allocated taxable gain of $21,867 and net sale proceeds of $903,122 from this transaction.
The following table shows lease expirations during each of the next ten years for all leases at properties in which the Partnership owned an interest through the joint ventures described above as of December 31, 2001, assuming no exercise of renewal options or termination rights:
(1) Average monthly gross rent over the life of the lease, annualized. (2) Primarily expiration of CH2M Hill lease (57,547 square feet). (3) Primarily expirations of Marathon lease (76,000 square feet), BellSouth lease (70,234 square feet), American Express lease at BellSouth Building (22,607 square feet), Mattress King lease at Hannover Center (6,020 square feet), and Bertucci's lease at the Holcomb Bridge Property (5,935 square feet).
The following describes the properties in which the Partnership owns an interest as of December 31, 2001:
Fund V-VI-VII Joint Venture
On September 8, 1994, the Partnership, Wells Fund V and Wells Fund VI, both of which are Georgia public limited partnerships affiliated with the Partnership through common general partners, formed the Fund V-VI-VII Joint Venture. The investment objectives of Wells Fund V and Wells Fund VI are substantially identical to those of the Partnership. The Partnership owns an approximate 42% interest in the following property through its investment in the Fund V-VI-VII Joint Venture:
The Marathon Building
On September 16, 1994, the Fund V-VI-VII Joint Venture purchased a three-story office building for a purchase price of $8,250,000, excluding acquisition costs, containing approximately 76,000 rentable square feet, located on approximately 6.2 acres of land in Appleton, Wisconsin, known as the Marathon Building. The funds used by the Fund V-VI-VII Joint Venture to acquire the Marathon Building were derived from capital contributions made by the Partnership, Wells Fund V and Wells Fund VI totaling $3,470,958, $1,337,505, and $3,470,958, respectively, for total contributions to the Fund V-VI-VII Joint Venture of $8,279,421, including acquisition costs.
The entire Marathon Building is leased to Jaakko Poyry Fluor Daniel for a period of twelve years, three and one-half months, with options to renew the lease for two additional five-year periods. The annual base rent is $980,000. The current lease expires on December 31, 2006.
The average effective annual rental rate per square foot at the Marathon Building was $12.78 in 2001, 2000, 1999 and 1998, and $12.74 for 1997. The occupancy rate at year-end was 100% in 2001, 2000, 1999, 1998 and 1997.
Fund VI-VII Joint Venture
On December 9, 1994, the Partnership and Wells Fund VI entered into a Joint Venture Agreement and formed the Fund VI-VII Joint Venture. As of December 31, 2001, the Partnership had contributed $3,358,633 and Wells Fund VI had contributed $2,710,639, including its cost to acquire land, to the Fund VI-VII Joint Venture for the acquisition and development of Stockbridge Village III and Stockbridge Village I Expansion. As of December 31, 2001, the Partnership's equity interest in the Fund VI-VII Joint Venture was approximately 55%, and Wells Fund VI's equity interest in the Fund VI-VII Joint Venture was approximately 45%.
Stockbridge Village III
In April 1994, Wells Fund VI purchased 3.27 acres of real property located in Clayton County, Georgia for a cost of $1,015,673. This tract of land is located directly across Route 138 from the Stockbridge Village Shopping Center which was developed and is owned by an affiliate of the Partnership. On December 9, 1994, Wells Fund VI contributed this real property as a capital contribution to the Fund VI-VII Joint Venture.
As of December 31, 2001, the Partnership has contributed $1,917,483 and Wells Fund VI has contributed $1,033,285 to the Fund VI-VII Joint Venture for the acquisition and development of the Stockbridge Village III Property. The first building is a 3,200 square foot restaurant, which was completed in March 1995 at a cost of approximately $400,000 excluding land and is currently leased to RMS/Fazoli's for a period of 13 years, which commenced on December 10, 1998.
The second out-parcel building containing approximately 15,000 square feet was completed in October 1995, at a cost of approximately $1,500,000, excluding land. In October 2001, Stockbridge Ribs, Inc. took occupancy of 6,732 square feet with a lease for ten years. The initial annual base rent for the first five years is $125,215, and $144,065 thereafter. Four other tenants occupy the remaining 6,543 square feet of this building.
The average effective annual rental rate per square foot at Stockbridge Village III was $14.99 for 2001, $ 17.05 for 2000, $17.08 for 1999, $13.08 for 1998, and $15.67 for 1997. The occupancy rate at year-end was 91% in 2001, and 100% in 2000, 1999, 1998 and 1997.
Stockbridge Village I Expansion
On June 7, 1995, the Fund VI-VII Joint Venture purchased 3.38 acres of real property located in Clayton County, Georgia for $718,000. The Stockbridge Village I Expansion consists of a multi-tenant shopping center containing approximately 29,200 square feet. Construction was substantially complete in April 1996, with Cici's Pizza taking occupancy of 4,000 square foot restaurant. The term of the Cici's Pizza lease is 9 years and 11 months commencing upon occupancy. The initial annual base rent was $48,000. In the third year, the annual base rent increased to $50,000, in the sixth year to $52,000, and in the ninth year to $56,000. Fourteen additional tenants occupy the remaining square feet.
As of December 31, 2001, the Partnership had contributed a total of $1,441,150, and Wells Fund VI had contributed a total of $1,677,354, for a total contribution of approximately $3,118,504 toward the development and construction of the Stockbridge Village I Expansion.
The average effective annual rental rate per square foot at the Stockbridge Village I Expansion was $13.87 for 2001, $11.97 for 2000, $10.74 for 1999, $10.08 for 1998, and $6.82 for 1997. The occupancy rate at year-end was 100% in 2001 and 2000, 86% for 1999, 81% for 1998, and 74% for 1997.
Fund II-III-VI-VII Joint Venture
On January 10, 1995, the Partnership, Wells Fund II-III Associates, and Wells Fund VI entered into a Joint Venture Agreement known as the Fund II-III-VI-VII Joint Venture. The Fund II-III Joint Venture is a joint venture between Wells Fund III, and the Fund II-Fund IIOW Joint Venture formed by Wells Fund II and Wells Fund IIOW, Georgia public limited partnerships having Leo F. Wells, III and Wells Capital, Inc. as general partners. The investment objectives of Wells Fund II, Wells Fund IIOW, Wells Fund III, and Wells Fund VI are substantially identical to those of the Partnership.
Holcomb Bridge Property
In January 1995, the Wells Fund II-III Associates contributed approximately 4.3 acres of land at the intersection of Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia (the "Holcomb Bridge Property") and funding for land improvements and the development and construction of two buildings containing a total of approximately 49,530 square feet to the Fund II-III-VI-VII Joint Venture.
Thirteen tenants occupied the Holcomb Bridge Property at December 31, 2001 for occupancy rates at year-end of 89% in 2001, 92% in 2000, 100% in 1999, and 94% in 1998 and 1997. The average effective annual rental rate per square foot was $17.07 for 2001, $17.55 for 2000, $19.36 for 1999, $17.63 for 1998, and $13.71 for 1997.
Fund VII-VIII Joint Venture
On February 10, 1995, the Partnership and Wells Fund VIII, a Georgia public limited partnership affiliated with the Partnership through common general partners, formed the Fund VII-VIII Joint Venture. The investment objectives of Wells Fund VIII are substantially identical to those of the Partnership. As of December 31, 2001, the Partnership has contributed $2,474,724, and Wells Fund VIII has contributed $4,267,621 for a total cost of $6,742,346 to the Fund VII-Fund VIII Joint Venture for the acquisition and development of the property. The Partnership held an approximate 37% equity interest and Wells Fund VIII held an approximate 63% equity interest in the Fund VII-VIII Joint Venture, through which a retail/office building and an office building as of December 31, 2001.
The Hannover Property
On April 1, 1996, the Partnership contributed 1.01 acres of land located in Clayton County, Georgia, and improvements thereon valued at $512,000 to the Fund VII-VIII Joint Venture for the development of a 12,080 square foot, single story combination retail/office building. As of December 31, 2001, the Partnership has funded $1,437,801 and Wells Fund VIII has contributed $190,311 for the development of the Hannover Center, in addition to the cost of the land.
A five-year lease has been signed with Mattress King, a mattress retailer, in December 2000 to occupy 6,020 square feet. The annual base rent is $88,795 for the first three years, and $91,805
for the last two years of the lease term, which expires in 2006. Two additional tenants occupy the remaining space at the property with leases that expire in 2003.
The average effective annual rental rate per square foot at the Hannover Property was $13.68 for 2001, $9.15 for 2000, $15.97 for 1999, $10.05 for 1998, and $8.92 for 1997. The occupancy rate at year-end was 100% in 2001, 2000, 1999 and 1998, and 50% in 1997.
CH2M Hill at Gainesville Property
The Partnership made an initial contribution to the Fund VII-VIII Joint Venture of $677,534, which constituted the total purchase price and all other acquisition and development costs related to the purchase of a 5 acre parcel of land in Gainesville, Alachua County, Florida. Construction of an office building containing 61,468 rentable square feet was completed in December 1995 and is known as the CH2M Hill at Gainesville Property.
The lease, as well as CH2M Hill's obligation to pay rent, commenced on December 1995 CH2M Hill took occupancy of 57,547 square feet of the building. The lease with CH2M Hill provides for a term of 9 years and 11 months and annual initial base rent payable of $530,313. CH2M Hill has the option to renew the lease for an additional five-year period. The annual rent for the extended term will be at the currently prevailing market rate.
As of December 31, 2001, the Partnership had contributed $1,036,923, and Wells Fund VIII had contributed $4,077,310 to the Fund VII-VIII Joint Venture toward the completion of this project.
The average effective annual rental rate per square foot at the Gainesville Property was $9.37 for 2001, 2000 and 1999, $9.19 for 1998, and $8.63 for 1997. The occupancy rate at year-end was 100% in 2001, 2000, 1999 and 1998, and 94% in 1997.
Fund VI-VII-VIII Joint Venture
On April 17, 1995, the Partnership, Wells Fund VI and Wells Fund VIII formed the Fund VI-VII-VIII Joint Venture. As of December 31, 2001, the Partnership had contributed approximately $5,932,312 for an approximate equity interest of 33% in the Fund VI-VII-VIII Joint Venture through which an office building in Jacksonville, Florida and a multi-tenant retail center in Clemmons, North Carolina are owned. As of December 31, 2001, Wells Fund VIII has contributed $5,700,000 for an equity interest in the Fund VI-VII-VIII Joint Venture of approximately 32%, and Wells Fund VI has contributed approximately $6,067,688 for an equity interest in the Fund VI-VII-VIII Joint Venture of approximately 35%. Thus, a total cost of $17,700,000 has been contributed to the Fund VI-VII-VIII Joint Venture for the acquisition and development of the properties described below.
BellSouth Building
On April 25, 1995, the Fund VI-VII-VIII Joint Venture purchased a 5.55 acres parcel of land in Jacksonville, Florida for a total of $1,245,059, including closing costs. In May 1996, the 92,964 square foot office building was completed with BellSouth Advertising and Publishing Corporation, a subsidiary of BellSouth Company, taking occupancy of approximately 66,333 square feet and American Express Travel Related Services Company, Inc. taking occupancy of approximately 22,607 square feet. BellSouth took occupancy of an additional 3,901 square feet in December 1996. The land purchase price and construction costs totaling approximately
$9 million were funded by capital contributions of $3,500,000 from the Partnership, $3,500,000 from Wells Fund VI, and $2,000,000 from Wells Fund VIII.
The BellSouth lease is for an initial term of nine years and eleven months, commencing May 1996, with an option to extend for an additional five-year period at the currently prevailing market rate. The annual base rent during the initial term is $1,094,426 during the first five years and $1,202,034 for the remaining period. The American Express lease was for an initial term of five years with an annual base rent of $369,851 and expired in June 2001. American Express has renewed their lease for a term of five years commencing in July 2001 at an annual base rent of $405,117 for the first year with 3 percent escalations each year thereafter. BellSouth and American Express are required to pay additional rent equal to their share of operating expenses during their respective lease terms.
The average effective annual rental rate per square foot at the BellSouth Building was $16.65 in 2001, $16.36 in 2000, 1999, and 1998, and $16.40 in 1997. The occupancy rate at year-end was 100% in 2001, 2000, 1999, 1998 and 1997.
Tanglewood Commons Shopping Center
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acres tract of real property located in Clemmons, Forsyth County, North Carolina. The Fund VI-VII-VIII Joint Venture constructed one large strip shopping center building containing approximately 67,320 gross square feet on a 12.48 acres tract. The remaining 2.2 acre portion of the property consists of four out-parcels which have been graded and are held for future development or resale. As of December 31, 2001, the Partnership has contributed $2,432,312, Wells Fund VI has contributed $2,567,688 and Wells Fund VIII has contributed $3,700,000 for total costs of $8,700,000 to complete the development of this project. Construction of the project was substantially completed in the first quarter of 1997.
In February 1997, Harris Teeter, Inc., a regional supermarket chain, executed a lease for a minimum of 45,000 square feet with an initial term of 20 years with extension options of four consecutive five-year periods with the same terms as the initial lease. The annual base rent payable during the initial term is $488,250. In addition, Harris Teeter has agreed to pay percentage rents equal to one percent of the amount by which Harris Teeter's gross sales at this location exceed $35,000,000 for each lease year.
The average effective annual rental rate per square foot at Tanglewood Commons was $13.02 for 2001, $12.53 for 2001, $11.48 for 1999, $10.96 for 1998, and $9.12 for 1997, the first year of occupancy. The occupancy rate at year-end was 100% in 2001 and 2000, 91% in 1999 and 1998, and 86% in 1997.
Fund I-II-II-OW-VI-VII Joint Venture
On August 1, 1995, the Partnership, Wells Fund I, the Fund II-Fund II-OW Joint Venture and Wells Fund VI formed the Fund I-II-IIOW-VI-VII Joint Venture for the purpose of owning and operating the Cherokee Property described below.
Cherokee Commons
Cherokee Commons consists of a retail shopping center located in metropolitan Atlanta, Cherokee County, which has been expanded to consist of approximately 103,755 net leasable
square feet. Cherokee Commons was initially developed through a joint venture between Wells Fund I and the Fund II-Fund IIOW Joint Venture, which contributed Cherokee Commons to the Fund I-II-IIOW-VI-VII Joint Venture on August 1, 1995 to complete the required funding for the expansion.
As of September 30, 2001, Wells Fund I contributed property with a book value of $2,139,900, the Fund II-Fund IIOW Joint Venture contributed property with a book value of $4,860,100, Wells Fund VI contributed cash in the amount of $953,798 and the Partnership contributed cash in the amount of $953,798 to the Fund I-II-IIOW-VI-VII Joint Venture. As of September 30, 2001, the equity interests in the Fund I-II-IIOW-VI-VII Joint Venture were approximately as follows: Wells Fund I, 24%; Fund II-Fund II-OW Joint Venture, 54%; Wells Fund VI, 11%; and the Partnership, 11%.
On October 1, 2001, the Fund I-II-IIOW-VI-VII Joint Venture sold Cherokee Commons for net sale proceeds of $8,434,089 and recognized a gain of $1,725,015 on the sale. The Partnership was allocated taxable gain of $21,867 and net sale proceeds of $903,122 from this transaction.
Because of the requirement for fiduciaries of retirement plans subject to ERISA to determine the value of the assets of such retirement plans on an annual basis, the General Partners are required under the Partnership Agreement to report estimated Unit values to the Limited Partners each year in the Partnership's annual Form 10-K. The methodology to be utilized for determining such estimated Unit values under the Partnership Agreement is for the General Partners to estimate the amount a Unit holder would receive if the Partnership's properties were sold at their estimated fair market values as of the end of the Partnership's fiscal year and the proceeds therefrom (without reduction for selling expenses) were distributed to the Limited Partners in liquidation of the Partnership. Utilizing this methodology, the General Partners have estimated Unit valuations, based upon their estimates of property values as of December 31, 2001, to be approximately $8.42 per Class A Unit and $13.55 per Class B Unit, based upon market conditions existing in early December 2001. In connection with these estimated valuations, the General Partners obtained an opinion from David L. Beal Company, an independent MAI appraiser, to the effect that such estimates of value were reasonable; however, due to the inordinate expense involved in obtaining appraisals for all of the Partnership's properties, no actual appraisals were obtained. Accordingly, these estimates should not be viewed as an accurate reflection of the fair market value of the Partnership's properties, nor do they represent the amount of net proceeds which would result from an immediate sale of the Partnership's properties. The valuations performed by the General Partners are estimates only, and are based a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline in the future. Further, as set forth above, no appraisals have or will be obtained. For these reasons, the estimated Unit valuations set forth above should not be relied upon for any purpose other than required ERISA disclosures.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings or proceedings known to be contemplated by governmental authorities involving the Partnership during 2001.
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 2001.
PART II
ITEM 5.
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
As of February 28, 2002, the Partnership had 2,067,020 outstanding Class A Units held by a total of 1,677 Limited Partners and 350,997 of Class B held by a total of 231 Limited Partners. There is no established public trading 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 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 Units. Holders of Class A Units will, except in limited circumstances, be allocated none of the Partnership's net loss, depreciation, amortization and cost recovery deductions. These deductions will be allocated to the Class B Units, until their capital account balances have been reduced to zero. No distributions have been made to the General Partner or holders of Class B Units as of December 31, 2001.
Cash available for distribution to the Limited Partners is distributed on a quarterly basis unless Limited Partners elect to have their cash distributed monthly. Cash distributions made to Class A Limited Partners during 2001 and 2000 were as follows:
Per Class A Per Class A Total Unit Unit Distribution for Cash Investment Return of Quarter Ended Distributed Income Capital - -------------------- ----------- ----------- ----------- March 31, 2000 $471,887 $0.23 $0.00 June 30, 2000 485,206 0.24 0.00 September 30, 2000 471,945 0.11 0.12 December 31, 2000 453,613 0.10 0.12 March 31, 2001 460,973 0.10 0.13 June 30, 2001 450,019 0.10 0.12 September 30, 2001 464,020 0.12 0.10 December 31, 2001 465,080 0.22 0.00
The fourth quarter distributions were accrued for accounting purposes in 2001 and paid to Limited Partners holding Class A Units in February 2002. The General Partners anticipate that cash distributions to Limited Partners holding Class A Units will continue in 2002 at a level at least comparable with 2001 cash distributions on an annual basis.
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, 2001, 2000, 1999, 1998, and 1997:
(1) Weighted average units are 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITIONS RESULTS OF OPERATION
Forward-Looking Statements
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
Gross revenues of the Partnership were $1,203,501, $961,858, and $982,630 for the years ended December 31, 2001, 2000, and 1999, respectively. The increase in revenues from 2000 to 2001 was attributable primarily to (i) increased rental rates at the BellSouth Building, Tanglewood Commons, Hannover Center, Cherokee Commons, and Stockbridge Village I Expansion Properties, (ii) a bad debt expense recognized for the Holcomb Bridge Property, and Hannover Center in 2000, (iii) gain on the 2001 sale of Cherokee Commons and related decrease in 2001 depreciation, and (iv) decreased depreciation for the Holcomb Bridge Property as some tenant improvements became fully depreciated in
2000. In accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", the Fund I-II-IIOW-VI-VII Joint Venture reclassified the real estate assets of Cherokee Common as "Held For Sale" upon finalizing negotiations with the Purchaser in August 2001 and, accordingly, stopped depreciating its real estate assets at that time. The increase in revenues was partially offset by (i) bad debt expense recorded at Tanglewood Commons and Stockbridge Village III in 2001, and (ii) decreased occupancy at the Holcomb Bridge Property in 2001. The decrease in revenues from 1999 to 2000 was attributable primarily to (i) bad debt expense recognized for the Holcomb Bridge Property, and Hannover Center, (ii) decreased occupancy at the Holcomb Bridge Property in 2000, partially offset by (i) increased rental rates at Stockbridge Village I Expansion and Cherokee Commons, (ii) increased occupancy at Tanglewood Commons, and (iii) increased common area maintenance reimbursement adjustments at Tanglewood Commons and the CH2M Hill at Gainesville Property.
Expenses of the Partnership were $89,817, $78,876, and $86,835 for the years ended December 31, 2001, 2000, and 1999, respectively. Expenses of the Partnership decreased in 2000, as compared to 1999 and 2001, due to decreased administrative salaries. As a result, net income of the Partnership was $1,113,684 for the year ended December 31, 2001, $882,982 for the year ended December 31, 2000, and $895,795 for the year ended December 31, 1999.
Net income per weighted average unit for Class A Limited Partners was $0.54 for the year ended December 31, 2001 as compared to $0.63 for the year ended December 31, 2000 and $0.93 for the year ended December 31, 1999. Net loss per weighted average unit for Class B was $0 for the year ended December 31, 2001 as compared to $1.07 for the year ended December 31, 2000 and $2.48 for the year ended December 31, 1999. The related decrease for Class A and increase for Class B resulted from a change in the method used to allocate income as the Class B Limited Partners' capital balances reached zero at the end of 2000.
Liquidity and Capital Resources
Pursuant to the terms of the Partnership Agreement, the Partnership is required to maintain working capital reserves in an amount equal to the cash operating expenses required to operate the Partnership for a six-month period not to be reduced below 1% of Limited Partners' capital contributions. As set forth above, in order to fund a portion of the tenant improvements at the Holcomb Bridge Property and Stockbridge Village III, the General Partners have used a portion of the Partnership's working capital reserves to reduce the balance below this minimum amount, rather than funding the tenant improvements out of operating cash flow, which would have the effect of reducing cash flow distributions to Limited Partners. The General Partners anticipate that the remaining $14,630 in working capital reserves will be sufficient to meet future needs.
The Partnership's net cash used in operating activities was $83,497 in 2001, $60,735 in 2000, and $82,763 in 1999. The use of cash in operating activities remains relatively stable for 2001 as compared to 1999. The decrease in use of cash in operating activities in 2000 was primarily due to a decrease in partnership administration expenses. Net cash provided by investing activities was $1,904,057 in 2001, $1,921,437 in 2000 and $1,777,010 in 1999. Even though there is a significant increase in equity in income from the Fund I-II-IIOW-VI-VII joint venture in 2001 due to the gain from the sale of Cherokee Commons, the proceeds from the sale have not been distributed. As a result, cash provided by investing activities in 2001, as compared to 2000, remains relatively stable. Net cash provided by investing activities increased in 2000 as compared to 1999 due to an increased in the distributions from joint ventures. Net cash used in financing activities was $1,829,826 in 2001, $1,887,183 in 2000, and $1,688,290 in 1999. The decrease in net cash used in financing activities in 2001, as compared to 2000,
was attributable to decreases in cash flows generated by properties owned through joint ventures, which resulted in a decreased distribution rate for the Partnership.
The Partnership expects to continue to meet its short-term liquidity requirements and budget demands generally through net cash provided by operations which the Partnership believes will continue to be adequate to meet both operating requirements and distributions to limited partners. At this time, given the nature of the joint ventures and properties in which the Partnership has invested, there are no known improvements or renovations to the properties expected to be funded from cash flow from operations.
As all properties have been acquired on an all-cash basis, the Partnership has no permanent long-term liquidity requirements.
Inflation
The real estate market has not been significantly affected by inflation during the past three years due to the relatively low inflation rate. There are provisions in the majority of tenant leases to protect the Partnership from the impact of inflation. These leases contain common area maintenance charges, real estate tax and insurance reimbursements on a per square foot basis, 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. 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.
Critical Accounting Policies
The Partnership's accounting policies have been established and conformed to in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied; thus, resulting in a different presentation of our financial statements. Below is a discussion of the accounting policies that we consider to be critical in that they may require complex judgment in their application or require estimates about matters, which are inherently uncertain. Additional discussion of accounting policies that we consider to be significant, including further discussion of the critical accounting policies described below, is presented in the notes to the Partnership's financial statements in Item 14(a).
Straight-Lined Rental Revenues
The Partnership recognizes rental income generated from all leases on real estate assets in which the Partnership has an ownership interest, either directly or through investments in joint ventures, on a straight-line basis over the terms of the respective leases. If a tenant was to encounter financial difficulties in future periods, the amount recorded as receivable may not be realized.
Operating Cost Reimbursements
The Partnership generally bills tenants for operating cost reimbursements, either directly or through investments in joint ventures, on a monthly basis at amounts estimated largely based on actual prior period activity and the respective lease terms. Such billings are generally adjusted on an annual basis to reflect reimbursements owed to the landlord based on the actual costs incurred during the period and the respective lease terms. Financial difficulties encountered by tenants may result in receivables not being realized.
Real Estate
Management continually monitors events and changes in circumstances indicating that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When such events or changes in circumstances are present, management assesses the potential impairment by comparing the fair market value of the asset, estimated at an amount equal to the future undiscounted operating cash flows expected to be generated from tenants over the life of asset and from its eventual disposition, to the carrying value of the asset. In the event that the carrying amount exceeds the estimated fair market value, the Partnership would recognize an impairment loss in the amount required to adjust the carrying amount of the asset to its estimated fair market value. Neither the Partnership nor its joint ventures have recognized impairment losses on real estate assets in 2001, 2000 or 1999.
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 2001.
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PART III
ITEM 10.
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP
Wells Partners, L.P. The sole General Partner of Wells Partners, L.P. is Wells Capital, Inc. The executive offices of Wells Capital, Inc. are located at 6200 The Corners Parkway, Norcross, Georgia 30092.
Leo F. Wells, III Mr. Wells is a resident of Atlanta, Georgia, is 58 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. He is also the President, sole Director and sole shareholder of Wells Real Estate Investment Funds, Inc., the parent corporation of Wells Capital, Inc. Mr. Wells is also 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 the principal broker. Mr. Wells is also 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., all of which are all 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, 2001:
Name of Individual Capacities in Which Served Cash Or Number in Group Form of Compensation Compensation - ------------------------------ ---------------------------- ------------ Leo F. Wells, III General Partner $ 0
Wells Management Company, Inc. Property Manager--Management $195,633(1) And Leasing Fees
(1) 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. The Partnership does not own any properties directly. Accordingly, these fees are payable to Wells Management, Inc. by the joint ventures described in Item 1 and represent the Partnership's ownership interest in amounts attributable to the properties owned directly by these joint ventures for services rendered during 2001. Some of these fees were accrued for accounting purposes in 2001, however, were not paid until January 2002.
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 December 31, 2001.
No arrangements exist which would, upon execution thereof, 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 described below:
Interest in Partnership Cash Flow and Net Sale Proceeds
The General Partners will receive a subordinated participation in net cash flow from operations equal to 10% of net cash flow from operations after the Limited Partners holding Class A Units have received preferential distributions equal to 10% of their adjusted capital contribution. The General Partners will also receive a subordinated participation in net sale proceeds and net financing proceeds equal to 20% of residual proceeds available for distribution after the Limited Partners holding Class A Units have received a return of their adjusted capital contributions plus a 10% cumulative return on their adjusted capital contributions and the Limited Partners holding Class B Units have received a return of their adjusted capital contribution plus a 15% cumulative return on their adjusted capital contribution; however, that in no event shall the General Partners receive in the aggregate in excess of 15% of net sale 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 sale proceeds for the year ended December 31, 2001.
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 lesser 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 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; and (ii) n the cash of industrial and commercial properties which are leased on a long-term 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; or (B) the amounts charged by unaffiliated persons rendering comparable services in the same geographic area. Wells
Management Company, Inc. received $195,633 in property management and leasing fees for services rendered during the year ended December 31, 2001.
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 2001, no real estate commissions were paid to the General Partners or their affiliates.
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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. The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the Commission during the fourth quarter of 2001.
(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.
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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 21st day of March 2002.
Wells Real Estate Fund VII (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 Date - --------------------- -------------------------------- ---------------------
/s/Leo F. Wells, III - --------------------
Individual General Partner, March 21, 2002 President and Sole Director of Wells Capital, Inc., the General Leo F. Wells, III 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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund VII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VII, L.P. (a Georgia public limited partnership) as of December 31, 2001 and 200 and the related statements of income, partners' capital, and cash flows for each of the three years in the period ended December 31, 2001. 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 VII, L.P. as of December 31, 2001 and 2000 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia January 25, 2002
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
The accompanying notes are an integral part of these balance sheets.
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000, AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund VII, L.P. (the "Partnership") is a public limited partnership organized on December 1, 1992 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 has two classes of limited partnership interests, Class A and Class B units. Limited partners have the right to change their prior elections to have some or all of their units treated as Class A 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 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, are currently under development or construction, are newly constructed, or have operating histories. During the periods audited, the Partnership owned an interest in the following properties through joint ventures between the Partnership and other Wells Real Estate Funds: (i) a shopping center located in Cherokee County, Georgia, the Cherokee Commons Shopping Center ("Cherokee"); (ii) an office/retail center in Roswell, Georgia (known as "880 Holcomb Bridge"); (iii) the Marathon Building, a three-story office building located in Appleton, Wisconsin; (iv) the Stockbridge Village III Retail Center, two retail buildings located in Stockbridge, Georgia; (v) a retail center expansion in Stockbridge, Georgia ("Stockbridge Expansion"); (vi) a four-story office building located in Jacksonville, Florida (the "BellSouth property"); (vii) a retail shopping center in Clemmons, Forsyth County, North Carolina ("Tanglewood Commons"); (viii) an office building located in Gainesville, Florida (the "CH2M Hill Building"); and (ix) a retail/office building in Stockbridge, Georgia ("The Hannover Center").
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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; 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, as defined by the partnership agreement, is distributed to the limited partners quarterly. In accordance with the partnership agreement, distributions are paid first to limited partners holding Class A units until they have received a 10% per annum return on their adjusted capital contributions, as defined. Cash available for distribution is then paid to the general partners until they have received an amount equal to 10% of distributions. 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 are distributed in the following order:
. 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 limited partners, on a per unit basis, until each limited partner has received 100% of his/her adjusted capital contributions, as defined
. To all limited partners until they receive a cumulative 10% per annum return on their adjusted capital contributions, as defined
. To limited partners holding Class B units on a per unit basis until they receive a cumulative 15% per annum return on their adjusted capital contributions, as defined
. To the general partners until they have received 100% of their capital contributions, as defined
. Thereafter, 80% to the limited partners 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 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/her 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 capital accounts until all negative capital accounts have been restored to zero, (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, and (d) allocations to Class A limited partners and general partners 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, investments in joint ventures are 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 repairs and maintenance expenditures 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 real estate assets held by the Partnership or its affiliated joint ventures as of December 31, 2001 or 2000.
Depreciation for buildings and improvements is calculated using the straight-line method over 25 years. Tenant improvements are amortized over the useful life of the related lease or real estate 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 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.
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. Deferred lease acquisition costs are included in prepaid expenses and other assets, net, in the balance sheets presented in Note 3.
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.
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the years ended December 31, 2001, 2000, and 1999 is computed based on the weighted average number of units outstanding during the period.
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, 2001 and 2000 represents the Partnership's share of cash to be distributed from its joint venture investments for the fourth quarters of 2001 and 2000, respectively, as follows:
2001 2000 ---------- -------- Fund I, II, II-OW, VI, and VII Associates--Cherokee $ 8,261 $ 20,703 Fund II, III, VI, VII Associates 86,643 58,544 Fund V, VI, and VII Associates 98,308 98,745 Fund VI and VII Associates 76,544 79,380 Fund VI, VII, and VIII Associates 109,084 126,377 Fund VII and VIII Associates 81,353 32,157 ---------- -------- $ 460,193 $415,906 ========== ========
The Partnership entered into a property management and leasing 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 $187,927, $195,633, and $199,571 for the years ended December 31, 2001, 2000, and 1999, respectively.
Wells Capital, Inc. (the "Company"), the general partner of Wells Partners, 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 of the Partnership 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.
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at December 31, 2001 and 2000 are summarized as follows:
The following is a roll forward of the Partnership's investment in joint ventures for the years ended December 31, 2001 and 2000:
2001 2000 ----------- ----------- Investment in joint ventures, beginning of year $16,519,029 $17,446,299 Equity in income of joint ventures 1,202,011 944,165 Distributions from joint ventures (1,948,344) (1,871,435) ----------- ----------- Investment in joint ventures, end of year $15,772,696 $16,519,029 =========== ===========
Fund I, II, II-OW, VI, and VII Associates--Cherokee
Fund I, II, II-OW, VI, and VII Associates--Cherokee (or the "Cherokee Joint Venture") was formed in August 1995 for the purpose of owning and operating Cherokee Commons, a retail shopping center containing approximately 103,755 square feet, located in Cherokee County, Georgia. Until the formation of this joint venture, Cherokee Commons was part of the Fund I and II Tucker--Cherokee Joint Venture. Concurrent with the formation of Fund I, II, II-OW, VI, and VII Associates--Cherokee, Cherokee Commons was transferred from the Fund I and II Tucker--Cherokee Joint Venture to the Cherokee Joint Venture. Percentage ownership interests in the Cherokee Joint Venture were determined at the time of formation based on relative capital contributions. Under the terms of the joint venture agreement, Fund VI and Fund VII each contributed approximately $1 million in return for an 11% ownership interest. Fund I's ownership interest in the Cherokee Joint Venture changed from 31% to 24%, and Fund II and II-OW joint venture's ownership interest changed from 69% to 55%. The $2 million in cash contributed to the Cherokee Joint Venture was used to fund an expansion of the property for an existing tenant. On October 1, 2001, the Cherokee Joint Venture sold Cherokee Commons for net proceeds of $8,434,089 and recognized a gain of $1,725,015 on the sale.
Following are the financial statements for Fund I, II, II-OW, VI, and VII Associates--Cherokee:
Fund I, II, II-OW, VI, and VII Associates--Cherokee (A Georgia Joint Venture) Balance Sheets December 31, 2001 and 2000
Fund I, II, II-OW, VI, and VII Associates--Cherokee (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund I, II, II-OW, VI, and VII Associates--Cherokee (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Fund I, II, II-OW, VI, and VII Associates--Cherokee (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
Fund II, III, VI, and VII Associates
On January 1, 1995, the Partnership entered into a joint venture agreement with Fund II and III Associates--Brookwood Grill and Fund VI. 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--Brookwood Grill contributed a 4.3-acre tract of land from its 880 Holcomb Bridge property to the Fund II, III, VI, and VII Associates joint venture. Development on this property of two buildings containing a total of approximately 49,500 square feet was substantially completed in 1996.
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, 2001 and 2000
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Fund II, III, VI, and VII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
Fund V, VI, and VII Associates
On September 8, 1994, the Partnership entered into a joint venture agreement with Wells Real Estate Fund V, L.P. ("Fund V") and Fund VI. The joint venture, Fund V, VI, and VII Associates, was formed for the purpose of investing in commercial real properties. In September 1994, Fund V, VI, and VII Associates purchased a 75,000-square foot, three-story office building known as the Marathon Building in Appleton, Wisconsin.
Following are the financial statements for Fund V, VI, and VII Associates:
Fund V, VI, and VII Associates (A Georgia Joint Venture) Balance Sheets December 31, 2001 and 2000
Fund V, VI, and VII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund V, VI, and VII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Fund V, VI, and VII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
Fund VI and VII Associates
On December 9, 1994, the Partnership entered into a joint venture agreement with Fund VI. The joint venture, Fund VI and VII Associates, was formed for the purpose of investing in commercial properties. In December 1994, the Partnership contributed its interest in a parcel of land, the Stockbridge Village III Retail Center property located in Stockbridge, Georgia, to the joint venture. The Stockbridge Village III Retail Center property is comprised of two separate out parcel buildings totaling approximately 18,500 square feet. One of the out parcel buildings began operations during 1995. The other out parcel building began operations during 1996. On June 7, 1995, Fund VI and VII Associates purchased an additional 3.38 acres of real property located in Stockbridge, Georgia. The retail center expansion, the Stockbridge Expansion, consists of a multitenant shopping center containing approximately 29,000 square feet.
During 2000, Fund VI made additional capital contributions to Fund VI and VII Associates; during 1999, the Partnership and Fund VI made additional capital contributions to the joint venture. Ownership percentage interests were recomputed accordingly.
Following are the financial statements for Fund VI and VII Associates:
Fund VI and VII Associates (A Georgia Joint Venture) Balance Sheets December 31, 2001 and 2000
Fund VI and VII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund VI and VII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Wells Real Wells Real Total Estate Estate Partners' Fund VI Fund VII Capital ----------- ----------- ----------- Balance, December 31, 1998 $ 2,511,074 $ 3,234,873 $ 5,745,947 Net income 118,073 152,106 270,179 Partnership distributions (230,711) (297,212) (527,923) ----------- ----------- ----------- Balance, December 31, 1999 2,398,436 3,089,767 5,488,203 Net income 127,466 161,584 289,050 Partnership contributions 105,723 0 105,723 Partnership distributions (239,611) (304,014) (543,625) ----------- ----------- ----------- Balance, December 31, 2000 2,392,014 2,947,337 5,339,351 Net income 96,332 118,696 215,028 Partnership distributions (224,154) (276,193) (500,347) ----------- ----------- ----------- Balance, December 31, 2001 $ 2,264,192 $ 2,789,840 $ 5,054,032 =========== =========== ===========
Funds VI and VII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
Fund VI, VII, and VIII Associates
On April 17, 1995, the Partnership entered into a joint venture with Fund VI and Wells Real Estate Fund VIII, L.P. ("Fund VIII"). The joint venture, Fund VI, VII, and VIII Associates, was formed to acquire, develop, operate, and sell real properties. On April 25, 1995, the joint venture purchased a 5.55-acre parcel of land in Jacksonville, Florida. A 92,964-square foot office building, known as the BellSouth property, was completed and commenced operations in 1996. On May 31, 1995, the joint venture purchased a 14.683-acre parcel of land located in Clemmons, Forsyth County, North Carolina. A retail shopping center, Tanglewood Commons, was developed and was substantially completed at December 31, 1997.
Following are the financial statements for Fund VI, VII, and VIII Associates:
Fund VI, VII, and VIII Associates (A Georgia Joint Venture) Balance Sheets December 31, 2001 and 2000
Fund VI, VII, and VIII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund VI, VII, and VIII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Fund VI, VII, and VIII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
Fund VII and VIII Associates
On February 10, 1995, the Partnership entered into a joint venture agreement with Fund VIII. The joint venture, Fund VII and VIII Associates, was formed to acquire, develop, operate, and sell real properties. During 1995, the joint venture purchased a five-acre parcel of land in Gainesville, Alachua County, Florida. A 62,975-square foot office building, the CH2M Hill Building, was constructed and began operations during 1995. In April 1996, the Partnership contributed 1.01 acres of land located in Stockbridge, Georgia, and improvements thereon to the joint venture for the development of a 12,000-square foot, single-story combination retail/office building. The building, The Hannover Center, was completed and commenced operations in 1996.
The following are the financial statements for Fund VII and VIII Associates:
Fund VII and VIII Associates (A Georgia Joint Venture) Balance Sheets December 31, 2001 and 2000
Fund VII and VIII Associates (A Georgia Joint Venture) Statements of Income for the Years Ended December 31, 2001, 2000, and 1999
Fund VII And VIII Associates (A Georgia Joint Venture) Statements of Partners' Capital for the Years Ended December 31, 2001, 2000, and 1999
Fund VII and VIII Associates (A Georgia Joint Venture) Statements of Cash Flows for the Years Ended December 31, 2001, 2000, and 1999
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December 31, 2001, 2000, and 1999 is calculated as follows:
The Partnership's income tax basis partners' capital at December 31, 2001, 2000, and 1999 is computed as follows:
5. RENTAL INCOME
The future minimum rental income due from the Partnership's respective ownership interests in joint ventures under noncancelable operating leases at December 31, 2001 is as follows:
Year ending December 31: 2002 $ 2,171,804 2003 1,892,772 2004 1,771,736 2005 1,663,071 2006 1,001,577 Thereafter 2,512,402 ----------- $11,013,362 ===========
Three tenants contributed approximately 22%, 16%, and 14% of rental income during the year ended December 31, 2000. In addition, three tenants will contribute approximately 27%, 21%, and 18% 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, 2001 is as follows:
Year ending December 30: 2002 $ 604,859 2003 319,952 2004 285,696 2005 167,194 2006 21,308 Thereafter 0 ---------- $1,399,009 ==========
Three tenants contributed approximately 15%, 15%, and 14% of rental income for the year ended December 31, 2001. In addition, four tenants will contribute approximately 38%, 17%, 13%, and 11% of future minimum rental income.
The future minimum rental income due Fund V, VI, and VII Associates under noncancelable operating leases at December 31, 2001 is as follows:
Year ending December 31: 2002 $ 990,000 2003 990,000 2004 990,000 2005 990,000 2006 990,000 Thereafter 0 ---------- $4,950,000 ==========
One tenant contributed 100% of rental income for the year ended December 31, 2001 and will contribute 100% of future minimum rental income.
The future minimum rental income due Fund VI and VII Associates under noncancelable operating leases at December 31, 2001 is as follows:
Year ending December 31: 2002 $ 632,544 2003 460,691 2004 418,929 2005 392,162 2006 281,375 Thereafter 1,251,668 ---------- $3,437,369 ==========
Two tenants contributed approximately 13% and 10% of rental income for the year ended December 31, 2001. In addition, two tenants will contribute approximately 38% and 27% of future minimum rental income.
The future minimum rental income due Fund VI, VII, and VIII Associates under noncancelable operating leases at December 31, 2001 is as follows:
Year ending December 31: 2002 $ 2,482,965 2003 2,405,444 2004 2,273,500 2005 2,214,804 2006 1,165,554 Thereafter 5,453,538 ----------- $15,995,805 ===========
Three tenants contributed approximately 48%, 22%, and 16% of rental income for the year ended December 31, 2001. In addition, three tenants will contribute approximately 51%, 33%, and 12% of future minimum rental income.
The future minimum rental income due Fund VII and VIII Associates under noncancelable operating leases at December 31, 2001 is as follows:
Year ending December 31: 2002 $ 774,165 2003 723,286 2004 622,118 2005 577,925 2006 91,805 Thereafter 0 ---------- $2,789,299 ==========
Two tenants contributed approximately 12% and 11% of rental income for the year ended December 31, 2001. In addition, two tenants will contribute approximately 74% and 16% 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, 2001 and 2000:
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any significant litigation or claims against the Partnership or Wells Partners. In the normal course of business, the Partnership or Wells Partners may become subject to such litigation or claims.
EXHIBIT INDEX -------------
(Wells Real Estate Fund VII, 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) Certificate of Limited Partnership of Wells Real Estate Fund VII, L.P. (Exhibit 3(d) to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*4(a) Agreement of Limited Partnership of Wells Real Estate Fund VII, L.P. dated April 5, 1994 (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1994, File No. 0-25606)
*4(b) First Amendment to Agreement of Limited Partnership of Wells Real Estate Fund VII, L.P. dated April 5, 1994 (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1994, File No. 0-25606)
*10(a) Management Agreement dated April 5, 1994, between Wells Real Estate Fund VII, L.P. and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1994, File No. 0-25606)
*10(b) Leasing and Tenant Coordinating Agreement dated April 5, 1994, between Wells Real Estate Fund VII, L.P. and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1994, File No. 0-25606)
*10(c) Custodial Agency Agreement dated April 1, 1994, between Wells Real Estate Fund VII, L.P. and NationsBank of Georgia, N.A. (Exhibit 10(f) to Post-Effective Amendment No. 5 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(d) Joint Venture Agreement of Fund V, Fund VI and Fund VII Associates dated September 8, 1994, among Wells Real Estate Fund V, L.P., Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P. (Exhibit 10(j) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(e) Agreement for the Purchase and Sale of Property dated August 24, 1994, between Interglobia Inc. - Appleton and NationsBank of Georgia, N.A., as Agent for Fund V and Fund VI Associates (Exhibit 10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(f) Assignment and Assumption of Agreement for the Purchase and Sale of Real Property dated September 9, 1994, between NationsBank of Georgia, N.A., as Agent for Fund V and Fund VI Associates, and NationsBank of Georgia, N.A., as Agent for Fund V, Fund VI and Fund VII Associates (Exhibit 10(l) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(g) Building Lease dated February 14, 1991, between Interglobia Inc. - Appleton and Marathon Engineers/Architects/Planners, Inc. (included as part of Exhibit D to Exhibit 10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(h) Limited Guaranty of Lease dated January 1, 1993, by J. P. Finance OY and Fluor Daniel, Inc. for the benefit of Interglobia Inc. - Appleton (included as Exhibit B to Assignment, Assumption and Amendment of Lease referred to as Exhibit 10(i) below, which is included as part of Exhibit D to Exhibit 10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(i) Assignment, Assumption and Amendment of Lease dated January 1, 1993, among Interglobia Inc. - Appleton, Marathon Engineers/Architects/Planners, Inc. and Jaakko Poyry Fluor Daniel (included as part of Exhibit D to Exhibit 10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(j) Second Amendment to Building lease dated August 15, 1994, between Interglobia Inc. - Appleton and Jaakko Poyry Fluor Daniel (successor-in-interest to Marathon Engineers/Architects/Planners, Inc.) (included as Exhibit D-1 to Exhibit 10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(k) Assignment and Assumption of Lease dated September 6, 1994, between Interglobia Inc. - Appleton and NationsBank of Georgia, N.A., as Agent for Fund V, Fund VI and Fund VII Associates (Exhibit 10(q) to Post-Effective Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
*10(l) Agreement for the Purchase and Sale of Real Property dated April 7, 1994, between 138 Industrial Ltd. and NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VI, L.P. (Exhibit 10(s) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1994, File No. 0-23656)
*10(m) Land and Building Lease Agreement dated August 22, 1994, between KRR Stockbridge, Inc. d/b/a Kenny Rogers Roasters and NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VI, L.P. (Exhibit 10(t) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1994, File No. 0-23656)
*10(n) Joint Venture Agreement of Fund VI and Fund VII Associates dated December 9, 1994 (Exhibit 10(u) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1994, File No. 0-23656)
*10(o) Building Lease Agreement dated December 19, 1994, between Damon's of Stockbridge, LLC d/b/a Damon's Clubhouse and NationsBank of Georgia, N.A., as Agent for Fund VI and Fund VII Associates, (Exhibit 10(v) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1994, File No. 0-23656)
*10(p) Joint Venture Agreement of Fund II, III, VI and VII Associates dated January 10, 1995 (Exhibit 10(w) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1995, File No. 0-23606)
*10(q) Fund VII and Fund VIII Associates Joint Venture Agreement dated February 10, 1995 (Exhibit 10(g) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(r) Agreement for the Purchase and Sale of Real Property dated March 31, 1994 (Exhibit 10(h) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(s) Letter Agreement amending Agreement for the Purchase and Sale of Real Property dated July 27, 1994 (Exhibit 10(i) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(t) Letter Agreement amending Agreement for the Purchase and Sale of Real Property dated October 27, 1994 (Exhibit 10(j) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(u) Letter Agreement between NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., as Landlord, and CH2M Hill, Inc., as Tenant (Exhibit 10(k) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(v) First Amendment to Lease Agreement between NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., as Landlord, and CH2M Hill, Inc., as Tenant (Exhibit 10(l) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(w) Second Amendment to Lease Agreement between NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., as Landlord, and CH2M Hill, Inc, as Tenant (Exhibit 10(m) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(x) Development Agreement between Wells Real Estate Fund VII, L.P. and ADEVCO Corporation (Exhibit 10(n) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(y) Owner-Contractor Agreement between Wells Real Estate Fund VII, L.P., as Owner, and Integra Construction, Inc., as Contractor (Exhibit 10(o) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(z) Architect's Agreement between Wells Real Estate Fund VII, L.P., as Owner, and Smallwood, Reynolds, Stewart, Stewart & Associates, Inc., as Architect (Exhibit 10(p) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(aa) Joint Venture Agreement of Fund VI, Fund VII and Fund VIII Associates dated April 17, 1995 (Exhibit 10(q) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(bb) Agreement for the Purchase and Sale of Real Property dated February 13, 1995, between G.L. National, Inc. and Wells Capital, Inc. (Exhibit 10(r) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(cc) Agreement to Lease dated February 15, 1995, between NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., and BellSouth Advertising & Publishing Corporation (Exhibit 10(s) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(dd) Development Agreement dated April 25, 1995, between Fund VI, Fund VII and Fund VIII Associates and ADEVCO Corporation (Exhibit 10(t) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(ee) Owner-Contractor Agreement dated April 24, 1995, between Fund VI, Fund VII and Fund VIII Associates, as Owner, and McDevitt Street Bovis, Inc., as Contractor (Exhibit 10(u) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(ff) Architect's Agreement dated February 15, 1995, between Wells Real Estate Fund VII, L.P., as Owner, and Mayes, Suddereth & Etheredge, Inc., as Architect (Exhibit 10(v) to Post-Effective Amendment No. 3 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(gg) First Amendment to Joint Venture Agreement of Fund VI and Fund VII Associates (Exhibit 10(dd) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1995, File No. 0-23656)
*10(hh) First Amendment to Joint Venture Agreement of Fund VI, Fund VII and Fund VIII Associates dated May 30, 1995 (Exhibit 10(w) to Post-Effective Amendment No. 4 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(ii) Real Estate Purchase Agreement dated April 13, 1995 (Exhibit 10(x) to Post-Effective Amendment No. 4 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(jj) Lease Agreement dated February 27, 1995, between NationsBank of Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., and Harris Teeter, Inc. (Exhibit 10(y) to Post-Effective Amendment No. 4 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(kk) Development Agreement dated May 31, 1995, between Fund VI, Fund VII and Fund VIII Associates and Norcom Development, Inc. (Exhibit 10(z) to Post- Effective Amendment No. 4 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(ll) Joint Venture Agreement of Fund I, II, II-OW, VI and VII Associates dated August 1, 1995 (Exhibit 10(ii) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31, 1995, File No. 0-23656)
*10(mm) Lease Modification Agreement No. 3 with The Kroger Co. dated December 31, 1993 (Exhibit 10(k) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 1993, File No. 0-14463)
*10(nn) First Amendment to Joint Venture Agreement of Fund VII and Fund VIII Associates dated April 1, 1996 (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1996, File No. 0-25606)
*10(oo) Lease Agreement with Moovies, Inc. dated May 20, 1996 (Exhibit to Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 1996, File No. 0-25606)
*10(pp) Purchase and Sale Agreement for the sale of Cherokee Commons Shopping Center dated August 6, 2001 (Exhibit 10(p) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 2001, File No. 0-14463)