WELLS REAL ESTATE FUND VIII LP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-27888

WELLS REAL ESTATE FUND VIII, L.P.

(Exact name of registrant as specified in its charter)

Georgia

(State or other jurisdiction of

incorporation or organization)

58-2126618

(I.R.S. Employer

Identification Number)

6200 The Corners Pkwy., Atlanta, Georgia

(Address of principal executive offices)

30092

(Zip Code)

Registrant’s telephone number, including area code(770) 449-7800

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

FORM 10-Q

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

INDEX

		Page No.
PART 1. FINANCIAL INFORMATION

Item 1.	Financial Statements	3


	Balance Sheets—June 30, 2002 (unaudited) and December 31, 2001	4


	Statements of Income for the Three Months and Six Months Ended June 30, 2002 (unaudited) and 2001 (unaudited)	5


	Statements of Partners’ Capital for the Year Ended December 31, 2001 and the Six Months Ended June 30, 2002 (unaudited)	6


	Statements of Cash Flows for the Six Months Ended June 30, 2002 (unaudited) and 2001 (unaudited)	7


	Condensed Notes to Financial Statements (unaudited)	8


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

PART II. OTHER INFORMATION		15

Exhibit Index		16

Exhibit 99.1—Certification of Chief Executive Officer

Exhibit 99.2—Certification of Chief Financial Officer

PART I. FINANCIAL INFORMATION

Effective July 3, 2002, Wells Real Estate Fund VIII (the “Partnership”) engaged Ernst & Young LLP (“Ernst & Young”) as its principal accountants to audit the Partnership’s financial statements. In accordance with the relief granted to former auditing clients of Arthur Andersen LLP in SEC Release No. 34-45589, Ernst & Young completed its review of the unaudited financial statements of the Partnership for the quarter ended March 31, 2002 pursuant to Rule 10-01(d) of Regulation S-X within the 60-day period allowed pursuant to the SEC Release, and no material modifications to the previously reported financial information were required.

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

BALANCE SHEETS

	(unaudited)
	June 30, 2002		December 31, 2001

ASSETS:
Investments in joint ventures (Note 2)	$	21,189,085	$	21,861,005
Cash and cash equivalents		70,443		28,901
Due from affiliates		647,572		804,064

Total assets	$	21,907,100	$	22,693,970


LIABILITIES AND PARTNERS’ CAPITAL:
Liabilities:
Partnership distributions payable	$	668,673	$	684,141
Accounts payable		2,384		6,527

		671,057		690,668

Partners’ capital:
Limited partners:
Class A—2,815,468 units and 2,806,519 units as of June 30, 2002 and December 31, 2001, respectively		21,236,043		22,003,302
Class B—387,801 units and 396,750 units as of June 30, 2002 and December 31, 2001, respectively		0		0

Total partners’ capital		21,236,043		22,003,302

Total liabilities and partners’ capital	$	21,907,100	$	22,693,970

The accompanying notes are an integral part of these balance sheets.

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF INCOME

	(unaudited)				(unaudited)
	Three Months Ended				Six Months Ended
	June 30, 2002		June 30, 2001		June 30, 2002		June 30, 2001
REVENUES:
Equity earnings of joint ventures (Note 2)	$	303,792	$	358,906	$	617,024	$	647,634
Interest income		0		0		1,076		2,151

		303,792		358,906		618,100		649,785

EXPENSES:
Legal and accounting		2,923		3,165		10,823		9,392
Partnership administration		18,257		22,000		33,975		31,341
Computer costs		1,930		4,308		4,194		5,508

		23,110		29,473		48,992		46,241

NET INCOME	$	280,682	$	329,433	$	569,108	$	603,544

NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS	$	280,682	$	329,433	$	569,108	$	603,544

NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS	$	0	$	0	$	0	$	0

NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT	$	0.10	$	0.12	$	0.20	$	0.22

NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT	$	0.00	$	0.00	$	0.00	$	0.00

CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT	$	0.23	$	0.23	$	0.46	$	0.45

The accompanying notes are an integral part of these statements.

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2001

AND THE SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)

	Limited Partners								Total Partners’ Capital
	Class A				Class B
	Units	Amounts			Units		Amounts
BALANCE, December 31, 2000	2,764,087	$	23,180,147		439,182		$	0	$	23,180,147
Net income	0		1,433,706		0			0		1,433,706
Partnership distributions	0		(2,610,551	)	0			0		(2,610,551	)
Class B conversion elections	42,432		0	)	(42,432	)		0		0

BALANCE, December 31, 2001	2,806,519		22,003,302		396,750			0		22,003,302
Net income	0		569,108		0			0		569,108
Partnership distributions	0		(1,336,367	)	0			0		(1,336,367	)
Class B conversion elections	8,949		0		(8,949	)		0		0

BALANCE, June 30, 2002 (unaudited)	2,815,468	$	21,236,043		387,801		$	0	$	21,236,043

The accompanying notes are an integral part of these statements.

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF CASH FLOWS

	(unaudited)
	Six Months Ended
	June 30, 2002			June 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	569,108		$	603,544
Adjustments to reconcile net income to net cash used in operating activities:
Equity in income of joint ventures		(617,024	)		(647,634	)
Changes in assets and liabilities:
Prepaid expenses and other assets		—			(20	)
Accounts payable		(4,143	)		(8,011	)

Net cash used in operating activities		(52,059	)		(52,121	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures		1,445,436			1,221,244

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated earnings		(1,351,835	)		(1,185,355	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		41,542			(16,232	)
CASH AND CASH EQUIVALENTS, beginning of year		28,901			18,722

CASH AND CASH EQUIVALENTS, end of period	$	70,443		$	2,490

The accompanying notes are an integral part of these statements.

WELLS REAL ESTATE FUND VIII, L.P.

(A Georgia Public Limited Partnership)

CONDENSED NOTES TO FINANCIAL STATEMENTS

June 30, 2002

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Business

Wells Real Estate Fund VIII, L.P. (the “Partnership”) is a Georgia public limited partnership with Leo Wells III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as the General Partners. The Partnership was formed on August 15, 1994, 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) 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 January 6, 1995, the Partnership commenced a public offering of up to $35,000,000 of Class A or Class B limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on February 24, 1995 upon receiving and accepting subscriptions for 125,000 units. The Partnership terminated this offering on January 4, 1996 upon receiving gross proceeds of $32,042,689, representing subscriptions for approximately 2,613,534 Class A units and 590,735 Class B units held by 1,939 and 302 limited partners, respectively. In March 1997, the Partnership repurchased 1,000 limited partners units.

The Partnership owns interests in all of its real estate assets through joint ventures with other Wells Real Estate Funds. As of June 30, 2002, the Partnership owned interests in the following 8 properties through the affiliated joint ventures listed below:

Joint Venture	Joint Venture Partners	Properties


Fund VI-VII-VIII Associates	— Wells Real Estate Fund VI, L.P. — Wells Real Estate Fund VII, L.P. — Wells Real Estate Fund VIII, L.P.	1. BellSouth Building A four-story office building located in Jacksonville, Florida 2. Tanglewood Commons A retail center in Clemmons, North Carolina


Fund VII-Fund VIII Associates	— Wells Real Estate Fund VII, L.P. — Wells Real Estate Fund VIII, L.P.	3. Hannover Center A retail center located in Stockbridge, Georgia 4. CH2M Hill at Gainesville Property An office building located in Gainesville, Florida


Fund VIII-Fund IX Associates	— Wells Real Estate Fund VIII, L.P. — Wells Real Estate Fund IX, L.P.	5. US Cellular Building A four-story office building located in Madison, Wisconsin 6. AT&T-TX Building A one-story office building located in Boulder County, Colorado 7. Cirrus Logic Building A two-story office building located in Boulder County, Colorado

Fund VIII-IX-REIT Associates	— Fund VIII-Fund IX Associates. — Wells Operating Partnership, L.P.*	8. Quest Building A two-story office building located in Orange County, California

Wells Operating Partnership, L.P. is a Delaware limited partnership with Wells Real Estate Investment Trust, Inc. (“Wells REIT”) serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.

Each of the aforementioned properties was acquired on an all cash basis. For further information regarding the foregoing joint ventures and properties, refer to the report filed for the Partnership Form 10-K for the year ended December 31, 2001.

(b) Basis of Presentation

The financial statements of the Partnership have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. The quarterly statements included herein have not been examined by independent accountants. However, in the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature and necessary to fairly present the results for these periods. For further information, refer to the financial statements and footnotes included in the report filed for the Partnership on Form 10-K for the year ended December 31, 2001. On June 28, 2002, Fund VI-VII-VIII Associates entered into an agreement to sell an out parcel of land at Tanglewood Commons for a gross selling price of approximately $560,000. Pursuant to the terms of the agreement, this transaction is currently subject to a due diligence period, during which the purchaser has the right to terminate the contract. Accordingly, there are no assurances that this sale will close.

(c) Distributions of Net Cash From Operations

As defined by the partnership agreement, ca

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