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Table of Contents
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
Form 10-Q
 
(Mark one)
 
x
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  For the quarterly period ended June 30, 2002 or
 
¨
 
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 0-20103
 
WELLS REAL ESTATE FUND IV, L.P.
(Exact name of registrant as specified in its charter)
 
Georgia
  
58-1915128
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
6200 The Corners Parkway, Suite 250,
Norcross, Georgia
  
30092
(Address of principal executive offices)
  
(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        

Table of Contents
Form 10-Q
 
WELLS REAL ESTATE FUND IV, L.P.
 
(A Georgia Public Limited Partnership)
 
INDEX
 
           
Page No.
      
Item 1.
        
3
         
4
         
5
         
6
         
7
         
8
Item 2.
        
11
    
14
    
15
      
      
 

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PART I. FINANCIAL INFORMATION
 
Effective July 3, 2002, Wells Real Estate Fund IV (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.

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WELLS REAL ESTATE FUND IV, L.P.
 
(A Georgia Public Limited Partnership)
 
BALANCE SHEETS
 
    
(unaudited)
June 30,
2002
   
December 31, 2001
ASSETS:
     
Investment in joint ventures (Note 2)
   
$
8,938,925
   
$
9,201,538
Cash and cash equivalents
   
 
42,418
   
 
45,866
Due from affiliates
   
 
228,890
   
 
259,086
    
  
Total assets
   
$
9,210,233
   
$
9,506,490
    
  
LIABILITIES AND PARTNERS’ CAPITAL:
              
Liabilities:
              
Accounts payable
   
$
1,829
   
$
2,498
Partnership distributions payable
   
 
233,675
   
 
267,575
    
  
Total liabilities
   
 
235,504
   
 
270,073
Partners’ capital:
              
Limited partners
              
Class A—1,322,909 units
   
 
8,974,729
   
 
9,236,417
Class B—38,551 units
   
 
0
   
 
0
    
  
Total partners’ capital
   
 
8,974,729
   
 
9,236,417
    
  
Total liabilities and partners’ capital
   
$
9,210,233
   
$
9,506,490
    
  
 
 
 
The accompanying notes are an integral part of these balance sheets.
 

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WELLS REAL ESTATE FUND IV, L.P.
 
(A Georgia Public Limited Partnership)
 
STATEMENTS OF INCOME
 
    
(unaudited)
Three Months Ended
   
(unaudited)
Six Months Ended
    
June 30, 2002
   
June 30, 2001
   
June 30, 2002
   
June 30, 2001
REVENUES:
                            
Equity in income of joint ventures (Note 2)
   
$
96,420
   
$
181,158
   
$
257,742
   
$
337,716
Interest income
   
 
98
   
 
96
   
 
946
   
 
2,042
    
  
  
  
    
 
96,518
   
 
181,254
   
 
258,688
   
 
339,758
    
  
  
  
EXPENSES:
                            
Legal and accounting
   
 
2,496
   
 
2,050
   
 
8,853
   
 
12,700
Computer costs
   
 
1,616
   
 
4,307
   
 
3,420
   
 
5,507
Partnership administration
   
 
16,110
   
 
18,600
   
 
28,548
   
 
27,253
    
  
  
  
    
 
20,222
   
 
24,957
   
 
40,821
   
 
45,460
    
  
  
  
NET INCOME
   
$
76,296
   
$
156,297
   
$
217,867
   
$
294,298
    
  
  
  
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS
   
$
76,296
   
$
156,297
   
$
217,867
   
$
294,298
    
  
  
  
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS
   
$
0
   
$
0
   
$
0
   
$
0
    
  
  
  
NET INCOME PER CLASS A LIMITED PARTNER UNIT
   
$
0.06
   
$
0.12
   
$
0.16
   
$
0.22
    
  
  
  
NET LOSS PER CLASS B LIMITED PARTNER UNIT
   
$
0.00
   
$
0.00
   
$
0.00
   
$
0.00
    
  
  
  
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT
   
$
0.17
   
$
0.18
   
$
0.36
   
$
0.36
    
  
  
  
 
The accompanying notes are an integral part of these financial statements.

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WELLS REAL ESTATE FUND IV, L.P.
 
(A Georgia Public Limited Partnership)
 
STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2001
AND SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)
 
    
Limited Partners
   
Total Partners’ Capital
  
    
Class A
     
Class B
   
    
Units
   
Amount
     
Partners
   
Amount
   
BALANCE, December 31, 2000
   
1,322,909
   
$
9,641,592
 
   
38,551
   
$
0
   
$
9,641,592
 
Net income
   
0
   
 
595,337
 
   
0
   
 
0
   
 
595,337
 
Partnership distributions
   
0
   
 
(1,000,512
)
   
0
   
 
0
   
 
(1,000,512
)
    
  
  
  
  
BALANCE, December 31, 2001
   
1,322,909
   
 
9,236,417
 
   
38,551
   
 
0
   
 
9,236,417
 
Net income
   
0
   
 
217,867
 
   
0
   
 
0
   
 
217,867
 
Partnership distributions
   
0
   
 
(479,555
)
   
0
   
 
0
   
 
(479,555
)
    
  
  
  
  
BALANCE, June 30, 2002 (unaudited)
   
1,322,909
   
$
8,974,729
 
   
38,551
   
$
0
   
$
8,974,729
 
    
  
  
  
  
 
The accompanying notes are an integral part of these financial statements.

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WELLS REAL ESTATE FUND IV, 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
   
$
217,867
 
   
$
294,298
 
Adjustments to reconcile net income to net cash used in operating activities:
                  
Equity in income of joint venture
   
 
(257,742
)
   
 
(337,716
)
Changes in assets and liabilities:
                  
Accounts payable
   
 
(669
)
   
 
0
 
Other assets
   
 
0
 
   
 
(482
)
    
  
Net cash used in operating activities
   
 
(40,544
)
   
 
(43,900
)
    
  
CASH FLOWS FROM INVESTING ACTIVITIES:
                  
Investment in joint ventures
   
 
0
 
   
 
(180,660
)
Distributions received from joint ventures
   
 
550,551
 
   
 
420,845
 
    
  
Net cash provided by investing activities
   
 
550,551
 
   
 
240,185
 
    
  
CASH FLOWS FROM FINANCING ACTIVITIES:
                  
Partnership distributions paid
   
 
(513,455
)
   
 
(231,171
)
    
  
NET DECREASE IN CASH AND CASH EQUIVALENTS
   
 
(3,448
)
   
 
(34,886
)
CASH AND CASH EQUIVALENTS, beginning of year
   
 
45,866
 
   
 
252,598
 
    
  
CASH AND CASH EQUIVALENTS, end of period
   
$
42,418
 
   
$
217,712
 
    
  
 
The accompanying notes are an integral part of these financial statements.

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WELLS REAL ESTATE FUND IV, 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 IV, L.P. (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia non-public limited partnership, serving as the General Partners. The Partnership was formed on October 25, 1990, for the purpose of acquiring, developing, constructing, 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 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 partner unit has equal voting rights, regardless of class.
 
On March 4, 1991, the Partnership commenced an offering of up to $25,000,000 of Class A or Class B limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership did not commence active operations until it received and accepted subscriptions for 125,000 units on May 13, 1991. The offering was terminated on February 29, 1992 at which time the Partnership had sold approximately 1,322,909 Class A units and 38,551 Class B units representing capital contributions of $13,614,652 from investors who were admitted to the Partnership as limited partners. From the original funds raised, the Partnership had invested a total of $11,088,611 in properties, paid $748,805 in acquisition and advisory fees, paid $1,767,236 in selling commission and organization and offering expenses.
 
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

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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 6 properties through the affiliated joint ventures listed below:
 
        Joint Venture        
  
Joint Venture Partners
  
Properties
Fund III-IV Associates
  
—Wells Real Estate Fund III, L.P.
—Wells Real Estate Fund IV, L.P.
  
1.      Stockbridge Village Center
         A retail shopping center located 
         in Stockbridge, Georgia
       
2.      Reciprocal Group Building
         A two-story office building
         located in Richmond, Virginia
 
Fund IV-V Associates
  
—Wells Real Estate Fund IV, L.P.
—Wells Real Estate Fund V, L.P.
  
3.      Village Overlook Property
         Two substantially identical
         two-story office buildings
         located in Clayton County,          Georgia
       
4.      IBM Jacksonville Building
         A four-story office building
         located in Jacksonville, Florida
 
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 that are of a normal and recurring nature and necessary to fairly present the results for those periods. Interim results for 2002 are not necessarily indicative of results for the year. 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.
 
(c) Distributions of Net Cash From Operations
 
As defined by the partnership agreement, cash available for distributions is distributed quarterly on a cumulative non-compounded basis to the limited partners as follows:
 
 
•
 
First, to all Class A limited partners until such limited partners have received distributions equal to a 10% per annum return on their respective adjusted capital contributions, as defined.
 
 
•
 
Second, to the General Partners until each general partner has received distributions equal to 10% of the total distributions declared by the Partnership per annum.
 
 
•
 
Third, to the Class A limited partners and the General Partners allocated on a basis of 90% and 10%, respectively.
 
No distributions will be made to the limited partners holding Class B units.

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(d) Impairment of Real Estate Assets
 
On January 1, 2002, the Partnership adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Under the new guidance, management reviews each of the properties in which it holds an interest for impairment when there is an event or change in circumstances that indicates the carrying amount of the asset may not be recoverable and the future undiscounted cash flows expected to be generated by the asset are less than its carrying amount. If such assets are considered to be impaired, the Partnership records impairment losses and reduces the carrying amount of impaired assets to an amount that reflects the fair value of the assets at the time impairment is evident. Management also reviews estimated selling prices of assets held for sale and records impairment losses to reduce the carrying amount of assets held for sale when the carrying amounts exceed the estimated selling prices less costs to sell. Also, material long-lived assets held for sale are separately identified in the balance sheets and their related net operating income is segregated as income from discontinued operations in the statements of income. In addition, depreciation of long-lived assets held for sale is not recorded. If an asset held for sale reverts to an asset used in operations, the asset will be measured at the lower of the original carrying cost, adjusted for the forgone depreciation, or the fair value at the date of the decision to hold the asset.
 
2. INVESTMENT IN JOINT VENTURES
 
(a) Basis of Presentation
 
The Partnership does not have control over the operations of the joint ventures described in Note 1; however, it does exercise significant influence. Accordingly, investments in joint ventures are recorded using the equity method of accounting. For further information, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2001.
 
(b) Summary of Operations
 
The following information summarizes the operations of the unconsolidated joint ventures in which the Partnership held ownership interests for the three and six months ended June 30, 2002 and 2001:
 
    
Total Revenues
   
Net Income
   
Partnership’s Share
of Net Income
    
Three Months Ended
   
Three Months Ended
   
Three Months Ended
    
June 30, 2002
   
June 30, 2001
   
June 30, 2002
   
June 30, 2001
   
June 30, 2002
   
June 30, 2001
Fund III-IV Associates