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 September 30, 2002 or |
| o | 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 0-23656
WELLS REAL ESTATE FUND VI,
L.P.
(Exact name of registrant as specified in its charter)
| Georgia (State of other jurisdiction of incorporation or organization) |
58-2022628 (I.R.S. Employer Identification No.) |
| 6200 The Corners Parkway, Suite 250, 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 o
Form 10-Q
Wells Real Estate Fund VI, L.P.
(A Georgia Public Limited Partnership)
INDEX
| Exhibit Index | 19 |
| Exhibit 99.1 Certification of Chief Executive Officer | 20 |
| Exhibit 99.2 Certification of Chief Financial Officer | 21 |
WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
| (unaudited) September 30, 2002 |
December 31, 2001 |
||||||
| ASSETS: | |||||||
| Investments in joint ventures (Note 2) | $ | 14,910,936 | $ | 16,403,394 | |||
| Cash and cash equivalents | 24,109 | 27,895 | |||||
| Due from affiliates | 1,353,273 | 462,092 | |||||
| Prepaid expenses and other assets | 0 | 910 | |||||
| Total assets | $ | 16,288,318 | $ | 16,894,291 | |||
| LIABILITIES AND PARTNERS’ CAPITAL | |||||||
| Liabilities: | |||||||
| Partnership distribution payable | $ | 446,502 | $ | 461,250 | |||
| Accounts payable | 5,129 | 2,534 | |||||
| Total liabilities | 451,631 | 463,784 | |||||
| Partners’ Capital | |||||||
| Limited Partners: | |||||||
| Class A – 2,248,716 units as of September 30, 2002 and 2,236,360 units as of December 31, 2001 |
15,836,687 | 16,430,507 | |||||
| Class B – 251,284 units as of September 30, 2002 and 263,640 units as of December 31, 2001 |
0 | 0 | |||||
| Total partners’ capital | 15,836,687 | 16,430,507 | |||||
| Total liabilities and partners’ capital | $ | 16,288,318 | $ | 16,894,291 | |||
The accompanying notes are an integral part of these balance sheets.
WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
| (unaudited) Three Months Ended |
(unaudited) Nine Months Ended |
||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
||||||||||
| REVENUES: | |||||||||||||
| Equity in income of joint ventures (Note 2) | $ | 272,559 | $ | 295,782 | $ | 822,425 | $ | 803,428 | |||||
| Other income | 1,561 | 0 | 1,561 | 0 | |||||||||
| Interest income | 204 | 264 | 1,065 | 687 | |||||||||
| 274,324 | 296,046 | 825,051 | 804,115 | ||||||||||
| EXPENSES: | |||||||||||||
| Legal and accounting | 7,302 | 2,167 | 27,609 | 14,900 | |||||||||
| Computer costs | 1,917 | 2,997 | 5,767 | 8,104 | |||||||||
| Partnership administration | 15,225 | 11,905 | 38,722 | 42,953 | |||||||||
| 24,444 | 17,069 | 72,098 | 65,957 | ||||||||||
| NET INCOME | $ | 249,880 | $ | 278,977 | $ | 752,953 | $ | 738,158 | |||||
| NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |
$ | 249,880 | $ | 278,977 | $ | 752,953 | $ | 738,158 | |||||
| NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS |
$ | 249,880 | $ | 0 | $ | 0 | $ | 0 | |||||
| NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.11 | $ | 0.12 | $ | 0.33 | $ | 0.34 | |||||
| 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 |
$ | 0.20 | $ | 0.23 | $ | 0.60 | $ | 0.60 | |||||
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2001
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
| Limited Partners | ||||||||||||||||
| Class A | Class B | |||||||||||||||
| Units | Amount | Units | Amount | Total Partner’s Capital |
||||||||||||
| BALANCE, December 31, 2000 | 2,198,969 | $ | 17,118,806 | 301,031 | $ | 0 | $ | 17,118,806 | ||||||||
| Net income | 0 | 1,190,997 | 0 | 0 | 1,190,997 | |||||||||||
| Partnership distributions | 0 | (1,879,296 | ) | 0 | 0 | (1,879,296 | ) | |||||||||
| Class B conversion elections | 37,391 | 0 | (37,391 | ) | 0 | 0 | ||||||||||
| BALANCE, December 31, 2001 | 2,236,360 | 16,430,507 | 263,640 | 0 | 16,430,507 | |||||||||||
| Net income | 0 | 752,953 | 0 | 0 | 752,953 | |||||||||||
| Partnership distributions | 0 | (1,346,773 | ) | 0 | 0 | (1,346,773 | ) | |||||||||
| Class B conversion elections | 12,356 | 0 | (12,356 | ) | 0 | |||||||||||
| BALANCE, September 30, 2002 (unaudited) |
2,248,716 | $ | 15,836,687 | 251,284 | $ | 0 | $ | 15,836,687 | ||||||||
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
| (unaudited) Nine Months Ended |
|||||||
| September 30, 2002 |
September 30, 2001 |
||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 752,953 | $ | 738,158 | |||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||
| Equity in income of joint ventures | (822,425 | ) | (803,428 | ) | |||
| Changes in assets and liabilities: | |||||||
| Prepaid expenses and other assets | 910 | (300 | ) | ||||
| Accounts payable | 2,595 | (2,000 | ) | ||||
| Net cash used in operating activities | (65,967 | ) | (67,570 | ) | |||
| CASH FLOW FROM INVESTING ACTIVITIES: | |||||||
| Distributions received from joint ventures | 1,423,702 | 1,498,548 | |||||
| CASH FLOW FROM FINANCING ACTIVITIES: | |||||||
| Partnership distributions from accumulated earnings | (959,155 | ) | (724,871 | ) | |||
| Partnership distributions in excess of accumulated earnings | (402,366 | ) | (706,041 | ) | |||
| Net cash used in financing activities | (1,361,521 | ) | (1,430,912 | ) | |||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (3,786 | ) | 66 | ||||
| CASH AND CASH EQUIVALENTS, beginning of year | 27,895 | 28,855 | |||||
| CASH AND CASH EQUIVALENTS, end of period | $ | 24,109 | $ | 28,921 | |||
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND VI, L.P.
(A Georgia Public Limited Partnership)
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| (a) Organization and Business |
| Wells Real Estate Fund VI, LP (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, LP (“Wells Partners”), a Georgia nonpublic limited partnership, serving as the General Partners. The Partnership was formed on December 1, 1992, for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and otherwise managing income producing properties for investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B units. The 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 and 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 5, 1993, the Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on April 4, 1994 upon receiving and accepting gross offering proceeds of $25,000,000 representing subscriptions from 1,793 Class A and Class B limited partners. |
| The Partnership owns interests in all of its real estate assets through joint ventures with other Wells Real Estate Funds. As of September 30, 2002, the Partnership owned interests in the following eight properties through the affiliated joint ventures listed below: |
| Joint Venture | Joint Venture Partners | Properties | ||
| | ||||
| Fund II-III-VI-VII Associates | - | Fund II and III Associates* | 1. | Holcomb Bridge Property |
| - | Wells Real Estate Fund VI, LP | An office/retail center | ||
| - | Wells Real Estate Fund VII, LP | located in Roswell, Georgia | ||
| | ||||
| Fund V-VI Associates | - | Wells Real Estate Fund V, LP | 2. | Stockbridge Village II |
| - | Wells Real Estate Fund VI, LP | Two retail buildings located in Clayton county, Georgia | ||
| 3. | Hartford Building A four story office building located in Hartford, Connecticut | |||
| | ||||
| Fund V-VI-VII Associates | - | Wells Real Estate Fund V, L.P. | 4. | Marathon Building |
| - | Wells Real Estate Fund VI, L.P. | A three-story office building located, | ||
| - | Wells Real Estate Fund VII, L.P. | in Appleton,Wisconsin | ||
| | ||||
| Fund VI-VII Associates | - | Wells Real Estate Fund VI, L.P. | 5. | Stockbridge Village I Expansion |
| - | Wells Real Estate Fund VII, L.P. | A retail shopping center expansion located in Stockbridge, Georgia | ||
| 6. | Stockbridge Village III Two retail buildings located in Stockbridge, Georgia | |||
| | ||||
| Fund VI-VII-VIII Associates | - | Wells Real Estate Fund VI, L.P. | 7. | BellSouth Building |
| - | Wells Real Estate Fund VII, L.P. | A four-story office building located in | ||
| - | Wells Real Estate Fund VIII, L.P | Jacksonville, Florida | ||
| 8. | Tanglewood Commons A retail center located in Clemmons, North Carolina | |||
| | ||||
| * | Fund II-III Associates is a joint venture between Fund II and IIOW Associates and Wells Real Estate Fund III,L.P.; Fund II and Fund IIOW Associates is a joint venture between Wells Real Estate Fund II and Wells Real Estate Fund II-OW. |
| Each of the above properties was acquired on an all cash basis. For further information regarding the foregoing joint ventures and properties, refer to the Partnership’s Form 10-K filed for the year ended December 31, 2001. |
| On October 1, 2001, Fund I-II-IIOW-VI-VII Associates, a joint venture among the Partnership, Wells Real Estate Fund I, Fund II and IIOW Associates, and Wells Real Estate Fund VII, L.P., sold the Cherokee Commons property to an unrelated third party. The Cherokee Commons property is a retail shopping center located in Cherokee County, Georgia. The portion of the proceeds from the sale of the Cherokee Commons property attributable to the Partnership in an amount of $886,212 is included in due from affiliates in the accompanying balance sheet as of September 30, 2002. |
| (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 for complete financial statements. The quarterly statements 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 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 year ended December 31, 2001. |
| (c) Distribution of Net Cash From Operations |
| As defined by the partnership agreement, cash available for distributions is distributed quarterly 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. |
| (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 this accounting standard, management reviews each of the properties in which the partnership holds an interest for impairment as events or changes in circumstances arise, which indicate that the carrying amounts of such assets may not be recoverable and the future undiscounted cash flows expected to be generated by such assets are less than the respective carrying amounts. If such assets are considered to be impaired, the Partnership records impairment losses and reduces the carrying amounts of the impaired assets to amounts that reflect 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. Material long-lived assets held for sale are separately identified in the balance sheets, and the related net operating income is segregated as income from discontinued operations in the statements of income. Depreciation is not recorded for long-lived assets held for sale. 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 assets for use in operations. Neither the Partnership nor its joint ventures have recognized impairment losses to date. |
2. INVESTMENTS IN JOINT VENTURES
| (a) Basis of Presentation |
| The Partnership owned interests in eight properties as of September 30, 2002 through its ownership in the joint ventures described in Note 1. The Partnership does not have control over the operations of these joint ventures; 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 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 nine months ended September 30, 2002 and 2001: |
| Total Revenues | Net Income | Partnership’s Share of Net Income |
|||||||||||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
||||||||||||||
| Fund V – VI Associates |
$ | 250,299 | $ | 258,309 | $ | 131,053 | $ | 124,098 | $ | 70,240 | $ | 66,513 | |||||||
| Fund V-VI-VII Associates |
244,445 | 244,189 | 156,098 | 150,721 | 65,296 | 63,047 | |||||||||||||
| Fund VI – VII Associates |
171,325 | 179,052 | 92,489 | 48,583 | 41,435 | 21,907 | |||||||||||||
| Fund II-III-VI-VII Associates |
140,100 | 215,407 | 20,320 | 84,664 | 5,458 | 22,741 | |||||||||||||
| Fund VI-VII-VIII Associates |
615,916 | 633,032 | 251,378 | 303,339 | 86,098 | 103,895 | |||||||||||||
| Fund I-II-IIOW-VI-VII Associates |
37,846 | 253,155 | 37,651 | 165,104 | 4,032 | 17,679 | |||||||||||||
| $ | 1,459,931 | $ | 1,783,144 | $ | 688,989 | $ | 876,509 | $ | 272,559 | $ | 295,782 | ||||||||
| Total Revenues | Net Income | Partnership’s Share of Net Income |
|||||||||||||||||
| Nine Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
||||||||||||||
| Fund V – VI Associates |
$ | 757,924 | $ | 777,063 | $ | 386,983 | $ | 380,082 | $ | 207,411 | $ | 203,713 | |||||||
| Fund V-VI-VII Associates |
731,264 | 735,685 | 445,597 | 449,066 | 186,393 | 187,844 | |||||||||||||
| Fund VI – VII Associates |
579,013 | 544,613 | 315,153 | 171,580 | 141,188 | 77,010 | |||||||||||||
| Fund II-III-VI-VII Associates |
498,567 | 631,698 | 140,517 | 175,834 | 37,744 | 47,229 | |||||||||||||
| Fund VI-VII-VIII Associates |
1,824,129 | 1,806,896 | 700,759 | 698,230 | 240,012 | 239,146 | |||||||||||||
| Fund I-II-IIOW-VI-VII Associates |
108,124 | 764,131 | 90,675 | 452,799 | 9,677 | 48,486 | |||||||||||||
| $ | 4,499,021 | $ | 5,260,086 | $ | 2,079,684 | $ | 2,327,591 | $ | 822,425 | $ | 803,428 | ||||||||
| The following information summarizes the operations of the property, which is owned by one of the above joint ventures and significant to the Partnership, for the three months and nine months ended September 30, 2002 and 2001. Audited financial statements of this property are included in the report filed for the Partnership on Form 10-K for the year ended December 31, 2001: |
| Total Revenues | Net Income | Partnership’s Share of Net Income |
|||||||||||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
||||||||||||||
| Hartford Building | $ | 181,588 | $ | 180,741 | $ | 96,553 | $ | 92,369 | $ | 51,752 | $ | 49,510 | |||||||
| Total Revenues | Net Income | Partnership’s Share of Net Income |
|||||||||||||||||
| Nine Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
||||||||||||||
| Hartford Building | $ | 531,861 | $ | 543,397 | $ | 273,079 | $ | 286,557 | $ | 146,370 | $ | 153,595 | |||||||