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 March 31, 2004
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 0-21580
WELLS REAL ESTATE FUND V, L.P.
(Exact name of registrant as specified in its charter)
| Georgia | 58-1936904 | |
| (State of other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 6200 The Corners Parkway, Norcross, GA |
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 ¨
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Wells Real Estate Fund V, L.P. (the “Partnership”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Any such forward-looking statements are subject to known and unknown risks, uncertainties and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations; provide distributions to limited partners; and maintain the value of our real estate properties, may be significantly hindered. Following are some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in certain forward-looking statements:
General economic risks
| • | Adverse changes in general economic conditions or local conditions; |
| • | Adverse economic conditions affecting the particular industry of one or more of our tenants; |
Real estate risks
| • | Our ability to achieve appropriate occupancy levels resulting in sufficient rental amounts; |
| • | Supply of or demand for similar or competing rentable space, which may adversely impact our ability to retain or obtain new tenants at lease expiration at acceptable rental amounts; |
| • | Tenant ability or willingness to satisfy obligations relating to our existing lease agreements; |
| • | Our potential need to fund tenant improvements, lease-up costs, or other capital expenditures out of operating cash flow; |
| • | Increases in property operating expenses, including property taxes, insurance, and other costs at our properties; |
| • | Our ability to secure adequate insurance at reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts; |
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| • | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties; |
| • | Unexpected costs of capital expenditures related to tenant build-out projects or other unforeseen capital expenditures; |
| • | Our ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any continuing obligations to us; |
Other operational risks
| • | Our dependency on Wells Capital, Inc., the corporate general partner of one of our General Partners, its key personnel, and its affiliates for various administrative services; |
| • | Wells Capital, Inc.’s ability to attract and retain high-quality personnel who can provide acceptable service levels to us and generate economies of scale for us over time; |
| • | Increases in our administrative operating expenses, including increased expenses associated with operating as a public company; |
| • | Changes in governmental, tax, real estate, environmental, and zoning laws and regulations and the related costs of compliance; |
| • | Our ability to prove compliance with any governmental, tax, real estate, environmental, and zoning in the event that any such position is questioned by the respective authority; and |
| • | Actions of our joint venture partners including potential bankruptcy, business interests differing from ours, or other actions that may adversely impact the operations of joint ventures. |
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TABLE OF CONTENTS
Page 4
WELLS REAL ESTATE FUND V, L.P.
BALANCE SHEETS
| ASSETS | ||||||
| (unaudited) March 31, 2004 |
December 31, 2003 | |||||
| Investments in joint ventures |
$ | 6,048,536 | $ | 6,058,674 | ||
| Cash and cash equivalents |
5,012,860 | 6,605,558 | ||||
| Due from joint ventures |
105,979 | 107,010 | ||||
| Total assets |
$ | 11,167,375 | $ | 12,771,242 | ||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||
| Liabilities: |
||||||
| Accounts payable and accrued expenses |
$ | 12,321 | $ | 2,815 | ||
| Total liabilities |
12,321 | 2,815 | ||||
| Partners’ capital: |
||||||
| Limited partners: |
||||||
| Class A—1,567,566 units outstanding, as of March 31, 2004 and December 31, 2003, respectively |
10,900,753 | 12,289,864 | ||||
| Class B—133,036 units outstanding, as of March 31, 2004 and December 31, 2003, respectively |
254,301 | 478,563 | ||||
| General partners |
0 | 0 | ||||
| Total partners’ capital |
11,155,054 | 12,768,427 | ||||
| Total liabilities and partners’ capital |
$ | 11,167,375 | $ | 12,771,242 | ||
See accompanying notes.
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WELLS REAL ESTATE FUND V, L.P.
STATEMENTS OF OPERATIONS
| (unaudited) Three Months Ended March 31, | |||||||
| 2004 |
2003 | ||||||
| REVENUES: |
|||||||
| Interest income |
$ | 14,575 | $ | 329 | |||
| Equity in (loss) income of joint ventures (Note 2) |
(92,771 | ) | 103,880 | ||||
| (78,196 | ) | 104,209 | |||||
| EXPENSES: |
|||||||
| Partnership administration |
17,545 | 14,893 | |||||
| Legal and accounting |
10,281 | 6,525 | |||||
| Other general and administrative |
349 | 1,389 | |||||
| 28,175 | 22,807 | ||||||
| NET (LOSS) INCOME |
$ | (106,371 | ) | $ | 81,402 | ||
| NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |
$ | 0 | $ | 81,402 | |||
| NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS |
$ | (106,371 | ) | $ | 0 | ||
| NET INCOME PER WEIGHTED-AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.00 | $ | 0.05 | |||
| NET LOSS PER WEIGHTED-AVERAGE CLASS B LIMITED PARTNER UNIT |
$ | (0.80 | ) | $ | 0.00 | ||
| CASH DISTRIBUTION PER WEIGHTED-AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.89 | $ | 0.06 | |||
| CASH DISTRIBUTION PER WEIGHTED-AVERAGE CLASS B LIMITED PARTNER UNIT |
$ | 0.89 | $ | 0.00 | |||
| WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING: |
|||||||
| CLASS A |
1,567,566 | 1,566,416 | |||||
| CLASS B |
133,036 | 134,186 | |||||
See accompanying notes.
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STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE THREE MONTHS ENDED MARCH 31, 2004 (unaudited)
| Limited Partners |
General Partners |
Total Partners’ Capital |
||||||||||||||||||
| Class A |
Class B |
|||||||||||||||||||
| Units |
Amount |
Units |
Amount |
|||||||||||||||||
| BALANCE, December 31, 2002 |
1,566,416 | $ | 10,681,632 | 134,186 | $ | 0 | $ | 0 | $ | 10,681,632 | ||||||||||
| Net income |
0 | 1,882,483 | 0 | 478,563 | 0 | 2,361,046 | ||||||||||||||
| Partnership distributions |
0 | (274,251 | ) | 0 | 0 | 0 | (274,251 | ) | ||||||||||||
| Class B conversion elections |
1,150 | 0 | (1,150 | ) | 0 | 0 | 0 | |||||||||||||
| BALANCE, December 31, 2003 |
1,567,566 | 12,289,864 | 133,036 | 478,563 | 0 | 12,768,427 | ||||||||||||||
| Net loss |
0 | 0 | 0 | (106,371 | ) | 0 | (106,371 | ) | ||||||||||||
| Partnership distributions |
0 | (1,389,111 | ) | 0 | (117,891 | ) | 0 | (1,507,002 | ) | |||||||||||
| BALANCE, March 31, 2004 |
1,567,566 | $ | 10,900,753 | 133,036 | $ | 254,301 | $ | 0 | $ | 11,155,054 | ||||||||||
See accompanying notes.
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WELLS REAL ESTATE FUND V, L.P.
STATEMENTS OF CASH FLOWS
| (unaudited) Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net (loss) income |
$ | (106,371 | ) | $ | 81,402 | |||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Equity in loss (income) of joint ventures |
92,771 | (103,880 | ) | |||||
| Changes in assets and liabilities: |
||||||||
| Accounts payable and accrued expenses |
9,506 | (16,771 | ) | |||||
| Net cash flows used in operating activities |
(4,094 | ) | (39,249 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Investment in joint ventures |
(109,460 | ) | 0 | |||||
| Distributions received from joint ventures |
27,858 | 145,120 | ||||||
| Net cash flows (used in) provided by investing activities |
(81,602 | ) | 145,120 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Partnership distributions paid |
(1,507,002 | ) | (97,901 | ) | ||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(1,592,698 | ) | 7,970 | |||||
| CASH AND CASH EQUIVALENTS, beginning of period |
6,605,558 | 29,716 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 5,012,860 | $ | 37,686 | ||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES: |
||||||||
| Due from joint ventures |
$ | 26,826 | $ | 255,148 | ||||
| Partnership distributions payable |
$ | 0 | $ | 97,901 | ||||
See accompanying notes.
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WELLS REAL ESTATE FUND V, L.P.
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004 (unaudited)
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Organization and Business |
Wells Real Estate Fund V, L.P. (the “Partnership”) is a public limited partnership organized on October 25, 1990 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 (collectively, the “General Partners”). The Partnership has two classes of limited partnership interests, Class A and Class B Units. Class B limited partners have a one-time right to elect to have all of their units treated as Class A 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 partnership unit has equal voting rights, regardless of class.
On March 6, 1992, 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 a minimum of 125,000 units on April 27, 1992. The offering was terminated on March 3, 1993, at which time the Partnership had sold 1,520,967 Class A Units and 179,635 Class B Units representing capital contributions of $17,006,020 from investors who were admitted to the Partnership as limited partners.
The Partnership owns interests in all of its real estate assets through joint ventures with other Wells entities (the “Joint Ventures”). During the periods presented, the Partnership owned interests in the following five properties through the affiliated joint ventures listed below (the “Joint Ventures”):
| Joint Venture | Joint Venture Partners | Properties | ||
| Fund IV and Fund V Associates (“Fund IV-V Associates”) |
• Wells Real Estate Fund IV, L.P. • Wells Real Estate Fund V, L.P. |
1. Village Overlook Property (1) Two substantially identical two-story office buildings located in Clayton County, Georgia 2. 10407 Centurion Parkway North (formerly known as the “IBM Jacksonville Building”) A four-story office building located in Jacksonville, Florida | ||
| Fund V and Fund VI Associates (“Fund V-VI Associates”) |
• Wells Real Estate Fund V, L.P. • Wells Real Estate Fund VI, L.P. |
3. Hartford Building (2) A four-story office building located in Hartford, Connecticut 4. Stockbridge Village II | ||
| Fund V, Fund VI, and Fund VII Associates (“Fund V-VI-VII Associates”) |
• Wells Real Estate Fund V, L.P. • Wells Real Estate Fund VI, L.P. • Wells Real Estate Fund VII, L.P. |
5. Marathon Building A three-story office building located in Appleton, Wisconsin | ||
| (1) | This property was sold in September 2003. |
| (2) | This property was sold in August 2003. |
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On August 12, 2003, Fund V-VI Associates sold the Hartford Building to an unrelated third party for a gross sales price of $8,925,000, less agreed-upon credits of $457,500. As a result of this sale, net proceeds of approximately $3,780,000 and gain of approximately $1,240,000 were allocated to the Partnership in the third quarter of 2003.
On September 29, 2003, Fund IV-V Associates sold the Village Overlook Property to an unrelated third party for a gross selling price of $5,300,000. As a result of this sale, net proceeds of approximately $3,114,000 and gain of approximately $1,140,000 were allocated to the Partnership in the third quarter of 2003.
Each of the aforementioned properties was acquired on an all-cash basis. The investment objectives of each of the joint venture partners listed in the above table are substantially identical to those of the Partnership. For further information regarding the foregoing Joint Ventures and properties, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2003.
| (b) | Basis of Presentation |
The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the instructions to Form 10-Q and Article 10