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

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended March 31, 2004

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 0-30287

WELLS REAL ESTATE FUND XII, L.P.

(Exact name of registrant as specified in its charter)


Georgia		58-2438242
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

6200 The Corners Pkwy., 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 ¨

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund XII, 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 No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Balance Sheets – March 31, 2004 (unaudited) and December 31, 2003	5

	Statements of Operations for the Three Months Ended March 31, 2004 (unaudited) and 2003 (unaudited)	6

	Statements of Partners’ Capital for the Year Ended December 31, 2003 and the Three Months Ended March 31, 2004 (unaudited)	7

	Statements of Cash Flows for the Three Months Ended March 31, 2004 (unaudited) and 2003 (unaudited)	8

	Condensed Notes to Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risks	18

Item 4.	Controls and Procedures	19

PART II.	OTHER INFORMATION	19

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WELLS REAL ESTATE FUND XII, L.P.

BALANCE SHEETS

ASSETS


	(unaudited) March 31, 2004		December 31, 2003
Investments in joint ventures	$	27,623,187	$	27,894,505
Due from joint ventures		490,732		658,908
Cash and cash equivalents		195,405		14,922
Accounts receivable		0		1,377

Total assets	$	28,309,324	$	28,569,712

LIABILITIES AND PARTNERS’ CAPITAL


Liabilities:
Partnership distributions payable	$	621,361	$	660,161
Accounts payable		29,376		17,948

Total liabilities		650,737		678,109

Partners’ capital:
Limited partners:
Cash Preferred—2,924,050 and 2,934,050 units outstanding as of March 31, 2004 and December 31, 2003, respectively		25,470,087		25,536,652
Tax Preferred—637,069 and 627,069 units outstanding as of March 31, 2004 and December 31, 2003, respectively		2,188,500		2,354,951
General partners		0		0

Total partners’ capital		27,658,587		27,891,603

Total liabilities and partners’ capital	$	28,309,324	$	28,569,712

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

STATEMENTS OF OPERATIONS


	(unaudited) Three Months Ended March 31,
	2004			2003
REVENUES:
Equity in income of joint ventures	$	413,146		$	429,111
Other income		0			262

		413,146			429,373

EXPENSES:
Partnership administration		15,726			30,033
Legal and accounting		8,794			3,984
Other general and administrative		282			1,350

		24,802			35,367

NET INCOME	$	388,344		$	394,006


NET INCOME ALLOCATED TO CASH PREFERRED LIMITED PARTNERS	$	666,570		$	672,104


NET LOSS ALLOCATED TO TAX PREFERRED LIMITED PARTNERS	$	(278,226	)	$	(278,098	)


NET INCOME PER WEIGHTED-AVERAGE CASH PREFERRED LIMITED PARTNER UNIT	$	0.23		$	0.24


NET LOSS PER WEIGHTED-AVERAGE TAX PREFERRED LIMITED PARTNER UNIT	$	(0.44	)	$	(0.40	)


CASH DISTRIBUTION PER WEIGHTED-AVERAGE CASH PREFERRED LIMITED PARTNER UNIT	$	0.21		$	0.22


WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:

CASH PREFERRED LIMITED PARTNER UNIT		2,924,050			2,858,396


TAX PREFERRED LIMITED PARTNER UNIT		637,069			702,723

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

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
	Cash Preferred					Tax Preferred
	Units		Amounts			Units		Amounts
BALANCE at December 31, 2002	2,856,396		$	25,158,289		704,723		$	3,800,870		$	0	$	28,959,159
Net income (loss)	0			2,563,592		0			(1,112,820	)		0		1,450,772
Partnership distributions	0			(2,518,328	)	0			0			0		(2,518,328	)
Tax preferred conversion elections	77,654			333,099		(77,654	)		(333,099	)		0		0

BALANCE at December 31, 2003	2,934,050			25,536,652		627,069			2,354,951			0		27,891,603

Net income (loss)	0			666,570		0			(278,226	)		0		388,344
Partnership distributions	0			(621,360	)	0			0			0		(621,360	)
Tax preferred conversion elections	(10,000	)		(111,775	)	10,000			111,775			0		0

BALANCE at March 31, 2004	2,924,050		$	25,470,087		637,069		$	2,188,500		$	0	$	27,658,587

See accompanying notes.

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WELLS REAL ESTATE FUND XII, L.P.

STATEMENTS OF CASH FLOWS


	(unaudited) Three Months Ended March 31,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	388,344		$	394,006
Adjustments to reconcile net income to net cash used in operating activities:
Equity in income of joint ventures		(413,146	)		(429,111	)
Changes in assets and liabilities:
Accounts receivable		1,377			460
Accounts payable		11,428			3,309

Net cash used in operating activities		(11,997	)		(31,336	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures		852,640			671,076


CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partners		(660,160	)		(660,541	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		180,483			(20,801	)

CASH AND CASH EQUIVALENTS, beginning of period		14,922			30,471

CASH AND CASH EQUIVALENTS, end of period	$	195,405		$	9,670


SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Due from joint ventures	$	490,732		$	682,323

Partnership distributions payable	$	621,361		$	626,984

See accompanying notes.

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WELLS REAL ESTATE FUND XII, 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 XII, 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, as the general partners (collectively, the “General Partners”). The Partnership was formed on September 15, 1998 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elect to have their units treated as Cash Preferred Units or Tax Preferred Units. Thereafter, the limited partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred Units one time during each quarterly accounting period. The 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; (c) remove a General Partner; (d) elect a new General Partner; (e) dissolve the Partnership; and (f) approve a sale involving all or substantially all of the Partnership’s assets, subject to certain limitations. The majority vote on any of the matters described above will bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights regardless of class.

On March 22, 1999, the Partnership commenced a public offering of up to $70,000,000 of limited partnership units pursuant to a Registration Statement on filed Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on June 1, 1999 upon receiving and accepting subscriptions for 125,000 units. The offering was terminated on March 21, 2001, at which time the Partnership had sold 2,688,861 Cash Preferred Units and 872,258 Tax Preferred Units for $10 per unit.

The Partnership owns interests in all of its real estate assets through joint ventures with other Wells entities. During the periods presented, the Partnership owned interests in the following seven properties through the affiliated joint ventures listed below (the “Joint Ventures”):




Joint Venture	Joint Venture Partners	Properties

The Wells Fund XI – Fund XII – REIT Joint Venture (“Fund XI-XII-REIT Associates”)	• Wells Real Estate Fund XI, L.P. • Wells Real Estate Fund XII, L.P. • Wells Operating Partnership, L.P.⁽¹⁾	1. 111 Southchase Boulevard (formerly known as the “EYBL CarTex Building”) A two-story manufacturing and office building located in Fountain Inn, South Carolina 2. Sprint Building A three-story office building located in Leawood, Kansas 3. Johnson Matthey Building A two-story office building and warehouse located in Wayne, Pennsylvania 4. Gartner Building A two-story office building located in Ft. Myers, Florida

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Joint Venture	Joint Venture Partners	Properties

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