SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year 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 0-22039
WELLS REAL ESTATE FUND IX, L.P.
(Exact name of registrant as specified in its charter)
| Georgia | 58-2126622 | |
| (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 IX, L.P. (or, 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; |
| • | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties; |
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| • | 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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| 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 | |||||||||
| 7 | ||||||||||
| Statements of Cash Flows for the Three Months Ended March 31, 2004 (unaudited) and 2003 (unaudited) |
8 | |||||||||
| 9 | ||||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||||||||
| Item 3. | 19 | |||||||||
| Item 4. | 20 | |||||||||
| PART II. |
OTHER INFORMATION | 20 | ||||||||
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WELLS REAL ESTATE FUND IX, L.P.
BALANCE SHEETS
| ASSETS | ||||||
| (unaudited) March 31, 2004 |
December 31, 2003 | |||||
| Investments in joint ventures |
$ | 22,271,391 | $ | 22,530,501 | ||
| Due from joint ventures |
698,849 | 737,493 | ||||
| Cash and cash equivalents |
13,266 | 14,175 | ||||
| Total assets |
$ | 22,983,506 | $ | 23,282,169 | ||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||
| Liabilities: |
||||||
| Partnership distribution payable |
$ | 660,870 | $ | 720,432 | ||
| Accounts payable and accrued expenses |
38,485 | 23,770 | ||||
| Total liabilities |
699,355 | 744,202 | ||||
| Partners’ capital: |
||||||
| Limited partners: |
||||||
| Class A – 3,204,219 units and 3,201,919 units outstanding as of March 31, 2004 and December 31, 2003, respectively |
22,284,151 | 22,537,967 | ||||
| Class B – 295,781 units and 298,081 units outstanding as of March 31, 2004 and December 31, 2003, respectively |
0 | 0 | ||||
| General partners |
0 | 0 | ||||
| Total partners’ capital |
22,284,151 | 22,537,967 | ||||
| Total liabilities and partners’ capital |
$ | 22,983,506 | $ | 23,282,169 | ||
See accompanying notes.
Page 5
WELLS REAL ESTATE FUND IX, L.P.
STATEMENTS OF OPERATIONS
| (unaudited) Three Months Ended March 31, | ||||||
| 2004 |
2003 | |||||
| REVENUES: |
||||||
| Equity in income of joint ventures |
$ | 439,727 | $ | 373,952 | ||
| Other income |
0 | 679 | ||||
| 439,727 | 374,631 | |||||
| EXPENSES: |
||||||
| Partnership administration |
24,242 | 25,169 | ||||
| Legal and accounting fees |
7,992 | 3,618 | ||||
| Other general and administrative |
439 | 1,438 | ||||
| 32,673 | 30,225 | |||||
| NET INCOME |
$ | 407,054 | $ | 344,406 | ||
| NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |
$ | 407,054 | $ | 344,406 | ||
| NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS |
$ | 0.00 | $ | 0.00 | ||
| NET INCOME PER WEIGHTED-AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.13 | $ | 0.11 | ||
| NET LOSS PER WEIGHTED-AVERAGE CLASS B LIMITED PARTNER UNIT |
$ | 0.00 | $ | 0.00 | ||
| CASH DISTRIBUTION PER WEIGHTED-AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.21 | $ | 0.21 | ||
| WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING: |
||||||
| CLASS A |
3,204,219 | 3,173,483 | ||||
| CLASS B |
295,781 | 326,517 | ||||
See accompanying notes.
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WELLS REAL ESTATE FUND IX, 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 |
|||||||||||||||||
| Class A |
Class B |
||||||||||||||||||
| Units |
Amounts |
Units |
Amounts |
||||||||||||||||
| BALANCE, December 31, 2002 |
3,165,583 | $ | 23,838,988 | 334,417 | $ | 0 | $ | 0 | $ | 23,838,988 | |||||||||
| Net income |
0 | 1,425,532 | 0 | 0 | 0 | 1,425,532 | |||||||||||||
| Partnership distributions |
0 | (2,726,553 | ) | 0 | 0 | 0 | (2,726,553 | ) | |||||||||||
| Class B conversion elections |
36,336 | 0 | (36,336 | ) | 0 | 0 | 0 | ||||||||||||
| BALANCE, December 31, 2003 |
3,201,919 | 22,537,967 | 298,081 | 0 | 0 | 22,537,967 | |||||||||||||
| Net income |
0 | 407,054 | 0 | 0 | 0 | 407,054 | |||||||||||||
| Partnership distributions |
0 | (660,870 | ) | 0 | 0 | 0 | (660,870 | ) | |||||||||||
| Class B conversion elections |
2,300 | 0 | (2,300 | ) | 0 | 0 | 0 | ||||||||||||
| BALANCE, March 31, 2004 |
3,204,219 | $ | 22,284,151 | 295,781 | $ | 0 | $ | 0 | $ | 22,284,151 | |||||||||
See accompanying notes.
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WELLS REAL ESTATE FUND IX, L.P.
STATEMENTS OF CASH FLOWS
| (unaudited) | ||||||||
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOW FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 407,054 | $ | 344,406 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Equity in income of joint ventures |
(439,727 | ) | (373,952 | ) | ||||
| Changes in assets and liabilities: |
||||||||
| Accounts payable and accrued expenses |
14,715 | 9,249 | ||||||
| Net cash used in operating activities |
(17,958 | ) | (20,297 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Distributions received from joint ventures |
737,481 | 628,083 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Distributions to limited partners |
(720,432 | ) | (712,257 | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(909 | ) | (104,471 | ) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period |
14,175 | 121,265 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 13,266 | $ | 16,794 | ||||
| SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES: |
||||||||
| Due from joint ventures |
$ | 698,849 | $ | 695,257 | ||||
| Partnership distributions payable |
$ | 660,870 | $ | 654,531 | ||||
See accompanying notes.
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WELLS REAL ESTATE FUND IX, 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 IX, 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, serving as the general partners (collectively, the “General Partners”). The Partnership was formed on August 15, 1994 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 Class A Units or Class B Units. Limited partners shall have the right to change their prior elections to have some or all of their units treated as Class A 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) 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 January 5, 1996, the Partnership commenced a public offering of up to $35,000,000 of 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 12, 1996, upon receiving and accepting subscriptions for 125,000 units and collecting aggregate gross offering proceeds of $2,500,000, thus allowing for the admission of New York and Pennsylvania investors in the Partnership. The offer terminated on December 30, 1996, at which time the Partnership sold approximately 2,935,931 Class A Units and 564,069 Class B Units for total limited partner Capital Contributions of $35,000,000.
The Partnership owns interests in all of its real estate assets through joint ventures with other Wells Real Estate Funds. During the periods presented, the Partnership owned interests in the following nine properties through the affiliated joint ventures listed below (the “Joint Ventures”):
| Joint Venture | Joint Venture Partners | Properties | ||
| Fund VIII and Fund IX Joint Venture Associates (“Fund VIII-Fund IX Associates”) |
• Wells Real Estate Fund VIII, L.P. • Wells Real Estate Fund IX, L.P. |
1. US Cellular Building A four-story office building located in Madison, Wisconsin 2. AT&T—Texas Building A one-story office building located in Farmer’s Branch, Texas 3. Cirrus Logic Building A two-story office building located in Boulder County, Colorado | ||
| Fund VIII-IX-REIT Joint Venture (“Fund VIII-IX-REIT Associates”) |
• Fund VIII-Fund IX Associates • Wells Operating Partnership, L.P.(1) |
4. Quest Building A two-story office building located in Irvine, California | ||
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| The Fund IX, Fund X, Fund XI and REIT Joint Venture (“Fund IX-X-XI-REIT Associates”) |
• Wells Real Estate Fund IX, L.P. • Wells Real Estate Fund X, L.P. • Wells Real Estate Fund XI, L.P. • Wells Operating Partnership, L.P.(1) |
5. Alstom Power—Knoxville Building A three-story office building located in Knoxville, Tennessee 6. 360 Interlocken Building A three-story office building located in Boulder County, Colorado 7. Avaya Building A one-story office building located in Oklahoma City, Oklahoma 8. Iomega Building A single-story warehouse and office building located in Ogden, Utah 9. Ohmeda Building A two-story office building located in Louisville, Colorado | ||
| (1) | Wells Operating Partnership, L.P. (“Wells OP”) 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. 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, refe