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, 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 0-25731
WELLS REAL ESTATE FUND XI, L.P.
(Exact name of registrant as specified in its charter)
| Georgia | 58-2250094 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| 6200 The Corners Pkwy., Norcross, Georgia | 30092-3365 | |
| (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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Wells Real Estate Fund XI, 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. Specifically, among others, we consider statements concerning projections of future operating results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that 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. 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 follow:
General economic risks
| • | Adverse changes in general or local economic conditions; |
| • | Adverse economic conditions affecting the particular industry of one or more of our tenants. |
Real estate risks inherent in properties owned and through joint ventures
| • | 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 retaining or obtaining new tenants upon lease expiration at acceptable rental amounts; |
| • | Tenant ability or willingness to satisfy obligations relating to our existing lease agreements; |
| • | Potential need to fund tenant improvements, lease-up costs, or other capital expenditures out of operating cash flow; |
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| • | Increases in property operating expenses, including property taxes, insurance, and other costs not recoverable from tenants; |
| • | 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; |
| • | Unexpected costs of capital expenditures related to tenant build-out projects or other unforeseen capital expenditures; |
| • | Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any continuing obligations. |
Other operational risks
| • | Our dependency on Wells Capital, Inc. (“Wells Capital”), the corporate general partner of one of our General Partners, its key personnel, and its affiliates for various administrative services; |
| • | Wells Capital’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 in the current regulatory environment; |
| • | 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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WELLS REAL ESTATE FUND XI, L.P.
| Page No. | ||||||
| PART I. |
FINANCIAL INFORMATION |
|||||
| Item 1. |
Financial Statements |
|||||
| Balance Sheets—June 30, 2004 (unaudited) and December 31, 2003 |
5 | |||||
| 6 | ||||||
| 7 | ||||||
| Statements of Cash Flows for the Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited) |
8 | |||||
| 9 | ||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Conditions and Results of Operations |
14 | ||||
| Item 3. |
21 | |||||
| Item 4. |
21 | |||||
| PART II. |
22 | |||||
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WELLS REAL ESTATE FUND XI, L.P.
BALANCE SHEETS
ASSETS
| June 30, 2004 (unaudited) |
December 31, 2003 | |||||
| Investments in joint ventures |
$ | 10,576,507 | $ | 10,826,635 | ||
| Cash and cash equivalents |
1,597,370 | 1,362,761 | ||||
| Due from joint ventures |
293,050 | 252,452 | ||||
| Total assets |
$ | 12,446,927 | $ | 12,441,848 | ||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||
| Liabilities: |
||||||
| Accounts payable and accrued expenses |
$ | 8,285 | $ | 207 | ||
| Partnership distributions payable |
225,388 | 225,429 | ||||
| Total liabilities |
233,673 | 225,636 | ||||
| Partners’ capital: |
||||||
| Limited partners: |
||||||
| Class A—1,387,003 and 1,387,253 units outstanding as of June 30, 2004 and December 31, 2003, respectively |
12,233,254 | 12,119,023 | ||||
| Class B—266,277 and 266,027 units outstanding as of June 30, 2004 and December 31, 2003, respectively |
0 | 97,189 | ||||
| General partners |
0 | 0 | ||||
| Total partners’ capital |
12,233,254 | 12,216,212 | ||||
| Total liabilities and partners’ capital |
$ | 12,466,927 | $ | 12,441,848 | ||
See accompanying notes.
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WELLS REAL ESTATE FUND XI, L.P.
STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| EQUITY IN INCOME OF JOINT VENTURES (Note 2) |
$ | 185,941 | $ | 156,290 | $ | 321,099 | $ | 342,337 | ||||||||
| EXPENSES: |
||||||||||||||||
| Partnership administration |
49,804 | 26,062 | 65,335 | 42,689 | ||||||||||||
| Legal and accounting |
9,251 | 4,286 | 18,176 | 8,293 | ||||||||||||
| Other general and administrative |
699 | 7,696 | 979 | 9,046 | ||||||||||||
| Total expenses |
59,754 | 38,044 | 84,490 | 60,028 | ||||||||||||
| OTHER INCOME |
2,913 | 0 | 5,821 | 260 | ||||||||||||
| NET INCOME |
$ | 129,100 | $ | 118,246 | $ | 242,430 | $ | 282,569 | ||||||||
| NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |
$ | 129,100 | $ | 236,966 | $ | 339,619 | $ | 523,742 | ||||||||
| NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS |
$ | 0 | $ | (118,720 | ) | $ | (97,189 | ) | $ | (241,173 | ) | |||||
| NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |
||||||||||||||||
| CLASS A |
$ | 0.09 | $ | 0.17 | $ | 0.24 | $ | 0.38 | ||||||||
| CLASS B |
$ | (0.00 | ) | $ | (0.44 | ) | $ | (0.37 | ) | $ | (0.88 | ) | ||||
| DISTRIBUTION OF OPERATING CASH PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |
||||||||||||||||
| CLASS A |
$ | 0.16 | $ | 0.16 | $ | 0.16 | $ | 0.36 | ||||||||
| CLASS B |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING: |
||||||||||||||||
| CLASS A |
1,387,003 | 1,381,206 | 1,387,128 | 1,380,706 | ||||||||||||
| CLASS B |
266,277 | 272,074 | 266,152 | 272,574 | ||||||||||||
See accompanying notes.
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WELLS REAL ESTATE FUND XI, L.P.
STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2003
AND THE SIX MONTHS ENDED JUNE 30, 2004 (unaudited)
| Limited Partners |
General Partners |
Total Partners’ Capital |
|||||||||||||||||||
| Class A |
Class B |
||||||||||||||||||||
| Units |
Amounts |
Units |
Amounts |
||||||||||||||||||
| BALANCE, December 31, 2002 |
1,371,606 | $ | 12,091,903 | 281,674 | $ | 681,047 | $ | 0 | $ | 12,772,950 | |||||||||||
| Net income (loss) |
0 | 999,612 | 0 | (554,083 | ) | 0 | 445,529 | ||||||||||||||
| Distributions of operating cash flow |
0 | (1,002,267 | ) | 0 | 0 | 0 | (1,002,267 | ) | |||||||||||||
| Class B conversions |
15,647 | 29,775 | (15,647 | ) | (29,775 | ) | 0 | 0 | |||||||||||||
| BALANCE, December 31, 2003 |
1,387,253 | 12,119,023 | 266,027 | 97,189 | 0 | 12,216,212 | |||||||||||||||
| Net income |
0 | 339,619 | 0 | (97,189 | ) | 0 | 242,430 | ||||||||||||||
| Distributions of operating cash flow |
0 | (225,388 | ) | 0 | 0 | 0 | (225,388 | ) | |||||||||||||
| Class A conversions |
(2,500 | ) | 0 | 2,500 | 0 | ||||||||||||||||
| Class B conversions |
2,250 | 0 | (2,250 | ) | 0 | 0 | 0 | ||||||||||||||
| BALANCE, June 30, 2004 |
1,387,003 | $ | 12,233,254 | 266,277 | $ | 0 | $ | 0 | $ | 12,233,254 | |||||||||||
See accompanying notes.
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WELLS REAL ESTATE FUND XI, L.P.
STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 242,430 | $ | 282,569 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Equity in income of joint ventures |
(321,099 | ) | (342,337 | ) | ||||
| Operating distributions received from joint ventures |
530,629 | 601,858 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts payable and accrued expenses |
8,078 | 2,077 | ||||||
| Accounts receivable |
0 | 732 | ||||||
| Total adjustments |
217,608 | 262,330 | ||||||