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

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2005 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 0-27888

WELLS REAL ESTATE FUND VIII, L.P.

(Exact name of registrant as specified in its charter)


Georgia		58-2126618
(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 VIII, 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; and

•

Adverse economic conditions affecting the particular industry of one or more tenants in properties owned by our joint ventures.

Enterprise risks

•

Our dependency on Wells Capital, Inc. (“Wells Capital”) and its affiliates and their key personnel for various administrative services; and

•

Wells Capital’s ability to attract and retain high quality personnel who can provide acceptable service levels and generate economies of scale over time.

Real estate risks

•

Ability to achieve appropriate occupancy levels resulting in rental amounts sufficient to cover operating costs;

•

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;

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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 at our properties;

•

Ability to fund foreseen and unforeseen capital expenditures, including those related to tenant build-out projects, tenant improvements, and lease-up costs, out of operating cash flow or net property sale proceeds; and

•

Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any and all closing conditions.

Other operational risks

•

Our reliance on Wells Management Company, Inc. (“Wells Management”) or third parties to manage our properties;

•

Increases in our administrative operating expenses, including increased expenses associated with operating as a public company in the current regulatory environment;

•

Ability to comply with governmental, tax, real estate, environmental, and zoning laws or regulations and funding the related costs of compliance; 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 VIII, L.P.

TABLE OF CONTENTS


			Page No.
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Balance Sheets—March 31, 2005 (unaudited) and December 31, 2004	5

		Statements of Operations for the Three Months Ended March 31, 2005 (unaudited) and 2004 (unaudited)	6

		Statements of Partners’ Capital for the Year Ended December 31, 2004 and the Three Months Ended March 31, 2005 (unaudited)	7

		Statements of Cash Flows for the Three Months Ended March 31, 2005 (unaudited) and 2004 (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 Risk	23

	Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	24

	Item 4.	Submission of Matters to a Vote of Security Holders	24

	Item 5.	Other Information	24

	Item 6.	Exhibits	24

Page 4

WELLS REAL ESTATE FUND VIII, L.P.

BALANCE SHEETS

ASSETS


	March 31, 2005 (unaudited)		December 31, 2004
Investment in joint ventures	$	14,650,310	$	14,392,272
Cash and cash equivalents		6,821,990		6,906,555
Due from joint ventures		554,146		456,859

Total assets	$	22,026,446	$	21,755,686


LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Accounts payable and accrued expenses	$	16,235	$	30,623
Partnership distributions payable		220,831		0
Due to affiliates		9,693		9,063

Total liabilities		246,759		39,686

PARTNERS’ CAPITAL:
Limited partners:
Class A—2,944,413 units and 2,931,096 units outstanding as of March 31, 2005 and December 31, 2004, respectively		21,450,485		21,206,578
Class B—258,856 units and 272,173 units outstanding as of March 31, 2005 and December 31, 2004, respectively		329,202		509,422
General partners		0		0

Total partners’ capital		21,779,687		21,716,000

Total liabilities and partners’ capital	$	22,026,446	$	21,755,686

See accompanying notes.

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WELLS REAL ESTATE FUND VIII, L.P.

STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended March 31,
	2005			2004
EQUITY IN INCOME OF JOINT VENTURES	$	310,924		$	407,643

EXPENSES:
Partnership administration		33,330			22,408
Legal and accounting		10,512			7,471
Other general and administrative		443			470

Total expenses		44,285			30,349

INTEREST AND OTHER INCOME		17,879			708

NET INCOME	$	284,518		$	378,002

NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:
CLASS A	$	439,812		$	378,002

CLASS B	$	(155,294	)	$	0

NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT:
CLASS A	$	0.15		$	0.13

CLASS B	$	(0.60	)	$	0.00

WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:
CLASS A		2,944,413			2,892,515

CLASS B		258,856			310,754

See accompanying notes.

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WELLS REAL ESTATE FUND VIII, L.P.

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2004

AND THE THREE MONTHS ENDED MARCH 31, 2005 (unaudited)


	Limited Partners										General Partners		Total Partners’ Capital
	Class A					Class B
	Units		Amounts			Units		Amounts
BALANCE, December 31, 2003	2,881,015		$	19,310,983		322,254		$	0		$	0	$	19,310,983

Class A conversion elections	(1,330	)		(9,072	)	1,330			9,072			0		0
Class B conversion elections	51,411			12,569		(51,411	)		(12,569	)		0		0
Net income	0			3,265,975		0			512,919			0		3,778,894
Distributions of operating cash flows ($0.47 per weighted-average Class A Units)	0			(1,373,877	)	0			0			0		(1,373,877	)

BALANCE, December 31, 2004	2,931,096			21,206,578		272,173			509,422			0		21,716,000

Class A conversion elections	13,317			24,926		(13,317	)		(24,926	)		0		0
Net income (loss)	0			439,812		0			(155,294	)		0		284,518
Distributions of operating cash flows ($0.08 per weighted-average Class A Units)	0			(220,831	)	0			0			0		(220,831	)

BALANCE, March 31, 2005	2,944,413		$	21,450,485		258,856		$	329,202		$	0	$	21,779,687

See accompanying notes.

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WELLS REAL ESTATE FUND VIII, L.P.

STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended March 31,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	284,518		$	378,002
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of joint ventures		(310,924	)		(407,643	)
Operating distributions received from joint ventures		312,880			687,469
Change in assets and liabilities:
Accounts payable and accrued expenses		(14,388	)		13,407
Due to affiliates		630			0

Total adjustments		(11,802	)		293,233

Net cash provided by operating activities		272,716			671,235

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures		(357,281	)		0

CASH FLOWS FROM FINANCING ACTIVITIES:
Operating distributions paid to limited partners		0			(684,240	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(84,565	)		(13,005	)

CASH AND CASH EQUIVALENTS, beginning of period		6,906,555			256,403

CASH AND CASH EQUIVALENTS, end of period	$	6,821,990		$	243,398

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Partnership distributions payable	$	220,831		$	686,972

See accompanying notes.

Page 8

WELLS REAL ESTATE FUND VIII, L.P.

CONDENSED NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2005 (unaudited)

1.	ORGANIZATION AND BUSINESS

Wells Real Estate Fund VIII, L.P. (the “Partnership”) is a Georgia public limited partnership with Leo Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as its general partners (collectively, “General Partners”). Wells Capital, Inc. (“Wells Capital”) serves as the corporate general partner of Wells Partners. Wells Capital is a wholly-owned subsidiary of Wells Real Estate Funds, Inc. Leo F. Wells, III is the president and sole director of Wells Capital and the sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on August 15, 1994 for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elected to have their units treated as Class A Units or Class B Units. 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. 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 6, 1995, the Partnership commenced a public offering of up to $35,000,000 of Class A or Class B limited partnership units ($10 per unit) pursuant to a Registration Statement on Form S-11 filed under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 units on January 4, 1996. The offering was terminated on January 4, 1996, at which time the Partnership had sold approximately 2,613,534 Class A Units and 590,735 Class B Units representing capital contributions of $32,042,689.

During the periods presented, the Partnership owned interests in the following joint ventures (the “Joint Ventures”) and properties:

Joint Venture

Joint Venture Partners

Properties

Fund VI, Fund VII and Fund VIII

Associates

(“Fund VI-VII-VIII Associates”)

• Wells Real Estate Fund VI, L.P.

• Wells Real Estate Fund VII, L.P.

• Wells Real Estate Fund VIII, L.P.

1. BellSouth Building

A four-story office building located in Jacksonville, Florida

2. Tanglewood Commons⁽¹⁾

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