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UNITED STATES

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, 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 0-23719

 

 

WELLS REAL ESTATE FUND X, L.P.

(Exact name of registrant as specified in its charter)

 

 

Georgia   58-2250093
(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  x    No  x

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements contained in this Form 10-Q of Wells Real Estate Fund X, 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;

 

  •   Increases in property operating expenses, including property taxes, insurance, and other costs not recoverable from tenants;

 

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  •   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 X, 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    22
    

Item 4.

    Controls and Procedures    22

PART II.

    OTHER INFORMATION     
    

Item 1.

    Legal Proceedings    23
    

Item 2.

    Unregistered Sales of Equity Securities and Use of Proceeds    23
    

Item 3.

    Defaults Upon Senior Securities    23
    

Item 4.

    Submission of Matters to a Vote of Security Holders    23
    

Item 5.

    Other Information    23
    

Item 6.

    Exhibits    23

 

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WELLS REAL ESTATE FUND X, L.P.

 

 

BALANCE SHEETS

 

ASSETS

     March 31,
2005
(unaudited)
    December 31,
2004

Investment in joint ventures

    $ 13,275,699    $ 16,477,756

Cash and cash equivalents

      6,577,238      857,860

Due from joint ventures

      466,224      392,849
    
  

Total assets

    $ 20,319,161    $ 17,728,465
    
  
LIABILITIES AND PARTNERS’ CAPITAL

LIABILITIES:

              

Accounts payable and accrued expenses

    $ 39,993    $ 39,068

Partnership distributions payable

      266,361      119,182

Due to affiliates

      7,316      4,514
    
  

Total liabilities

      313,670      162,764

PARTNERS’ CAPITAL:

              

Limited partners:

              

Class A—2,414,142 units and 2,407,142 units issued and outstanding as of March 31, 2005 and December 31, 2004, respectively

      17,999,760      17,565,701

Class B—298,749 units and 305,749 units issued and outstanding as of March 31, 2005 and December 31, 2004, respectively

      2,005,731      0

General partners

      0      0
    
  

Total partners’ capital

      20,005,491      17,565,701
    
  

Total liabilities and partners’ capital

    $ 20,319,161    $ 17,728,465
    
  

 

See accompanying notes.

 

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WELLS REAL ESTATE FUND X, L.P.

 

 

STATEMENTS OF OPERATIONS

(unaudited)

 

    

Three Months Ended

March 31,

     2005
    2004

EQUITY IN INCOME OF JOINT VENTURES

    $ 2,754,797    $ 273,809

EXPENSES:

              

Partnership administration

      39,754      21,191

Legal and accounting

      12,980      7,361

General and administrative

      354      378
    
  

Total expenses

      53,088      28,930

INTEREST AND OTHER INCOME

      4,442      4,018
    
  

NET INCOME

    $ 2,706,151    $ 248,897
    
  

NET INCOME ALLOCATED TO LIMITED PARTNERS:

              

CLASS A

    $ 714,587    $ 248,897
    
  

CLASS B

    $ 1,991,564    $ 0
    
  

NET INCOME PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT:

              

CLASS A

    $ 0.30    $ 0.09
    
  

CLASS B

    $ 6.67    $ 0.00
    
  

WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:

              

CLASS A

      2,414,142      2,838,850
    
  

CLASS B

      298,749      329,041
    
  

 

See accompanying notes.

 

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WELLS REAL ESTATE FUND X, 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
     Amount
     Units
     Amount
      

BALANCE, December 31, 2003

   2,376,350     $ 18,482,669     336,541     $ 0     $ 0   $ 18,482,669  

Class A conversion elections

   (2,500 )     (19,327 )   2,500       19,327       0     0  

Class B conversion elections

   33,292       0     (33,292 )     0       0     0  

Net income

   0       357,097     0       550,760       0     907,857  

Distributions of operating cash flows ($0.33 per Class A Unit)

   0       (789,825 )   0       0       0     (789,825 )

Distributions of net sales proceeds ($0.20 and $1.78 per Class A Unit and class B Unit, respectively)

   0       (464,913 )   0       (570,087 )     0     (1,035,000 )
   
 
 
 
 
 

BALANCE, December 31, 2004

   2,407,142       17,565,701     305,749       0       0     17,565,701  

Class A conversion elections

   (2,000 )     (14,594 )   2,000       14,594       0     0  

Class B conversion elections

   9,000       427     (9,000 )     (427 )     0     0  

Net income

   0       714,587     0       1,991,564       0     2,706,151  

Distributions of operating cash flows ($0.11 per Class A Unit)

   0       (266,361 )   0       0       0     (266,361 )
   
 
 
 
 
 

BALANCE, March 31, 2005

   2,414,142     $ 17,999,760     298,749     $ 2,005,731     $ 0   $ 20,005,491  
   
 
 
 
 
 

 

See accompanying notes.

 

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WELLS REAL ESTATE FUND X, L.P.

 

 

STATEMENTS OF CASH FLOWS

(unaudited)

 

   

Three Months Ended

March 31,

  
    2005
     2004
  

CASH FLOWS FROM OPERATING ACTIVITIES:

 

        

Net income

   $ 2,706,151     $ 248,897  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Equity in income of joint ventures

     (2,754,797 )     (273,809 )

Operating distributions received from joint ventures

     215,773       478,980  

Changes in operating assets and liabilities:

                

Accounts payable and accrued expenses

     925       13,251  

Due to affiliates

     2,802       0  
   
 

Total adjustments

     (2,535,297 )     218,422  
   
 

Net cash provided by operating activities

     170,854       467,319  

CASH FLOWS FROM INVESTING ACTIVITIES:

                

Net sale proceeds received from joint ventures

     5,667,706       0  
   
 

CASH FLOWS FROM FINANCING ACTIVITIES:

                

Distributions paid to limited partners

     (119,182 )     (430,715 )
   
 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     5,719,378       36,604  

CASH AND CASH EQUIVALENTS, beginning of period

     857,860       1,809,328  
   
 

CASH AND CASH EQUIVALENTS, end of period

   $ 6,577,238     $ 1,845,932  
   
 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

                

Partnership distributions payable

   $ 266,361     $ 402,275  
   
 

 

See accompanying notes.

 

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WELLS REAL ESTATE FUND X, L.P.

 

 

CONDENSED NOTES TO FINANCIAL STATEMENTS

 

MARCH 31, 2005 (unaudited)

 

1. ORGANIZATION AND BUSINESS

 

Wells Real Estate Fund X, L.P. (the “Partnership”) is a public limited partnership organized on June 20, 1996 under the laws of the state of Georgia with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as its general partners (collectively, the “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. Upon subscription for units, each limited partner must elect whether to have its units treated as Class A Units or Class B Units. Thereafter, limited partners have the right to change their prior election 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; (c) add or remove a general partner; (d) dissolve the Partnership; and (e) approve a sale of all or substantially all of the Partnership’s assets, subject to certain limitations. 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 December 31, 1996, the Partnership commenced an offering of up to $35,000,000 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 commenced active operations upon receiving and accepting subscriptions for 125,000 units on February 4, 1997. The offering was terminated on December 30, 1997, at which time the Partnership had sold approximately 2,116,099 Class A Units and 596,792 Class B Units representing capital contributions of $27,128,912.

 

The Partnership owns interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners. The Partnership owned interests in the following joint ventures (the “Joint Ventures”) and properties:

 

Joint Venture    Joint Venture Partners   Properties

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.(2)

  

1. Alstom Power—Knoxville Building