Back to GetFilings.com



Table of Contents

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 0-25731

 

 

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

 

Table of Contents

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; 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;

 

Page 2

Table of Contents
  •   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.

 

Page 3

Table of Contents

WELLS REAL ESTATE FUND XI, 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    14
    

Item 3.

    Quantitative and Qualitative Disclosures about Market Risk    24
    

Item 4.

    Controls and Procedures    24

PART II.

   

OTHER INFORMATION

     
    

Item 1.

    Legal Proceedings    25
    

Item 2.

    Unregistered Sales of Equity Securities and Use of Proceeds    25
    

Item 3.

    Defaults Upon Senior Securities    25
    

Item 4.

    Submission of Matters to a Vote of Security Holders    25
    

Item 5.

    Other Information    25
    

Item 6.

    Exhibits    25

 

Page 4

Table of Contents

WELLS REAL ESTATE FUND XI, L.P.

 

 

BALANCE SHEETS

 

ASSETS

 

     March 31,
2005
(unaudited)
    December 31,
2004

Investments in joint ventures

    $ 8,102,651    $ 8,710,862

Cash and cash equivalents

      5,137,613      4,082,376

Due from affiliate

      0      2,254

Due from joint ventures

      108,313      87,017
    
  

Total assets

    $ 13,348,577    $ 12,882,509
    
  
LIABILITIES AND PARTNERS’ CAPITAL

LIABILITIES:

              

Accounts payable and accrued expenses

    $ 22,560    $ 20,562

Partnership distributions payable

      69,334      0

Due to affiliates

      5,719      2,330
    
  

Total liabilities

      97,613      22,892

PARTNERS’ CAPITAL:

              

Limited partners:

              

Class A—1,386,674 and 1,384,203 units issued and outstanding as of March 31, 2005 and December 31, 2004, respectively

      12,518,966      12,517,532

Class B—266,606 and 269,077 units issued and outstanding as of March 31, 2005 and December 31, 2004, respectively

      731,998      342,085

General partners

      0      0
    
  

Total partners’ capital

      13,250,964      12,859,617
    
  

Total liabilities and partners’ capital

    $ 13,348,577    $ 12,882,509
    
  

 

See accompanying notes.

 

Page 5

Table of Contents

WELLS REAL ESTATE FUND XI, L.P.

 

 

STATEMENTS OF OPERATIONS

(unaudited)

 

    

Three Months Ended

March 31,

  
     2005
    2004
  

EQUITY IN INCOME OF JOINT VENTURES

    $ 491,235    $ 135,158  

EXPENSES:

                

Partnership administration

      31,096      15,531  

Legal and accounting

      16,897      8,925  

Computer costs

      261      280  
    
  

Total expenses

      48,254      24,736  

INTEREST AND OTHER INCOME

      17,700      2,908  
    
  

NET INCOME

    $ 460,681    $ 113,330  
    
  

NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:

                

CLASS A

    $ 85,660    $ 210,519  
    
  

CLASS B

    $ 375,021    $ (97,189 )
    
  

NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT:

                

CLASS A

    $ 0.06    $ 0.15  
    
  

CLASS B

    $ 1.41    $ (0.37 )
    
  

WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:

                

CLASS A

      1,386,674      1,387,253  
    
  

CLASS B

      266,606      266,027  
    
  

 

See accompanying notes.

 

Page 6

Table of Contents

WELLS REAL ESTATE FUND XI, 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

    1,387,253     $ 12,119,023     266,027     $ 97,189     $ 0    $ 12,216,212  

Class A conversions

    (7,500 )     (66,252 )   7,500       66,252       0      0  

Class B conversions

    4,450       0     (4,450 )     0       0      0  

Net income

    0       759,499     0       178,644       0      938,143  

Distributions of operating cash flows ($0.21 per weighted-average Class A Unit)

    0       (294,738 )   0       0       0      (294,738 )
    
 
 
 
 
  

BALANCE, December 31, 2004

    1,384,203       12,517,532     269,077       342,085       0      12,859,617  

Class A conversions

    (2,362 )     (21,364 )   2,362       21,364       0      0  

Class B conversions

    4,833       6,472     (4,833 )     (6,472 )     0      0  

Net income

    0       85,660     0       375,021       0      460,681  

Distributions of operating cash flows ($0.05 per weighted-average Class A Unit)

    0       (69,334 )   0       0       0      (69,334 )
    
 
 
 
 
  

BALANCE, March 31, 2005

    1,386,674     $ 12,518,966     266,606     $ 731,998     $ 0    $ 13,250,964  
    
 
 
 
 
  

 

See accompanying notes.

 

Page 7

Table of Contents

WELLS REAL ESTATE FUND XI, L.P.

 

 

STATEMENTS OF CASH FLOWS

(unaudited)

 

    

Three Months Ended

March 31,

  
     2005
     2004
  

CASH FLOWS FROM OPERATING ACTIVITIES:

                 

Net income

    $ 460,681     $ 113,330  

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

                 

Equity in income of joint ventures

      (491,235 )     (135,158 )

Operating distributions received from joint ventures

      50,931       252,462  

Changes in operating assets and liabilities:

                 

Due from affiliate

      2,254       0  

Accounts payable and accrued expenses

      1,998       9,692  

Due to affiliates

      3,389       0  
    
 

Total adjustments

      (432,663 )     126,996  
    
 

Net cash provided by operating activities

      28,018       240,326  

CASH FLOWS FROM INVESTING ACTIVITIES:

                 

Net sale proceeds received from joint ventures

      1,027,219       0  
    
 

Net cash provided by investing activities

      1,027,219       0  

CASH FLOWS FROM FINANCING ACTIVITIES:

                 

Operating distributions paid to limited partners

      0       (225,429 )
    
 

NET INCREASE IN CASH AND CASH EQUIVALENTS

      1,055,237       14,897  

CASH AND CASH EQUIVALENTS, beginning of period

      4,082,376       1,362,761  
    
 

CASH AND CASH EQUIVALENTS, end of period

    $ 5,137,613     $ 1,377,658  
    
 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

                 

Partnership distributions payable

    $ 69,334     $ 0  
    
 

 

See accompanying notes.

 

 

Page 8

Table of Contents

WELLS REAL ESTATE FUND XI, L.P.

 

 

CONDENSED NOTES TO FINANCIAL STATEMENTS

 

MARCH 31, 2005 (unaudited)

 

1. ORGANIZATION AND BUSINESS

 

Wells Real Estate Fund XI, 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 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. The Partnership was formed on June 20, 1996 for the purpose of acquiring, developing, owning, operating, improving, leasing, and 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. The 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 annual 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 December 31, 1997, 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 F