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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 September 30, 2012
or
o
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 000-50647
___________________________ 
WELLS REAL ESTATE FUND XIV, L.P.
(Exact name of registrant as specified in its charter)
___________________________ 
Georgia
 
01-0748981
(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

N/A
(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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x (Do not check if a smaller reporting company)
Smaller reporting company
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  x

 
 
 
 
 



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Wells Real Estate Fund XIV, L.P. (the "Partnership," "we," "our," "us," or the "Registrant") other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future obligations, and the amount and timing of any 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 this report is filed with the Securities and Exchange Commission ("SEC"). We make no representations or warranties (express or implied) about the accuracy of any such 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 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 partners, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.



Page 2


WELLS REAL ESTATE FUND XIV, L.P.
 
TABLE OF CONTENTS
 
 
  
 
 
Page No.
 
 
 
 
 
 
PART I.
  
 
 
 
 
 
 
 
 
 
  
Item 1.
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
Item 2.
 
 
 
 
 
 
 
 
  
Item 3.
 
 
 
 
 
 
 
 
  
Item 4.
 
 
 
 
 
 
 
PART II.
  
 
 
 
 
 
 
 
 
 
  
Item 1.
 
 
 
 
 
 
 
 
  
Item 1A.
 
 
 
 
 
 
 
 
  
Item 2.
 
 
 
 
 
 
 
 
  
Item 3.
 
 
 
 
 
 
 
 
  
Item 4.
 
 
 
 
 
 
 
 
  
Item 5.
 
 
 
 
 
 
 
 
  
Item 6.
 


Page 3


PART 1.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
The information presented in the Partnership's accompanying balance sheets and statements of operations, partners' capital, and cash flows reflects all adjustments that are, in management's opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.
The accompanying financial statements should be read in conjunction with the notes to the Partnership's financial statements, the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, all included in both this report on Form 10-Q and in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2011. The Partnership's results of operations for the three months and nine months ended September 30, 2012 are not necessarily indicative of the operating results expected for the full year.


Page 4


WELLS REAL ESTATE FUND XIV, L.P.
 
BALANCE SHEETS
 
 
(Unaudited)
 
 
 
September 30,
2012
 
December 31,
2011
Assets:
 
 
 
Real estate, at cost:
 
 
 
Land
$

 
$
557,401

Building and improvements, less accumulated depreciation of $0 and $350,345 as of September 30, 2012 and December 31, 2011, respectively

 
1,294,402

Intangible lease assets, less accumulated amortization of $0 and $243,244 as of September 30, 2012 and December 31, 2011, respectively

 
34,259

Total real estate assets

 
1,886,062

 
 
 
 
Investment in joint venture
4,253,331

 
4,225,161

Cash and cash equivalents
6,343,130

 
10,305,477

Tenant receivables, net of allowance for doubtful accounts of $0 and $531,498 as of September 30, 2012 and December 31, 2011, respectively
4,502

 
4,502

Due from joint venture
34,379

 
133,068

Other assets
4,092

 
80,736

Deferred leasing costs, less accumulated amortization of $0 and $2,057 as of September 30, 2012 and December 31, 2011, respectively

 
1,286

Intangible lease origination costs, less accumulated amortization of $0 and $185,960 as of September 30, 2012 and December 31, 2011, respectively

 
26,191

Total assets
$
10,639,434

 
$
16,662,483

 
Liabilities:
 
 
 
Accounts payable, accrued expenses, and refundable security deposits
$
12,883

 
$
47,097

Deferred income

 
11,481

Due to affiliates
7,037

 
6,890

Total liabilities
19,920

 
65,468

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Partners' Capital:
 
 
 
Limited Partners:
 
 
 
Cash Preferred – 2,673,615 units and 2,648,615 units issued and outstanding
as of September 30, 2012 and December 31, 2011, respectively
10,612,183

 
15,771,638

Tax Preferred – 800,508 units and 825,508 units issued and outstanding
as of September 30, 2012 and December 31, 2011, respectively

 
824,632

General Partners
7,331

 
745

Total partners' capital
10,619,514

 
16,597,015

Total liabilities and partners' capital
$
10,639,434

 
$
16,662,483

See accompanying notes.

 


Page 5


WELLS REAL ESTATE FUND XIV, L.P.
 
STATEMENTS OF OPERATIONS
 
(Unaudited)
 
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Interest and other income
$
2,427

 
$
4,370

 
$
10,810

 
$
4,385

Total revenues
2,427

 
4,370

 
10,810

 
4,385

Expenses:
 
 
 
 
 
 
 
General and administrative
36,239

 
29,337

 
129,792

 
110,925

Total expenses
36,239

 
29,337

 
129,792

 
110,925

Equity in Income of Joint Venture
84,809

 
94,943

 
287,816

 
273,794

Income from Continuing Operations
50,997

 
69,976

 
168,834

 
167,254

Discontinued Operations:
 
 
 
 
 
 
 
Operating income (loss)
185

 
(133,810
)
 
489,770

 
(94,533
)
Gain on sale of real estate assets

 
985,565

 
363,895

 
985,565

Income from Discontinued Operations
185

 
851,755

 
853,665

 
891,032

Net Income
$
51,182

 
$
921,731

 
$
1,022,499

 
$
1,058,286

Net Income (Loss) Allocated to:
 
 
 
 
 
 
 
Cash Preferred limited partners:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
50,487

 
$
124,991

 
$
(306,531
)
 
$
221,296

Income (loss) from discontinued operations
183

 
(96,588
)
 
502,040

 
(57,704
)
Net income allocated to Cash Preferred limited partners
$
50,670

 
$
28,403

 
$
195,509

 
$
163,592

Tax Preferred limited partners:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$

 
$
(55,714
)
 
$
473,677

 
$
(55,714
)
Income from discontinued operations

 
949,681

 
346,727

 
949,681

Net income allocated to Tax Preferred limited partners
$

 
$
893,967

 
$
820,404

 
$
893,967

General partners:
 
 
 
 
 
 
 
Income from continuing operations
$
510

 
$
699

 
$
1,688

 
$
1,672

Income (loss) from discontinued operations
2

 
(1,338
)
 
4,898

 
(945
)
Net income (loss) allocated to general partners
$
512

 
$
(639
)
 
$
6,586

 
$
727

Net Income (Loss) per Weighted-Average Limited Partner Unit:
 
 
 
 
 
 
 
Cash Preferred:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
0.02

 
$
0.05

 
$
(0.12
)
 
$
0.08

Income (loss) from discontinued operations
0.00

 
(0.04
)
 
0.19

 
(0.02
)
Net income per Cash Preferred limited partner unit
$
0.02

 
$
0.01

 
$
0.07

 
$
0.06

Tax Preferred:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$

 
$
(0.07
)
 
$
0.58

 
$
(0.07
)
Income from discontinued operations

 
1.15

 
0.42

 
1.15

Net income per Tax Preferred limited partner unit
$

 
$
1.08

 
$
1.00

 
$
1.08

Weighted-Average Limited Partner Units Outstanding:
 
 
 
 
 
 
 
Cash Preferred
2,673,615

 
2,648,615

 
2,656,948

 
2,648,615

Tax Preferred
800,508

 
825,508

 
817,175

 
825,508

See accompanying notes.

Page 6


WELLS REAL ESTATE FUND XIV, L.P.
 
STATEMENTS OF PARTNERS' CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2011
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2012 (UNAUDITED)
 
 
Limited Partners
 
General
Partners
 
Total
Partners'
Capital
 
Cash Preferred
 
Tax Preferred
 
 
Units
 
Amount
 
Units
 
Amount
 
BALANCE, December 31, 2010
2,648,615

 
$
15,536,993

 
825,508

 
$

 
$

 
$
15,536,993

 
 
 
 
 
 
 
 
 
 
 
 
Net income

 
234,645

 

 
824,632

 
745

 
1,060,022

BALANCE, December 31, 2011
2,648,615

 
15,771,638

 
825,508

 
824,632

 
745

 
16,597,015

 
 
 
 
 
 
 
 
 
 
 
 
Tax Preferred conversion elections
25,000

 

 
(25,000
)
 

 
 
 

Net income

 
195,509

 

 
820,404

 
6,586

 
1,022,499

Distributions of net sale proceeds ($2.02 and $1.99 per weighted-average Cash Preferred Unit and Tax Preferred Unit, respectively)


 
(5,354,964
)
 

 
(1,645,036
)
 

 
(7,000,000
)
BALANCE, September 30, 2012
2,673,615

 
$
10,612,183

 
800,508

 
$

 
$
7,331

 
$
10,619,514

See accompanying notes.
 


 

Page 7


WELLS REAL ESTATE FUND XIV, L.P.

STATEMENTS OF CASH FLOWS
 
 
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2012
 
2011
Cash Flows from Operating Activities:
 
 
 
Net income
$
1,022,499

 
$
1,058,286

Operating distributions received from joint venture
358,335

 
379,602

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on disposition
(363,895
)
 
(985,565
)
Depreciation
3,500

 
173,505

Amortization
11,300

 
153,329

Bad debt expense
49,320

 
379,563

Equity in income of joint venture
(287,816
)
 
(273,794
)
Changes in assets and liabilities:
 
 
 
Increase in tenant receivables
(49,320
)
 
(521,534
)
Decrease (increase) in other assets
76,644

 
(7,177
)
(Decrease) increase in accounts payable, accrued expenses, and refundable security deposits
(34,214
)
 
69,054

Decrease in deferred income
(11,481
)
 
(19,561
)
Increase (decrease) in due to affiliates
147

 
(1,523
)
Net cash provided by operating activities
775,019

 
404,185

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Net proceeds from sale of real estate
2,262,634

 
9,566,058

Payment of deferred leasing costs

 
(449,286
)
Net cash provided by investing activities
2,262,634

 
9,116,772

 
 
 
 
Cash Flows from Financing Activities:
 
 
 
Distributions of net sale proceeds to limited partners
(7,000,000
)
 

Net (Decrease) Increase in Cash and Cash Equivalents
(3,962,347
)
 
9,520,957

 
 
 
 
Cash and Cash Equivalents, beginning of period
10,305,477

 
732,451

Cash and Cash Equivalents, end of period
$
6,343,130

 
$
10,253,408


See accompanying notes.
 


 

Page 8


WELLS REAL ESTATE FUND XIV, L.P.
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 (unaudited)
1.
ORGANIZATION AND BUSINESS
Wells Real Estate Fund XIV, L.P. (the "Partnership") is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, Inc. ("Wells Capital"), a Georgia corporation, serving as its general partners (collectively, the "General Partners"). Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. ("WREF"). Leo F. Wells, III is the president and sole director of Wells Capital and the president, sole director, and sole owner of WREF. The Partnership was formed on October 25, 2002 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 Cash Preferred Units or Tax Preferred Units. Thereafter, limited partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred 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) elect a new general partner; (e) dissolve the Partnership; (f) authorize a merger or a consolidation of the Partnership; and (g) approve a sale involving all or substantially all of the Partnership's assets, subject to certain limitations. A majority vote on any of the described matters will bind the Partnership, without the concurrence of the General Partners. Each limited partnership unit has equal voting rights, regardless of the class of the unit.
On May 14, 2003, the Partnership commenced a public offering of up to $45,000,000 of Cash Preferred or Tax Preferred limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act. The offering was terminated on April 30, 2005, at which time the Partnership had sold approximately 2,531,031 Cash Preferred Units and 943,093 Tax Preferred Units representing total limited partner capital contributions of $34,741,238.
During the periods presented, the Partnership owned the following properties directly:
1.     150 Apollo Drive(1)
A three-story office building located in Chelmsford, Massachusetts
2.     3675 Kennesaw Building(2)
A one-story distribution warehouse building located in Kennesaw, Georgia
(1) 
This property was sold in July 2011.
(2) 
This property was sold in February 2012.

During the periods presented, the Partnership owned interests in the following joint venture (the "Joint Venture") and property:
 
Joint Venture
Joint Venture Partners
Ownership %
Property
Fund XIII and Fund XIV Associates
("Fund XIII-XIV Associates" or the "Joint Venture")
• Wells Real Estate Fund XIII, L.P.
• Wells Real Estate Fund XIV, L.P.
47.3%
52.7%
Siemens – Orlando Building
Two single-story office buildings
located in Orlando, Florida

Wells Real Estate Fund XIII, L.P. is affiliated with the Partnership through common general partners. Each of the properties described above was acquired on an all-cash basis. For further information regarding the Joint Venture and foregoing properties, refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2011.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and consistently present the results for these periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and

Page 9


footnotes included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2011.
Investment in Joint Venture
The Partnership has evaluated the Joint Venture and concluded that it is not a variable interest entity. The Partnership does not have control over the operations of the Joint Venture; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partner is required for any major decision or any action that would materially affect the Joint Venture or its real property investments. Accordingly, the Partnership accounts for its investment in the Joint Venture using the equity method of accounting, whereby the original investment is recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreement, all income (loss) and distributions are allocated to the joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.
Evaluating the Recoverability of Real Estate Assets
The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets and related intangible assets, in which the Partnership has an ownership interest, may not be recoverable. When indicators of potential impairment are present which suggest that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use, or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts the real estate assets to their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets and recognizes an impairment loss. Estimated fair values are determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value. The Partnership has determined that there have been no impairments in the carrying value of any of its real estate assets to date; however, certain of the Partnership's assets may be carried at an amount more than could be realized in a current disposition transaction.
While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures describes three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as little, if any, related market activity or information is available. Examples of Level 3 inputs include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, timing of new leases, and sales prices; additionally, the Partnership may assign an estimated probability-weighting to more than one fair value estimate based on the Partnership's assessment of the likelihood of the respective underlying assumptions occurring as of the evaluation date. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Partnership's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability. The accounting standard for fair value measurements and disclosures was applied to the Partnership's outstanding nonfinancial assets and nonfinancial liabilities effective January 1, 2009.
Projections of expected future cash flows require that the Partnership estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's future cash flows and fair value, and could result in the misstatement of the carrying values of real estate assets and related intangible assets held by the Joint Venture and net income of the Partnership. 




Page 10


Intangible Assets Arising from In-Place Leases where the Partnership is the Lessor
As of September 30, 2012 and December 31, 2011, the Partnership had the following gross intangible in-place lease assets: 
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
September 30, 2012
$

 
$

 
$

December 31, 2011
$
42,045

 
$
235,458

 
$
212,151

During the three months ended September 30, 2012 and 2011, the Partnership recognized the following amortization of acquired intangible lease assets:
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
For the three months ended September 30:
2012
$

 
$

 
$

2011
$
1,557

 
$
8,721

 
$
7,857


During the nine months ended September 30, 2012 and 2011, the Partnership recognized the following amortization of acquired intangible lease assets:
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
For the nine months ended September 30:
2012
$
930

 
$
5,213

 
$
4,696

2011
$
4,671

 
$
26,162

 
$
23,572


Tenant Receivables

Tenant receivables are comprised of prior year reimbursement billings due from the tenant at 150 Apollo Drive. Management assesses the collectibility of tenant receivables on an ongoing basis and provides for allowances as such balances, or portions thereof, become uncollectible. Allowances of $0 and $531,498 have been recorded as of September 30, 2012 and December 31, 2011, respectively.

Distribution of Net Cash from Operations
Net cash from operations, if available and unless reserved, is generally distributed quarterly to the partners as follows:
First, to all Cash Preferred limited partners on a per-unit basis until such limited partners have received distributions equal to a 10% per annum return on their respective net capital contributions, as defined;
Second, to the General Partners until the General Partners receive distributions equal to 10% of the total cumulative distributions paid by the Partnership for such year; and
Third, to the Cash Preferred limited partners on a per-unit basis and the General Partners allocated on a basis of 90% and 10%, respectively.
No distributions of net cash flow from operations will be made to limited partners holding Tax Preferred Units.
Distribution of Net Sale Proceeds
Upon the sale of properties, unless reserved, net sale proceeds will be distributed in the following order:
In the event that the particular property sold is sold for a price that is less than its original property purchase price, to the limited partners holding Cash Preferred Units until they have received an amount equal to the excess of the original property purchase price over the price for which the property was sold, limited to the amount of depreciation, amortization,

Page 11


and cost recovery deductions taken by the limited partners holding Tax Preferred Units with respect to such property;
To limited partners holding units which at any time have been treated as Tax Preferred Units until each such limited partner has received an amount necessary to equal the net cash from operations previously distributed to the limited partners holding Cash Preferred Units on a per-unit basis;
To all limited partners on a per-unit basis until the limited partners have received 100% of their respective net capital contributions, as defined;
To all limited partners on a per-unit basis until the limited partners have received a cumulative 10% per annum return on their respective net capital contributions, as defined;
To limited partners on a per-unit basis until the limited partners have received an amount equal to their respective preferential limited partner returns (defined as the sum of a 10% per annum cumulative return on net capital contributions for all periods during which the units were treated as Cash Preferred Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were treated as Tax Preferred Units);
To the General Partners until they have received 100% of their respective capital contributions, as defined;
Then, if limited partners have received any excess limited partner distributions (defined as distributions to limited partners over the life of their investment in the Partnership in excess of their net capital contributions, as defined, plus their preferential limited partner return), to the General Partners until they have received distributions equal to 20% of the sum of any such excess limited partner distributions, plus distributions made to the General Partners pursuant to this provision; and
Thereafter, 80% to the limited partners on a per-unit basis and 20% to the General Partners.
Allocations of Net Income, Net Loss, and Gain on Sale
For the purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, cost recovery, and the gain on sale of assets. Net income, as defined, of the Partnership will be allocated each year in the same proportion that net cash from operations is distributed to the partners holding Cash Preferred Units and the General Partners. To the extent the Partnership's net income in any year exceeds net cash from operations, such excess net income will be allocated 99% to the limited partners holding Cash Preferred Units and 1% to the General Partners.
Net loss, depreciation, and amortization deductions for each fiscal year will be allocated as follows: (a) 99% to the limited partners holding Tax Preferred Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then, to any partner having a positive balance in his capital account in an amount not to exceed such positive balance; and (c) thereafter, to the General Partners.
Gain on the sale or exchange of the Partnership's properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the deductions for depreciation and amortization previously allocated to them with respect to the specific property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale of such property.
Recent Accounting Pronouncement
In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-04, Fair Value Measurement Topic Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS ("ASU 2011-04"). ASU 2011-04 converges the GAAP and International Financial Reporting Standards definition of "fair value," the requirements for measuring amounts at fair value, and disclosures about these measurements. The update does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The adoption of ASU 2011-04 was effective for the Partnership for the interim period beginning January 1, 2012. The adoption of ASU 2011-04 has not had a material impact on the Partnership's financial statements or disclosures.

Page 12


3.
INVESTMENT IN JOINT VENTURE
Summary of Financial Information
The following information summarizes the operations of the Joint Venture for the three months and nine months ended September 30, 2012 and 2011, respectively:
 
Total Revenues
 
Net Income
 
Total Revenues
 
Net Income
 
Three Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Fund XIII-XIV Associates
$
374,373

 
$
418,289

 
$
160,927

 
$
180,157

 
$
1,160,735

 
$
1,255,818

 
$
546,140

 
$
519,533

Due from Joint Venture
As presented in the accompanying balance sheets, due from joint venture as of September 30, 2012 and December 31, 2011 represents operating cash flow generated by the Joint Venture for the three months ended September 30, 2012 and December 31, 2011, respectively, which is attributable to the Partnership.
4.
RELATED-PARTY TRANSACTIONS
Management and Leasing Fees
The Partnership has entered into a property management, leasing, and asset management agreement with Wells Management Company, Inc. ("Wells Management"), an affiliate of the General Partners. In accordance with the property management, leasing, and asset management agreement, Wells Management receives compensation for the management and leasing of the Partnership's properties owned directly or through the Joint Venture, equal to the lesser of (a) 4.5% of the gross revenues collected monthly; plus, a separate competitive fee for the one-time initial lease-up of newly constructed properties generally paid in conjunction with the receipt of the first month's rent, or (b) fees that would be paid to a comparable outside firm, which is assessed periodically based on market studies. In the case of commercial properties leased on a long-term net-lease basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases, except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Management and leasing fees are paid by the Joint Venture for the remaining property owned through the Joint Venture and, accordingly, are included in equity in income of joint venture in the accompanying statements of operations. Management and leasing fees were paid by the Partnership for the properties owned directly. The Partnership's share of management, leasing and asset management fees and lease acquisition costs incurred by the properties owned directly and through the Joint Venture and payable to Wells Management is $7,127 and $4,463 for the three months ended September 30, 2012 and 2011, respectively, and $49,974 and $12,529 for the nine months ended September 30, 2012 and 2011, respectively, portions of which are included in income from discontinued operations in the accompanying statements of operations. The Partnership incurred an increase in management fees for the nine months ended September 30, 2012 due to receiving cash in the first quarter of 2012 in connection with the settlement of the litigation with World Electric Supply at the 3675 Kennesaw Building.
Administrative Reimbursements
Wells Capital, one of the Partnership's General Partners, and Wells Management perform certain administrative services for the Partnership, relating to accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated among other entities affiliated with the General Partners based on estimates of the amount of time dedicated to each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation of such expenses. The Partnership incurred administrative expenses of $23,388 and $23,706 payable to Wells Capital and Wells Management for the three months ended September 30, 2012 and 2011, respectively, and $69,879 and $73,540 for the nine months ended September 30, 2012 and 2011, respectively, portions of which are included in income from discontinued operations in the accompanying statements of operations. In addition, Wells Capital and Wells Management pay for certain operating expenses of the Partnership directly and invoice the Partnership for the reimbursement thereof on a quarterly basis.
Due to Affiliates
As presented in the accompanying balance sheets, due to affiliates as of September 30, 2012 and December 31, 2011 was comprised of administrative reimbursements due to Wells Capital and/or Wells Management.


Page 13


Assertion of Legal Action Against Related-Parties
On March 12, 2007, a stockholder of Piedmont Office Realty Trust, Inc. ("Piedmont REIT"), an entity affiliated with the Partnership's General Partners, filed a putative class action and derivative complaint, presently styled In re Wells Real Estate Investment Trust, Inc. Securities Litigation, in the United States District Court for the District of Maryland against, among others, Piedmont REIT; Leo F. Wells, III and Wells Capital, the Partnership's General Partners; Wells Management, the Partnership's property manager; certain affiliates of WREF; the directors of Piedmont REIT; and certain individuals who formerly served as officers or directors of Piedmont REIT prior to the closing of the internalization transaction on April 16, 2007.
The complaint alleged, among other things, violations of the federal proxy rules and breaches of fiduciary duty arising from the Piedmont REIT internalization transaction and the related proxy statement filed with the SEC on February 26, 2007, as amended. The complaint sought, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization transaction.
On June 27, 2007, the plaintiff filed an amended complaint, which attempted to assert class action claims on behalf of those persons who received and were entitled to vote on the Piedmont REIT proxy statement filed with the SEC on February 26, 2007, and derivative claims on behalf of Piedmont REIT.
On March 31, 2008, the Court granted in part the defendants' motion to dismiss the amended complaint. The Court dismissed five of the seven counts of the amended complaint in their entirety. The Court dismissed the remaining two counts with the exception of allegations regarding the failure to disclose in the Piedmont REIT proxy statement details of certain expressions of interest in acquiring Piedmont REIT. On April 21, 2008, the plaintiff filed a second amended complaint, which alleged violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for the Piedmont REIT internalization transaction omitted details of certain expressions of interest in acquiring Piedmont REIT. The second amended complaint sought, among other things, unspecified monetary damages, to nullify and rescind the internalization transaction, and to cancel and rescind any stock issued to the defendants as consideration for the internalization transaction. On May 12, 2008, the defendants answered and raised certain defenses to the second amended complaint. Subsequent to the filing of the second amended complaint, the plaintiff said it intended to seek monetary damages of approximately $159 million plus prejudgment interest.
On June 23, 2008, the plaintiff filed a motion for class certification. On September 16, 2009, the Court granted the plaintiff's motion for class certification. On September 20, 2009, the defendants filed a petition for permission to appeal immediately the Court's order granting the motion for class certification with the Eleventh Circuit Court of Appeals. The petition for permission to appeal was denied on October 30, 2009.
On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add additional defendants. The Court denied the plaintiff's motion for leave to amend on June 23, 2009.
On December 4, 2009, the parties filed motions for summary judgment. On August 2, 2010, the Court entered an order denying the defendants' motion for summary judgment and granting, in part, the plaintiff's motion for partial summary judgment. The Court ruled that the question of whether certain expressions of interest in acquiring Piedmont REIT constituted "material" information required to be disclosed in the proxy statement to obtain approval for the Piedmont REIT internalization transaction raises questions of fact that must be determined at trial.
On November 17, 2011, the Court issued rulings granting several of the plaintiff's motions in limine to prohibit the defendants from introducing certain evidence, including evidence of the defendants' reliance on advice from their outside legal and financial advisors, and limiting the defendants' ability to relate their subjective views, considerations, and observations during the trial of the case. On February 23, 2012, the Court granted several of the defendants' motions, including a motion for reconsideration regarding a motion the plaintiff had filed seeking exclusion of certain evidence impacting damages, and motions seeking exclusion of certain evidence proposed to be submitted by the plaintiff.
On March 20, 2012, the Court granted the defendants leave to file a motion for summary judgment.  On April 5, 2012, the defendants filed a motion for summary judgment. On September 26, 2012, the Court granted the defendants' motion for summary judgment and entered judgment in favor of the defendants. On October 12, 2012, the plaintiff filed a notice of appeal with the Eleventh Circuit Court of Appeals. 
On October 22, 2012, Piedmont REIT announced that the parties reached an agreement in principle to settle the lawsuit on October 12, 2012. Under the terms of the proposed settlement, the plaintiff will dismiss the appeal and release all defendants from liability in exchange for total payment of $4.9 million in cash by Piedmont REIT and its insurer. The settlement, which is subject to Court approval following the negotiation and execution of definitive agreements and the provision of notice to the class, will resolve the appeal and result in the final disposition of the litigation.

Page 14


Mr. Wells, Wells Capital, and Wells Management believe that the allegations contained in the complaint are without merit and intend to vigorously defend this action if for any reason the settlement is not approved. Although WREF believes that it has meritorious defenses to the claims of liability and damages in these actions, WREF is unable at this time to predict the outcome of the appeal of this action or, if reinstated, reasonably estimate a range of damages, or how any liability and responsibility for damages might be allocated among the 17 defendants in the action, which includes 11 defendants not affiliated with Mr. Wells, Wells Capital, or Wells Management. The ultimate resolution of this matter could have a material adverse impact on WREF's financial results, financial condition, or liquidity.
Operational Dependency
The Partnership has engaged Wells Capital and Wells Management to provide certain essential services, including supervision of the management and leasing of its properties, asset acquisition and disposition services, as well as other administrative responsibilities, including accounting services and investor communications and relations. These agreements are terminable by either party upon 60 days' written notice. As a result of these relationships, the Partnership's operations are dependent upon Wells Capital and Wells Management.
Wells Capital and Wells Management are owned and controlled by WREF. The operations of Wells Capital and Wells Management represent substantially all of the business of WREF. Accordingly, the Partnership focuses on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF were to become unable to meet its obligations as they become due, the Partnership might be required to find alternative service providers.
Future net income generated by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs, as well as distribution income earned from its holdings of common stock of Piedmont REIT, which was acquired in connection with the Piedmont REIT internalization transaction (see "Assertion of Legal Action Against Related-Parties" above). As of September 30, 2012, the Partnership has no reason to believe that WREF does not have access to adequate liquidity and capital resources, including cash flow generated from operations, cash on hand, other investments and borrowing capacity, necessary to meet its current and future obligations as they become due through the end of 2013. Modifying service agreements between WREF, or its affiliates, and the Partnership, or other WREF-sponsored programs, could impact WREF's future net income and future access to liquidity and capital resources. For example, a large portion of WREF's income is derived under an advisory agreement with Wells Real Estate Investment Trust II, Inc. ("Wells REIT II") and WREF does not expect to receive significant compensation from Wells REIT II beyond December 31, 2013.
5.
ECONOMIC DEPENDENCY
The Partnership is dependent upon the ability of its current tenants to pay their contractual rent amounts as they become due. The inability of a tenant to pay future rental amounts would be likely to have a negative impact on the Partnership's results of operations. The Partnership is not currently aware of any reason why its existing tenants should not be able to pay their contractual rental amounts as they become due in all material respects. Situations preventing the tenants from paying contractual rents could result in a material adverse impact on the Partnership's results of operations.

Page 15


6.
DISCONTINUED OPERATIONS
In accordance with GAAP, the Partnership has classified the results of operations related to the 3675 Kennesaw Building, which was sold on February 24, 2012, and the 150 Apollo Drive property, which was sold on July 21, 2011, as discontinued operations in the accompanying statements of operations. The details comprising income from discontinued operations are presented below:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Rental income
$

 
$
86,159

 
$
46,043

 
$
675,042

Tenant reimbursements

 
47,812

 
13,827

 
198,604

Bad debt recoveries

 

 
546,109

 

Interest and other income
415

 

 
415

 

Total revenues
415

 
133,971

 
606,394

 
873,646

Expenses:
 
 
 
 
 
 
 
Property operating costs

 
48,383

 
5,051

 
173,169

Asset and property management fees:

 

 

 

Related-party

 

 
23,625

 

Other

 
3,399

 

 
16,069

Depreciation

 
18,303

 
3,500

 
173,505

Amortization

 
23,436

 
10,370

 
117,558

Bad debt expense

 
120,443

 
49,320

 
379,563

General and administrative expenses
230

 
53,817

 
24,758

 
108,315

Total expenses
230

 
267,781

 
116,624

 
968,179

Operating income (loss)
185

 
(133,810
)
 
489,770

 
(94,533
)
Gain on disposition

 
985,565

 
363,895

 
985,565

Income from Discontinued Operations
$
185

 
$
851,755

 
$
853,665

 
$
891,032

World Electric Supply vacated the 3675 Kennesaw Building in 2010, ceased paying rent effective in January 2011, and initiated litigation against the lessor entity, Wells Fund XIV – 3675 Kennesaw 75 Parkway, LLC. On February 17, 2012, the parties reached a settlement agreement for $525,000, which was contingent upon the successful closing of the sale of the 3675 Kennesaw Building. Effective February 24, 2012, the settlement became final, the lease was terminated, and the litigation was dismissed with prejudice on March 1, 2012.
7.
COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Partnership and its General Partners are parties to legal proceedings which arise in the ordinary course of the Partnership's business. The Partnership is not currently involved in any litigation for which the outcome would, in the judgment of the General Partners based on information currently available, have a materially adverse impact on the results of operations or financial condition of the Partnership, nor is management aware of any such litigation threatened against us.
Tenant Allowance Obligation
Certain lease agreements include provisions that, at the option of the tenant, may obligate the Partnership to expend capital to expand an existing property or provide other expenditures for the benefit of the tenant. In May 2012, Fund XIII-XIV Associates executed a lease amendment with Etour and Travel, Inc. ("Etour") at the Siemens - Orlando Building. As a result, Etour has the right to request the reimbursement of tenant improvements of up to approximately $254,000, which would be required to be funded by Fund XIII-XIV Associates, of which approximately $197,100 has been incurred as of September 30, 2012.
8.
SUBSEQUENT EVENT
Distribution of Net Sale Proceeds
The sales of 150 Apollo Drive and the 3675 Kennesaw Building generated total net sale proceeds to the Partnership of approximately $11.8 million, which approximately $7.0 million has previously been distributed to the limited partners through September 30, 2012. In November 2012, net sale proceeds of approximately $4.5 million from the aforementioned property sales were distributed to the limited partners of record as of September 30, 2012, which, under the terms of the partnership agreement, does not include

Page 16


limited partners acquiring units after June 30, 2012. Accordingly, the General Partners have determined to hold residual net sale proceeds in reserve to fund the Partnership's pro rata share of anticipated re-leasing costs at the Partnership's remaining property.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto. See also "Cautionary Note Regarding Forward-Looking Statements" preceding Part I, as well as our financial statements, the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, all provided in our Annual Report on Form 10-K for the year ended December 31, 2011.
Overview
Management believes that the Partnership typically operates through the following five key life cycle phases. The duration of each phase is dependent upon various economic, industry, market, and other internal/external factors. Some overlap naturally exists in the transition from one phase to the next.
Fundraising phase
The period during which the Partnership is raising capital through the sale and issuance of limited partner units to the public;

Investing phase
The period during which the Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets;
Holding phase
The period during which the Partnership owns and operates its real estate assets during the initial lease terms of the tenants;
Positioning-for-sale phase
The period during which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the real estate assets, evaluate various options for disposition, and market the real estate assets for sale; and
Disposition-and-liquidation phase
The period during which the Partnership sells its real estate investments, distributes net sale proceeds to the partners, liquidates, and terminates the Partnership.
Portfolio Overview
We are currently in the positioning-for-sale phase of our life cycle. We currently own a partial interest in one remaining property, following the sale of the 3675 Kennesaw Building on February 24, 2012. As a result of the sale, we received net sale proceeds of approximately $2,263,000 and recognized a gain of approximately $364,000. While our focus at this time involves marketing efforts at our remaining property that we believe will ultimately result in the best disposition pricing of our asset for our limited partners, we will evaluate offers to sell our remaining property on an as-is basis.
The third quarter 2012 operating distributions to limited partners holding Cash Preferred Units were reserved. We anticipate that operating distributions will continue to be reserved in the near-term as a result of anticipated re-leasing costs at our remaining property. On November 1, 2012, our General Partners distributed net sale proceeds of approximately $4.5 million from the sales of 150 Apollo Drive and the 3675 Kennesaw Building.
Property Summary
During the positioning-for-sale phase, we continue to focus on re-leasing space that may become vacant upon the expiration of our current leases. In doing so, we will seek to maximize returns to our limited partners by attempting to negotiate long-term leases at market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs, and portfolio costs. As our remaining property is positioned for sale, our attention will shift to locating suitable buyers, and negotiating a purchase-sale contract that will attempt to maximize the total return to our limited partners and minimize contingencies and potential post-closing obligations to buyers. As of October 31, 2012, we owned an interest in one property.
Information relating to the properties owned by the Partnership or its Joint Venture is presented below:
The 7500 Setzler Parkway property was sold on January 31, 2007.

Page 17


The Randstad – Atlanta Building was sold on April 24, 2007.
The 150 Apollo Drive property was sold on July 21, 2011.
The 3675 Kennesaw Building was sold on February 24, 2012.
The Siemens – Orlando Building, located in Orlando, Florida, is currently 100% leased to three tenants. The major lease to Siemens extends through April 2014. We are currently marketing the property for sale.
Liquidity and Capital Resources
Overview
Our operating strategy entails funding expenditures related to the recurring operations of our remaining property and the portfolio with operating cash flows, including current and prior period operating distributions received from the Joint Venture, and assessing the amount of remaining cash flows that will be required to fund known future re-leasing costs and other capital improvements. Any residual operating cash flows are generally considered available for distribution to the Cash Preferred limited partners and, unless reserved, are generally paid quarterly. As a result, the ongoing monitoring of our cash position is critical to ensuring that adequate liquidity and capital resources are available. Economic downturns in our remaining market could adversely impact the ability of one or more of our tenants to honor lease payments and our ability to re-lease space on favorable terms as leases expire or space otherwise becomes vacant. In the event of either situation, cash flows and, consequently, our ability to provide funding for capital needs could be adversely affected.
Short-Term Liquidity
During the nine months ended September 30, 2012, we generated net cash flows from operating activities, including distributions received from the Joint Venture, of approximately $775,000, primarily due to the litigation settlement reached with World Electric Supply and related recovery of bad debt at the 3675 Kennesaw Building. Operating distributions from the Joint Venture generally consist of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures. We continued to reserve the net operating cash flows generated in 2012 to fund our pro rata share of anticipated re-leasing costs at our remaining property in connection with the recent lease amendment with Etour at the Siemens – Orlando Building. The extent to which future operating distributions are paid to limited partners will be largely dependent upon the amount of cash generated from the Joint Venture, our expectations of future cash flows and determination of near-term cash needs to fund our share of tenant re-leasing costs and other capital improvements for our remaining property owned by the Joint Venture. We anticipate that operating distributions from Fund XIII-XIV Associates may decline in the near-term as a result of funding our pro rata share of anticipated re-leasing costs at the Siemens – Orlando Building.
During the nine months ended September 30, 2012, we received net sale proceeds of approximately $2.3 million from the sale of the 3675 Kennesaw Building. In addition, during the nine months ended September 30, 2012, we distributed net sale proceeds to our limited partners of approximately $7.0 million from the prior sales of the Randstad – Atlanta Building and 150 Apollo Drive.
We believe that the cash on hand and distributions due from the Joint Venture will be sufficient to cover our working capital needs, including those provided for within our total liabilities of approximately $20,000, as of September 30, 2012.
Long-Term Liquidity
We expect that our future sources of capital will be primarily derived from operating cash flows generated from our remaining property owned by the Joint Venture, and net proceeds generated from the sale of that property. Our future long-term liquidity requirements will include, but not be limited to, funding our share of tenant improvements, renovations, expansions, and other significant capital improvements necessary for our remaining property owned by the Joint Venture. We expect to continue to use substantially all future net cash from operations, including distributions received from the Joint Venture, to fund our pro rata share of leasing costs and capital expenditures necessary to position our remaining property for sale. To the extent that residual operating cash flows remain after considering these funding requirements, we would then distribute such residual operating cash flow to the limited partners.
Capital Resources
The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties or investing in joint ventures formed for the same purpose, and has invested all of the partners' original net offering proceeds available for investment. Thus, it is unlikely that we will acquire interests in any additional properties or joint ventures. Historically, our investment strategy has generally involved acquiring properties that are preleased to creditworthy tenants on an all-cash basis either directly by us or through the Joint Venture.


Page 18


We fund capital expenditures primarily related to building improvements for the purpose of maintaining the quality of our properties, and tenant improvements for the purpose of readying our properties for re-leasing. As leases at our remaining property expire, we will work with the Joint Venture to attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates.
Operating cash flows, if available, are generally distributed from the Joint Venture to us approximately one month following calendar quarter-ends. However, the Joint Venture will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management policy typically includes first utilizing current period operating cash flows until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event that current and prior period accumulated operating cash flows are insufficient to fund such costs, net sale proceeds reserves, if available, would then be utilized. Any capital or other expenditures not funded from the operations of the Joint Venture will be required to be funded by us and the other respective joint venture partners on a pro rata basis.
As of September 30, 2012, we have received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:
 
 
Net Sale
Proceeds
 
Partnership's
Approximate
Ownership %
 
Net Sale
Proceeds
Allocated to the
Partnership
 
Use of
Net Sale Proceeds
 
Net Sale Proceeds
Distributed to
Partners as of
September 30, 2012
 
Undistributed Net
Sale Proceeds as of
September 30, 2012
Property Sold
 
Amount
 
Purpose
 
7500 Setzler Parkway
(sold in 2007)
 
$
8,723,080

 
52.7
%
 
$
4,597,063

 
$

 

 
$
4,597,063

 
$

Randstad – Atlanta Building
(sold in 2007)
 
$
8,992,600

 
52.7
%
 
4,739,100

 

 

 
4,739,100

 

150 Apollo Drive
(sold in 2011)
 
$
9,566,058

 
100.0
%
 
9,566,058

 

 

 
6,953,837

 
2,612,221

3675 Kennesaw Building
(sold in 2012)
 
$
2,262,634

 
100.0
%
 
2,262,634

 

 

 

 
2,262,634

Total
 
 
 
 
 
$
21,164,855

 
$

 
 
 
$
16,290,000

 
$
4,874,855


Our General Partners distributed net sale proceeds of approximately $4.5 million to limited partners in November 2012 from the sales of 150 Apollo Drive and the 3675 Kennesaw Building. Upon evaluating the capital needs of our portfolio, our General Partners have decided to reserve the remaining net sale proceeds in the near-term to fund our pro rata share of anticipated re-leasing costs at our remaining property.

Results of Operations
Comparison of the three months ended September 30, 2011 versus the three months ended September 30, 2012
Continuing Operations
General and administrative expenses increased from $29,337 for the three months ended September 30, 2011 to $36,239 for the three months ended September 30, 2012, primarily due to an increase in administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on future changes in our reporting and regulatory requirements.
Equity in income of Joint Venture decreased from $94,943 for the three months ended September 30, 2011 to $84,809 for the three months ended September 30, 2012. This decrease is primarily due to the reduction in rental rate at the Siemens - Orlando Building in connection with the execution of the lease extension with Siemens in the first quarter of 2012, incurring parking lot repairs at the Siemens - Orlando Building in the third quarter of 2012, partially offset by a decrease in depreciation expense in connection with the expiration of the initial Siemens lease at the Siemens – Orlando Building. We expect equity in income of Joint Venture to remain at a similar level in the near term, as compared to the third quarter of 2012.
Discontinued Operations
In accordance with GAAP, we have classified the results of operations related to the 150 Apollo Drive property and the 3675 Kennesaw Building as discontinued operations for all periods presented. Income from discontinued operations decreased from $851,755 for the three months ended September 30, 2011 to $185 for the three months ended September 30, 2012 primarily as a result of recognizing a nonrecurring gain on the sale of 150 Apollo Drive in July 2011.

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Comparison of the nine months ended September 30, 2011 versus the nine months ended September 30, 2012
Continuing Operations
General and administrative expenses increased from $110,925 for the nine months ended September 30, 2011 to $129,792 for the nine months ended September 30, 2012, primarily due to the classification of accounting fees related to the 150 Apollo Drive property for the nine months ended September 30, 2011 as discontinued operations and accounting fees related to the 150 Apollo Drive property for the nine months ended September 30, 2012 as continuing operations and an increase in administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on future changes in our reporting and regulatory requirements.
Equity in income of Joint Venture increased from $273,794 for the nine months ended September 30, 2011 to $287,816 for the nine months ended September 30, 2012. This increase is primarily due to a decrease in depreciation expense in connection with the expiration of the initial Siemens lease at the Siemens – Orlando Building, partially offset by the reduction in rental rate at the Siemens - Orlando Building in connection with the execution of the lease extension with Siemens in the first quarter of 2012 and incurring parking lot repairs at the Siemens - Orlando Building in the third quarter of 2012. We expect equity in income of Joint Venture to remain at a similar level in the near term, as compared to the nine months ended September 30, 2012.
Discontinued Operations
In accordance with GAAP, we have classified the results of operations related to the 150 Apollo Drive property and the 3675 Kennesaw Building as discontinued operations for all periods presented. Income from discontinued operations decreased from $891,032 for the nine months ended September 30, 2011 to $853,665 for the nine months ended September 30, 2012, primarily as a result of recognizing a nonrecurring gain on the sale of 150 Apollo Drive in July 2011, partially offset by recognizing a nonrecurring gain on the sale of the 3675 Kennesaw Building in February 2012, and a recovery of bad debt in connection with the settlement of the litigation at the 3675 Kennesaw Building in February 2012.
Application of Critical Accounting Policies
Summary
Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management's judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.
Below is a discussion of the accounting policies used by us and the Joint Venture, which are considered critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.
Investment in Real Estate Assets
We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of the assets to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the assets owned directly by the Partnership or through the Joint Venture are depreciated or amortized using the straight-line method over the following useful lives:
Buildings
  
40 years
Building improvements
  
5-25 years
Land improvements
  
20 years
Tenant improvements
  
Shorter of lease term or economic life
Intangible lease assets
  
Lease term

In the event that the Partnership or Joint Venture utilizes inappropriate useful lives or methods of depreciation or amortization, our net income would be misstated.


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Evaluating the Recoverability of Real Estate Assets
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets and related intangible assets in which we have an ownership interest, may not be recoverable. When indicators of potential impairment are present which suggest that the carrying amounts of real estate assets and related intangible assets may not be recoverable, we assess the recoverability of the real estate assets and related intangible assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that such expected undiscounted future cash flows for assets held for use, or the estimated fair values, less costs to sell, for assets held for sale, do not exceed the respective assets' carrying values, we adjust the real estate assets and related intangible assets to their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognize an impairment loss. Estimated fair values are determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value. We have determined that there have been no additional impairments in the carrying value of our real estate assets and related intangible assets to date; however, certain of our assets may be carried at an amount more than could be realized in a current disposition transaction.
Projections of expected future cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's future cash flows and fair value, and could result in the misstatement of the carrying values of real estate assets and related intangible assets held by the Joint Venture and our net income (loss). 
Allocation of Purchase Price of Acquired Assets
Upon acquisition of real properties, either owned directly by the Partnership or through its investment in the Joint Venture, the Partnership allocated the purchase price of properties to the identifiable tangible assets, which consist of land and buildings, and identifiable intangible assets and liabilities, which consist of the following items:
Direct costs associated with obtaining a new tenant, including commissions, tenant improvements and other direct costs are included in intangible lease origination costs in the accompanying balance sheets and are amortized to expense over the remaining terms of the respective leases.
The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease are included in intangible lease assets in the accompanying balance sheets and are amortized to expense over the remaining terms of the respective leases.
The value of tenant relationships is included in intangible lease assets in the accompanying balance sheets and amortized to expense over the remaining terms of the respective leases.
The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is recorded as intangible lease assets or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.
As of September 30, 2012 and December 31, 2011, the Partnership had the following gross intangible in-place lease assets: 
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
September 30, 2012
$

 
$

 
$

December 31, 2011
$
42,045

 
$
235,458

 
$
212,151






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During the three months ended September 30, 2012 and 2011, the Partnership recognized the following amortization of acquired intangible lease assets:
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
For the three months ended September 30:
2012
$

 
$

 
$

2011
$
1,557

 
$
8,721

 
$
7,857

During the nine months ended September 30, 2012 and 2011, the Partnership recognized the following amortization of acquired intangible lease assets:
 
Intangible Lease Assets
 
Intangible
Lease
Origination
Costs
 
Above-Market
In-Place
Lease Asset
 
Absorption
Period Costs
 
For the nine months ended September 30:
2012
$
930

 
$
5,213

 
$
4,696

2011
$
4,671

 
$
26,162

 
$
23,572

Related-Party Transactions
We have entered into agreements with Wells Capital and Wells Management, or their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells Management, or their affiliates for asset management; the management and leasing of our properties; and administrative services relating to accounting, property management, and other partnership administration, and we incur the related expenses. See Note 4 to our financial statements included in this report for a description of these fees and expense reimbursements we have incurred.
Commitment and Contingencies
Tenant Allowance Obligation

Certain lease agreements include provisions that, at the option of the tenant, may obligate the Partnership to expend capital to
expand an existing property or provide other expenditures for the benefit of the tenant. In May 2012, Fund XIII-XIV Associates executed a lease amendment with Etour and Travel, Inc. ("Etour") at the Siemens - Orlando Building. As a result, Etour has the right to request the reimbursement of tenant improvements of up to approximately $254,000, which would be required to be funded by Fund XIII-XIV Associates, of which approximately $197,100 has been incurred as of September 30, 2012.
Subsequent Event
Distribution of Net Sale Proceeds
The sales of 150 Apollo Drive and the 3675 Kennesaw Building generated total net sale proceeds to the Partnership of approximately $11.8 million, which approximately $7.0 million has previously been distributed to the limited partners through September 30, 2012. In November 2012, net sale proceeds of approximately $4.5 million from the aforementioned property sales were distributed to the limited partners of record as of September 30, 2012, which, under the terms of the partnership agreement, does not include limited partners acquiring units after June 30, 2012. Accordingly, the General Partners have determined to hold residual net sale proceeds in reserve to fund our pro rata share of anticipated re-leasing costs at the Partnership's remaining property.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since we do not borrow any money, make any foreign investments or invest in any market risk-sensitive instruments, we are not subject to risks relating to interest rates, foreign currency exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.
ITEM 4.
CONTROLS AND PROCEDURES
Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management of Wells Capital, one of our General Partners, including the Principal Executive Officer and the Principal Financial Officer of Wells Capital, of the effectiveness of the

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design and operation of the Partnership's disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act as of the end of the quarterly period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer of Wells Capital concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer of Wells Capital, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 
PART II.
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We are not currently involved in any litigation the outcome of which would, in management's judgment based on information currently available, have a material adverse effect on our results of operations or financial condition, nor is management aware of any such litigation threatened against us during the quarter ended September 30, 2012, requiring disclosure under Item 103 of Regulation S-K. For a description of pending litigation involving certain related parties, see "Assertion of Legal Action Against Related-Parties" in Note 4 to our financial statements included in this report.
ITEM 1A.
RISK FACTORS
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
We did not sell any equity securities that were not registered under the Securities Act during the quarter ended September 30, 2012.
(b)
Not applicable.
(c)
We did not redeem any securities during the quarter ended September 30, 2012.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
(a)
We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended September 30, 2012.
(b)
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
(a)
During the quarter ended September 30, 2012, there was no information required to be disclosed in a report on Form
8-K which was not disclosed in a report on Form 8-K.
(b)
Not applicable.
ITEM 6.
EXHIBITS
The Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
WELLS REAL ESTATE FUND XIV, L.P.
(Registrant)
 
 
 
 
By:
WELLS CAPITAL, INC.
(General Partner)
 
 
 
November 9, 2012
 
/s/  DOUGLAS P. WILLIAMS
 
 
Douglas P. Williams
Principal Financial Officer
of Wells Capital, Inc.


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EXHIBIT INDEX
TO THIRD QUARTER FORM 10-Q
OF
WELLS REAL ESTATE FUND XIV, L.P.
 
Exhibit
Number
Description of Document
 
 
 
31.1

 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
31.2

 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
32.1

 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101.INS

*
XBRL Instance Document.
 
 
 
101.SCH

*
XBRL Taxonomy Extension Schema.
 
 
 
101.CAL

*
XBRL Taxonomy Extension Calculation Linkbase.
 
 
 
101.DEF

*
XBRL Taxonomy Extension Definition Linkbase.
 
 
 
101.LAB

*
XBRL Taxonomy Extension Label Linkbase.
 
 
 
101.PRE

*
XBRL Taxonomy Extension Presentation Linkbase.
*
Furnished with this Form 10-Q, but not filed under the Exchange Act


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