WELLS REAL ESTATE FUND XI L P - FORM 10-Q - November 12, 2013

Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - WELLS REAL ESTATE FUND XI L PFinancial_Report.xls
EX-31.1 - SECTION 302 PEO CERTIFICATION - WELLS REAL ESTATE FUND XI L Pfund11q32013ex311.htm
EX-31.2 - SECTION 302 PFO CERTIFICATION - WELLS REAL ESTATE FUND XI L Pfund11q32013ex312.htm
EX-32.1 - SECTION 906 PEO AND PFO CERTIFICATION - WELLS REAL ESTATE FUND XI L Pfund11q32013ex321.htm

 
 
 
 
 
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, 2013
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 000-25731
__________________________________
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
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 XI, 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, 2012 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 XI, 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 I.
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 and Management's Discussion and Analysis of Financial Condition and Results of Operations, all included in both this Quarterly Report on Form 10-Q and in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2012. The Partnership's results of operations for the three months and nine months ended September 30, 2013 are not necessarily indicative of the operating results expected for the full year.


Page 4

WELLS REAL ESTATE FUND XI, L.P.
 
BALANCE SHEETS
 
 
(Unaudited)
 
 
 
September 30,
2013
 
December 31,
2012
Assets:
 
 
 
Investment in joint venture
$
—

 
$
1,197,485

Cash and cash equivalents
1,968,668

 
1,548,502

Other assets
19,836

 
6,644

Total assets
$
1,988,504

 
$
2,752,631

 
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
3,520

 
$
6,447

Due to affiliates
3,188

 
4,924

Total liabilities
6,708

 
11,371

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Partners' Capital:
 
 
 
Limited Partners:
 
 
 
Class A – 1,430,724 units issued and outstanding
1,981,796

 
2,741,260

Class B – 222,556 units issued and outstanding
—

 
—

General Partners
—

 
—

Total partners' capital
1,981,796

 
2,741,260

Total liabilities and partners' capital
$
1,988,504

 
$
2,752,631

See accompanying notes.

Page 5

WELLS REAL ESTATE FUND XI, L.P.
 
STATEMENTS OF OPERATIONS
 
 
(Unaudited)
 
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Equity in Income (Loss) of Joint Venture
$
3,536

 
$
(6,038
)
 
$
(659,364
)
 
$
(12,867
)
 
 
 
 
 
 
 
 
General and Administrative Expenses
27,890

 
35,110

 
102,269

 
111,379

 
 
 
 
 
 
 
 
Interest and Other Income
733

 
783

 
1,945

 
2,753

 
 
 
 
 
 
 
 
Gain on Sale of Interest in Joint Venture
224

 
—

 
224

 
—

Net Loss
$
(23,397
)
 
$
(40,365
)
 
$
(759,464
)
 
$
(121,493
)
 
 
 
 
 
 
 
 
Net Loss Allocated to:
 
 
 
 
 
 
 
Class A Limited Partners
$
(23,397
)
 
$
(40,365
)
 
$
(759,464
)
 
$
(86,396
)
Class B Limited Partners
$
—

 
$
—

 
$
—

 
$
(35,097
)
General Partners
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Net Loss per Weighted-Average Limited Partner Unit:
 
 
 
 
 
 
 
Class A
$
(0.02
)
 
$
(0.03
)
 
$
(0.53
)
 
$
(0.06
)
Class B
$
0.00

 
$
0.00

 
$
0.00

 
$
(0.16
)
 
 
 
 
 
 
 
 
Weighted-Average Limited Partner Units Outstanding:
 
 
 
 
 
 
 
Class A
1,430,724

 
1,430,724

 
1,430,724

 
1,430,724

Class B
222,556

 
222,556

 
222,556

 
222,556

See accompanying notes.

 

Page 6

WELLS REAL ESTATE FUND XI, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED)
 
 
Limited Partners
 
General
Partners
 
Total
Partners'
Capital
 
Class A
 
Class B
 
 
Units
 
Amount
 
Units
 
Amount
 
BALANCE, December 31, 2011
1,430,724

 
$
2,878,060

 
222,556

 
$
35,097

 
$
—

 
$
2,913,157

 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
(136,800
)
 
—

 
(35,097
)
 
—

 
(171,897
)
BALANCE, December 31, 2012
1,430,724

 
2,741,260

 
222,556

 
—

 
—

 
2,741,260

 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
(759,464
)
 
—

 
—

 
—

 
(759,464
)
BALANCE, September 30, 2013
1,430,724

 
$
1,981,796

 
222,556

 
$
—

 
$
—

 
$
1,981,796

See accompanying notes.

Page 7

WELLS REAL ESTATE FUND XI, L.P.
STATEMENTS OF CASH FLOWS
 
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2013
 
2012
Cash Flows from Operating Activities:
 
 
 
Net loss
$
(759,464
)
 
$
(121,493
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Operating distributions received from joint ventures
—

 
30,275

Equity in loss of joint venture
659,364

 
12,867

Gain on sale of interest in joint venture
(224
)
 
—

Changes in assets and liabilities:
 
 
 
(Increase) decrease in other assets
(13,192
)
 
323

Decrease in accounts payable and accrued expenses
(2,927
)
 
(3,931
)
Decrease in due to affiliates
(1,736
)
 
(1,059
)
Net cash used in operating activities
(118,179
)
 
(83,018
)
 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Investment in joint venture
(377,892
)
 
—

       Net sale proceeds received from sale of interest in joint venture
916,237

 
—

Net cash provided by investing activities
538,345

 
—

Net Increase (Decrease) in Cash and Cash Equivalents
420,166

 
(83,018
)
 
 
 
 
Cash and Cash Equivalents, beginning of period
1,548,502

 
1,691,184

Cash and Cash Equivalents, end of period
$
1,968,668

 
$
1,608,166

See accompanying notes.


Page 8

WELLS REAL ESTATE FUND XI, L.P.
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2013 (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. ("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 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. Limited partners have the right to change their prior elections to have some or all of their units treated as Class A Units or Class B Units one time during each quarterly accounting period. Limited partners may vote to, among other things, (a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; (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 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 a public offering of up to $35,000,000 of Class A or Class B limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act. The offering was terminated on December 30, 1998, at which time the Partnership had sold approximately 1,302,942 Class A Units and 350,338 Class B Units representing total limited partner capital contributions of $16,532,802.
The Partnership owned indirect interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners and Piedmont Operating Partnership, LP ("Piedmont OP"), formerly known as Wells Operating Partnership, L.P. Piedmont OP is a Delaware limited partnership with Piedmont Office Realty Trust, Inc. ("Piedmont REIT"), formerly known as Wells Real Estate Investment Trust, Inc., serving as its general partner. Piedmont REIT is a Maryland corporation that has elected to be taxed as a real estate investment trust. During the periods presented, the Partnership owned interests in the following joint ventures (the "Joint Ventures") and properties:
Joint Venture
Joint Venture Partners
Ownership %
Properties
The Fund IX, Fund X, Fund XI and REIT Joint Venture(1)
("Fund IX-X-XI-REIT Associates")
• Wells Real Estate Fund IX, L.P.
• Wells Real Estate Fund X, L.P.
• Wells Real Estate Fund XI, L.P.
• Piedmont Operating Partnership, LP
39.0%
48.5%
8.8%
3.7%
This joint venture did not own any properties during the periods presented.
Fund X and Fund XI Associates(1)
("Fund X-XI Associates")
• Wells Real Estate Fund X, L.P.
• Wells Real Estate Fund XI, L.P.
58.0%
42.0%
This joint venture only owned an interest in another joint venture, Wells/Fremont Associates, and did not own any properties directly.
Wells/Fremont Associates(1)
("Fund X-XI-REIT Associates - Fremont")
• Fund X-XI Associates
• Piedmont Operating Partnership, LP
22.5%
77.5%
This joint venture did not own any properties during the periods presented.
The Wells Fund XI-Fund XII-REIT Joint Venture
("Fund XI-XII-REIT Associates")(2)
• Wells Real Estate Fund XI, L.P.
• Wells Real Estate Fund XII, L.P.
• Piedmont Operating Partnership, LP
26.1%
17.1%
56.8%
20/20 Building
A three-story office building located
in Leawood, Kansas
(1) 
These joint ventures wound up their affairs in 2011 and were terminated in the first quarter of 2012.
(2) 
The Partnership sold its equity interest in this joint venture on August 12, 2013.

Wells Real Estate Fund IX, L.P. and Wells Real Estate Fund XII, L.P. are affiliated with the Partnership through common general partners. Wells Real Estate Fund X, L.P. was affiliated with the Partnership through one or more common general partners prior to its dissolution. Each of the properties described above was acquired on an all-cash basis. For further information regarding the Joint Ventures and foregoing properties, refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2012.

Page 9

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 such periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2012.
Investment in Joint Venture
The Partnership evaluated Fund XI-XII-REIT Associates and concluded that it was not a variable interest entity. The Partnership did not have control over the operations of Fund XI-XII-REIT Associates; however, it did exercise significant influence. Approval by the Partnership as well as the other joint venture partners was required for any major decision or any action that would have materially affected Fund XI-XII-REIT Associates or its real property investments. Accordingly, the Partnership accounted for its investment in Fund XI-XII-REIT Associates using the equity method of accounting, whereby original investments were 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 were allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, were generally distributed to the joint venture partners on a quarterly basis.
Evaluating the Recoverability of Real Estate Assets
The Partnership continually monitored events and changes in circumstances that would have indicated that the carrying amounts of the real estate assets owned through the Partnership's investment in Fund XI-XII-REIT Associates may not have been recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not be recoverable, management assessed the recoverability of the real estate assets by determining whether the respective carrying values would have been recovered through the estimated undiscounted future 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 did not exceed the respective asset carrying value, management adjusted 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 recognized an impairment loss. Estimated fair values were 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. During the second quarter of 2013, the Partnership evaluated the recoverability of the carrying value of the 20/20 Building pursuant to the accounting policy outlined above and determined that it was not recoverable, as compared to the estimated expected fair value, primarily due to management redefining its strategy for the Partnership to dispose of its equity interest in Fund XI-XII-REIT Associates in the second quarter of 2013. Accordingly, Fund XI-XII-REIT Associates reduced the carrying value of the 20/20 Building to its estimated fair value based on a direct offer received on the 20/20 Building and recognized a corresponding impairment loss of $2,411,051 in the second quarter of 2013, of which $630,442 was allocated to the Partnership. The fair value measurements used in this evaluation of nonfinancial assets are considered to be Level 1 valuations within the fair value hierarchy outlined below, based on a direct offer received on the 20/20 Building.
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

Page 10

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.
Distribution of Net Cash from Operations
Net cash from operations is generally distributed quarterly to the limited partners as follows:
•
First, to all limited partners holding Class A Units 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 have received distributions equal to 10% of the total cumulative distributions paid by the Partnership; and
•
Third, to the limited partners holding Class A Units on a per-unit basis and the General Partners allocated on a basis of 90% and 10%, respectively.
No distributions of net cash from operations were made to limited partners holding Class B Units.
Distribution of Net Sale Proceeds
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 Class A 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, and cost recovery deductions taken by the limited partners holding Class B Units with respect to such property;
•
To limited partners holding units which at any time have been treated as Class B Units until the limited partners have received an amount necessary to equal the net cash from operations previously distributed to the limited partners holding Class A 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 return (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 Class A Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were treated as Class B Units);
•
To the General Partners until they have received 100% of their 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, and cost recovery and the gain on the 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 Class A 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 Class A 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 Class B 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

Page 11

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 Class B 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 April 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-07, Presentation of Financial Statements Topic Liquidation Basis of Accounting ("ASU 2013-07"). ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent when the likelihood is remote that the organization will return from liquidation and either: (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties; or (b) a plan for liquidation is being imposed by other forces. ASU 2013-07 will be effective for the Partnership beginning on January 1, 2014. The Partnership expects that the adoption of ASU 2013-07 will not have a material impact on its financial statements or disclosures.

3.
INVESTMENT IN JOINT VENTURE
On August 12, 2013, the Partnership sold its equity interest in its remaining joint venture, Fund XI-XII-REIT Associates, to Piedmont JV Partnership Interests, LLC ("Piedmont JV"). As a result of the disposition of the Partnership's equity interest in Fund XI-XII-REIT Associates, the Partnership received net sale proceeds of approximately $916,000 and recognized a gain of $224.
Summary of Financial Information
Condensed financial information for Fund XI-XII-REIT Associates for the three months and nine months ended September 30, 2013 and 2012, respectively, is presented below:
 
Total Revenues
 
Income From
Continuing Operations
 
Income (Loss) From
Discontinued Operations
 
Net Income (Loss)
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Fund XI-XII-REIT Associates
$
—

 
$
—

 
$
—

 
$
—

 
$
13,527

 
$
(23,091
)
 
$
13,527

 
$
(23,091
)
 
Total Revenues
 
Income From
Continuing Operations
 
Loss From
Discontinued Operations
 
Net Loss
 
Nine Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Fund XI-XII-REIT Associates
$
—

 
$
—

 
$
—

 
$
—

 
$
(2,521,656
)
 
$
(49,210
)
 
$
(2,521,656
)
 
$
(49,210
)
The Partnership allocates its share of net income, net loss, and gain on sale generated by Fund XI-XII-REIT Associates to its Class A and Class B limited partners pursuant to the partnership agreement provisions outlined in Note 2. The components of loss from discontinued operations recognized by Fund XI-XII-REIT Associates are provided below:
 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2013
 
September 30, 2012
 
Operating
Loss
 
Impairment Loss
 
Total
 
Operating
Loss
 
Impairment Loss
 
Total
Fund XI-XII-REIT Associates
$
(110,605
)
 
$
(2,411,051
)
 
$
(2,521,656
)
 
$
(49,210
)
 
$
—

 
$
(49,210
)

Page 12

4.
RELATED-PARTY TRANSACTIONS
Management and Leasing Fees
The Partnership entered into a property management and leasing agreement with Wells Management Company, Inc. ("Wells Management"), an affiliate of the General Partners. In accordance with the property management and leasing agreement, Wells Management received compensation for the management and leasing of the Partnership's properties owned through the Joint Ventures, equal to (a) 2.5% for management services and 2% for leasing services of the gross revenues collected monthly (aggregate maximum of 4.5%), plus a separate competitive fee for the one-time initial lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties, which is assessed periodically based on market studies, or (b) in the case of commercial properties leased on a long-term net 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 were paid by the Joint Ventures and, accordingly, were included in equity in income (loss) of joint ventures in the accompanying statements of operations. The Partnership's share of management and leasing fees and lease acquisition costs incurred through Fund XI-XII-REIT Associates and payable to Wells Management was $158 and $569 for the three months ended September 30, 2013 and 2012, respectively, and $469 and $1,722 for the nine months ended September 30, 2013 and 2012, respectively.
Administrative Reimbursements
Wells Capital, the corporate general partner of Wells Partners, 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 payable to Wells Capital and Wells Management of $10,083 and $16,311 for the three months ended September 30, 2013 and 2012, respectively, and $33,376 and $49,824 for the nine months ended September 30, 2013 and 2012, respectively. In addition, Wells Capital and Wells Management pay for certain operating expenses of the Partnership ("bill-backs") directly and invoice the Partnership for the reimbursement thereof on a quarterly basis. As presented in the accompanying balance sheets, due to affiliates as of September 30, 2013 and December 31, 2012 represents administrative reimbursements and bill-backs due to Wells Capital and/or Wells Management.
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, Wells Investment Securities, Inc., Wells Management, Wells Core Office Income REIT Advisory Services, LLC, and their affiliates represent substantially all of the business of WREF. Accordingly, we focus 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, we 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 management of assets for WREF-sponsored programs and the volume of future 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. As of September 30, 2013, 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. 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 agreements with Columbia Property Trust, Inc. ("Columbia"), formerly known as Wells Real Estate Investment Trust II, Inc. Effective February 28, 2013, Columbia transitioned to self-management and indicated that it does not expect to rely on WREF for the same level of services beyond December 31, 2013. In addition, a smaller portion of WREF’s income is derived under agreements with CatchMark Timber Trust, Inc. (“CatchMark”), formerly known as Wells Timberland REIT, Inc. Effective October 25, 2013, CatchMark also transitioned to self-management and indicated that it does not expect to rely on WREF for the same level of services beyond June 30, 2014. As such, WREF does

Page 13

not expect to receive significant compensation from Columbia or CatchMark beyond December 31, 2013 and June 30, 2014, respectively.
5.
COMMITMENTS AND CONTINGENCIES
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.
6.
SUBSEQUENT EVENT

Distribution of Net Sale Proceeds
On November 1, 2013, net sale proceeds of approximately $1,700,000 from the sales of the 360 Interlocken Building, 47300 Kato Road, and the Partnership's equity interest in Fund XI-XII-REIT Associates were distributed to the limited partners of record as of October 1, 2013, which, under the terms of the partnership agreement, does not include limited partners acquiring units after September 30, 2013. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2013.

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, 2012.
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 have transitioned into the disposition-and-liquidation phase of our life cycle. On August 12, 2013, we sold our equity interest in our remaining joint venture, Fund XI-XII-REIT Associates, to Piedmont JV. As a result of the disposition of our equity interest in Fund XI-XII-REIT Associates, we received net sale proceeds of approximately $916,000 and recognized a gain of $224. In making the determination to dispose of our equity interest in our remaining joint venture, our General Partners took into account various considerations, including the leasing risk, projected total leasing costs, and the portfolio general and administrative costs.

Page 14

On November 1, 2013, net sale proceeds of approximately $1,700,000 from the sales of the 360 Interlocken Building, 47300 Kato Road, and our equity interest in Fund XI-XII-REIT Associates were distributed to limited partners. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2013.
Property Summary
We have now sold all of the real estate assets in which we had owned interests following the sale of our equity interest in Fund XI-XII-REIT Associates on August 12, 2013. We have begun to take the steps necessary to liquidate and dissolve the Partnership.
Information relating to the properties previously owned by the joint ventures is provided below:
•
The Cort Building was sold on September 11, 2003.
•
The Johnson Matthey Building was sold on October 5, 2004.
•
The Alstom Power - Knoxville Building was sold on March 15, 2005.
•
The Gartner Building was sold on April 13, 2005.
•
The 1315 West Century Drive property was sold on December 22, 2006.
•
The Iomega Building was sold on January 31, 2007.
•
The 111 Southchase Boulevard property was sold on May 23, 2007.
•
The Avaya Building was sold on October 15, 2010.
•
The 360 Interlocken Building was sold on June 2, 2011.
•
The 47300 Kato Road property was sold on August 25, 2011.
•
Our interest in the 20/20 Building was sold on August 12, 2013.
Liquidity and Capital Resources
Overview
Our operating strategy has entailed funding expenditures related to the recurring operations of our joint ventures' properties and the portfolio with operating cash flows, including current and prior period operating distributions received from the joint ventures, and assessing the amount of remaining cash flows that will be required to fund known future re-leasing costs and other capital improvements. Historically, any residual operating cash flows were generally considered available for distribution to the Class A limited partners and, unless reserved, were generally paid quarterly. To the extent that operating cash flows were insufficient to fund our recurring operations, net sale proceeds would have been utilized. The ongoing monitoring of our cash position has been critical to ensuring that adequate liquidity and capital resources were available.
Short-Term Liquidity
During the nine months ended September 30, 2013, net cash outflows from operating activities were approximately $118,000, primarily due to (i) Fund XI-XII-REIT Associates retaining its operating cash flow to fund re-leasing costs and capital expenditures at the 20/20 Building, prior to the disposition of our interest in Fund XI-XII-REIT Associates, and (ii) funding our general and administrative expenses.

During the nine months ended September 30, 2013, we received net sale proceeds from the disposition of our interest in Fund XI-XII-REIT Associates of approximately $916,000. During the nine months ended September 30, 2013, we invested approximately $378,000 in Fund XI-XII-REIT Associates to fund our pro rata share of tenant improvements and property operating costs at the 20/20 Building related to leasing activity prior to the disposition of our interest in Fund XI-XII-REIT Associates.

We believe that the cash on hand will be sufficient to cover our working capital needs, including those provided for within our total liabilities of approximately $7,000, as of September 30, 2013.

Long-Term Liquidity

We have sold all of the real estate assets in which we had owned interests and will not acquire additional properties. As a result of the sale of our equity interest in the remaining assets of Fund XI-XII-REIT Associates in August 2013, we have begun to take the steps necessary to liquidate and dissolve the Partnership. We are in the process of evaluating the amount of cash reserves

Page 15

needed to settle estimated liabilities of the Partnership at dissolution and intend to distribute the cash balances remaining at that time to the limited partners pursuant to applicable provisions of the partnership agreement.
Capital Resources
As of September 30, 2013, we had received, used, distributed, and held net sale proceeds allocated to us from the sale of properties and joint ventures 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
 
Undistributed Net
Sale Proceeds
Property/Joint Venture Sold
 
Amount
 
Purpose
 
Cort Building
(sold in 2003)
 
$
5,563,403

 
24
%
 
$
1,315,906

 
$
—

 
—

 
$
1,315,906

 
$
—

Johnson Matthey Building
(sold in 2004)
 
$
9,675,000

 
26
%
 
2,529,819

 
—

 
—

 
2,529,819

 
—

Alstom Power – Knoxville Building
(sold in March 2005)
 
$
11,646,089

 
9
%
 
1,023,528

 
—

 
—

 
1,023,528

 
—

Gartner Building
(sold in April 2005)
 
$
12,396,859

 
26
%
 
3,241,531

 
340,000

 
Partnership operating expenses (2006)
 
Joint venture operating expenses (2006)
 
Re-leasing the 20/20 Building (2006)
 
Re-leasing 111 Southchase Boulevard (2007)
 
2,901,531

 
—

1315 West Century Drive
(sold in December 2006)
 
$
8,059,625

 
9
%
 
708,328

 
120,000

 
Re-leasing 111 Southchase Boulevard (2007)
 
588,328

 
—

Iomega Building
(sold in January 2007)
 
$
4,685,151

 
9
%
 
411,759

 
—

 
—

 
411,759

 
—

111 Southchase Boulevard
(sold in May 2007)
 
$
7,236,841

 
26
%
 
1,892,289

 
793,161

 
Re-leasing the 20/20 Building (2007-2008, 2012)
 
Partnership operating expenses (2007-2012)
 
Capital improvements for the 20/20 Building (2008-2009)
 
Re-leasing the Avaya Building (2010)
                                                                                                            
Re-leasing the 360 Interlocken Building (2010-2011)
 
1,099,128

 
—

Avaya Building
(sold in October 2010)
 
$
5,107,662

 
9
%
 
448,892

 
448,892

 
Re-leasing the 20/20 Building (2012-2013)

Partnership operating expenses (2013)
 
—

 
—

360 Interlocken Building
(sold in June 2011)
 
$
8,685,166

 
9
%
 
763,305

 
37,946

 
 
 
—

 
725,359

47300 Kato Road
(sold in August 2011)
 
$
3,503,755

 
9
%
 
330,947

 
—

 
 
 
—

 
330,947

Fund XI-XII-REIT Associates
(sold in August 2013)
 
 
 
 
 
916,237

 
25,000

 
Partnership operating expenses (2013)
 
 
 
891,237

Total
 
 
 
 
 
$
13,582,541

 
$
1,764,999

 
 
 
$
9,869,999

 
$
1,947,543


On November 1, 2013, net sale proceeds of approximately $1,700,000 from the sales of the 360 Interlocken Building, 47300 Kato Road, and our equity interest in Fund XI-XII-REIT Associates were distributed to limited partners of record effective October 1, 2013. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2013.


Page 16

Results of Operations
Comparison of the three months ended September 30, 2012 versus the three months ended September 30, 2013
Equity in Income (Loss) of Joint Venture
Equity in income (loss) of Joint Venture increased from a loss of $(6,038) for the three months ended September 30, 2012 to income of $3,536 for the three months ended September 30, 2013, primarily due to the leasing activity at the 20/20 Building prior to the disposition of our interest in Fund XI-XII-REIT Associates on August 12, 2013.
General and Administrative Expenses
General and administrative expenses decreased from $35,110 for the three months ended September 30, 2012 to $27,890 for the three months ended September 30, 2013, primarily due to a decrease in administrative reimbursements and administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on the amount of time necessary to liquidate the partnership.
Gain on Sale of Interest in Joint Venture
Gain on sale of interest in Joint Venture increased from $0 for the three months ended September 30, 2012 to $224 for the three months ended September 30, 2013, due to the gain recognized on the disposition of our interest in Fund XI-XII-REIT Associates on August 12, 2013.
Comparison of the nine months ended September 30, 2012 versus the nine months ended September 30, 2013
Equity in Loss of Joint Venture
Equity in loss of Joint Venture increased from $12,867 for the nine months ended September 30, 2012 to $659,364 for the nine months ended September 30, 2013, primarily due to recognizing an impairment loss in the second quarter of 2013 on the 20/20 Building of approximately $2,411,051, of which $630,442 was allocated to the Partnership.
General and Administrative Expenses
General and administrative expenses decreased from $111,379 for the nine months ended September 30, 2012 to $102,269 for the nine months ended September 30, 2013, primarily due to a decrease in administrative reimbursements and administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on the amount of time necessary to liquidate the partnership.
Gain on Sale of Interest in Joint Venture
Gain on sale of interest in Joint Venture increased from $0 for the nine months ended September 30, 2012 to $224 for the nine months ended September 30, 2013, due to the gain recognized on the disposition of our interest in Fund XI-XII-REIT Associates on August 12, 2013.
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 Ventures, which are considered to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Page 17

Investment in Real Estate Assets
We were required to make subjective assessments as to the useful lives of our depreciable assets. We considered the period of future benefit of the assets to determine the appropriate useful lives. These assessments had a direct impact on net income. The estimated useful lives of the Joint Ventures' assets were depreciated 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

In the event that Fund XI-XII-REIT Associates utilized inappropriate useful lives or methods of depreciation, our net income would have been misstated.
Evaluating the Recoverability of Real Estate Assets

We continually monitored events and changes in circumstances that would have indicated that the carrying amounts of the real estate assets in which we had an ownership interest through our investment in Fund XI-XII-REIT Associates may not have been recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not have been recoverable, we assessed the recoverability of the real estate assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future 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, did not exceed the respective assets' carrying values, we adjusted 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 recognized an impairment loss. Estimated fair values were 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. During the second quarter of 2013, we evaluated the recoverability of the carrying value of the 20/20 Building pursuant to the accounting policy outlined above and determined that it was not recoverable, as compared to the estimated expected fair value, primarily due to management redefining its strategy for the Partnership to dispose of its equity interest in Fund XI-XII-REIT Associates in the second quarter of 2013. Accordingly, Fund XI-XII-REIT Associates reduced the carrying value of the 20/20 Building to its estimated fair value based on a direct offer received on the 20/20 Building and recognized a corresponding impairment loss of $2,411,051 in the second quarter of 2013, of which $630,442 was allocated to the Partnership.

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.
Subsequent Event
On November 1, 2013, net sale proceeds of approximately $1,700,000 from the sales of the 360 Interlocken Building, 47300 Kato Road, and our equity interest in Fund XI-XII-REIT Associates were distributed to the limited partners of record as of October 1, 2013, which, under the terms of the partnership agreement, does not include limited partners acquiring units after September 30, 2013. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2013.


Page 18

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, the corporate general partner of Wells Partners, including the Principal Executive Officer and the Principal Financial Officer of Wells Capital, of the effectiveness of the 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, 2013 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 from time to time a party to legal proceedings, which arise in the ordinary course of our business. 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, 2013, requiring disclosure under Item 103 of Regulation S-K.
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, 2012.
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, 2013.
(b)
Not applicable.
(c)
We did not redeem any securities during the quarter ended September 30, 2013.
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, 2013.
(b)
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
(a)
During the quarter ended September 30, 2013, 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.

Page 19

ITEM 6.
EXHIBITS
The Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.

Page 20

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 XI, L.P.
(Registrant)
 
 
 
 
By:
WELLS PARTNERS, L.P.
(General Partner)
 
 
 
 
By:
WELLS CAPITAL, INC.
(Corporate General Partner)
 
 
 
November 12, 2013
 
/s/  DOUGLAS P. WILLIAMS
 
 
Douglas P. Williams
 
 
On behalf of the registrant and as Senior Vice President and Principal Financial Officer of Wells Capital, Inc.





EXHIBIT INDEX
TO THIRD QUARTER FORM 10-Q
OF
WELLS REAL ESTATE FUND XI, L.P.
 
Exhibit
Number
 
Description
 
 
 
 
10.1

*
 
Purchase and Sale Agreement for the sale of joint venture interest in Wells Fund XI - Fund XII – REIT Joint Venture, dated as of August 12, 2013 (incorporated by reference to Exhibit 10.2 to Form 10-Q of Wells Real Estate Fund XI, L.P. for the period ended June 30, 2013, Commission File No. 000-25731)
 
 
 
 
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 Principal Executive Officer and Principal 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.
*
Previously filed and incorporated herein by reference.





WELLS REAL ESTATE FUND XI L P Reports