SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2001 or ------------------------------------------- [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________________ to ________________________ Commission file number 0-25739 --------------------------------------------------------- WELLS REAL ESTATE INVESTMENT TRUST, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 58-2328421 - ------------------------------------------------- ---------------------------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 6200 The Corners Pkwy., Norcross, Georgia 30092 - ------------------------------------------------- ---------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 449-7800 ---------------------------- ________________________________________________________________________________ (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ -----
FORM 10-Q WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY INDEX <TABLE> <CAPTION> Page No. ----------- <S> <C> PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets--March 31, 2001 and December 31, 2000 3 Statements of Income for the Three Months Ended March 31, 2001 4 and 2000 Statements of Shareholders' Equity for the Year Ended December 31, 2000 5 and the Three Months Ended March 31, 2001 Statements of Cash Flows for the Three Months Ended March 31, 2001 6 and 2000 Condensed Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 11 Operations PART II. OTHER INFORMATION 42 </TABLE> -2-
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY BALANCE SHEETS ASSETS <TABLE> <CAPTION> March 31, December 31, 2001 2000 ------------ ------------ <S> <C> <C> REAL ESTATE, at cost: Land $ 46,640,032 $ 46,237,812 Building and improvements, less accumulated depreciation of $12,656,832 in 2001 and $9,469,653 in 2000 285,461,251 287,862,655 Construction in progress 6,303,454 3,357,720 ------------ ------------ Total real estate 338,404,737 337,458,187 ------------ ------------ INVESTMENT IN JOINT VENTURES (Note 2) 43,901,986 44,236,597 CASH AND CASH EQUIVALENTS 8,156,316 4,298,301 ACCOUNTS RECEIVABLE 3,620,844 3,356,428 DEFERRED LEASE ACQUISITION COSTS 1,599,976 1,890,332 DEFERRED PROJECT COSTS 1,409,081 550,256 DEFERRED OFFERING COSTS 581,690 1,291,376 DUE FROM AFFILIATES 1,050,313 734,286 PREPAID EXPENSES AND OTHER ASSETS, net 2,252,702 4,734,583 ------------ ------------ Total assets $400,977,645 $398,550,346 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Accounts payable $ 2,263,215 $ 2,166,387 Notes payable (Note 3) 76,540,000 127,663,187 Deferred rental income 238,306 381,194 Due to affiliates (Note 4) 1,084,012 1,772,956 Dividends payable 1,069,579 1,025,010 ------------ ------------ Total liabilities 81,195,112 133,008,734 ------------ ------------ MINORITY INTEREST OF UNIT HOLDER IN OPERATING PARTNERSHIP 200,000 200,000 ------------ ------------ SHAREHOLDERS' EQUITY: Common shares, $.01 par value; 125,000,000 shares authorized, 38,127,278 shares issued and 37,908,326 shares outstanding at March 31, 2001, and 31,509,807 shares issued and 31,368,510 outstanding at December 31, 2000. 381,273 315,097 Additional paid-in capital 321,390,784 266,439,484 Treasury stock, at cost, 218,952 shares at March 31, 2001 and 141,297 shares at December 31, 2000. (2,189,524) (1,412,969) ------------ ------------ Total shareholders' equity 319,582,533 265,341,612 ------------ ------------ Total liabilities and shareholders' equity $400,977,645 $398,550,346 ============ ============ </TABLE> The accompanying notes are an integral part of these consolidated balance sheets. -3-
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY STATEMENTS OF INCOME <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ----------- ---------- <S> <C> <C> REVENUES: Rental income $ 9,860,085 $3,151,262 Equity in income of joint ventures (Note 2) 709,713 481,761 Interest income 99,915 77,386 ----------- ---------- 10,669,713 3,710,409 ----------- ---------- EXPENSES: Operating costs, net of reimbursements 1,091,185 148,808 Management and leasing fees 565,714 233,770 Depreciation 3,187,179 1,180,258 Administrative costs 106,540 57,144 Legal and accounting 67,767 19,418 Computer costs 800 3,068 Amortization of deferred financing costs 214,757 22,603 Interest expense 2,160,426 354,052 ----------- ---------- 7,394,368 2,019,121 ----------- ---------- NET INCOME $ 3,275,345 $1,691,288 ----------- ---------- BASIC AND DILUTED EARNINGS PER SHARE $ 0.10 $ 0.11 =========== ========== </TABLE> See accompanying condensed notes to financial statements. -4-
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE THREE MONTHS ENDED MARCH 31, 2001 <TABLE> <CAPTION> Common Stock Treasury Stock --------------------- Additional ------------------------ Total Paid-In Retained Shareholders' Shares Amount Capital Earnings Shares Amount Equity ----------- -------- ------------ ------------ ---------- ------------ ------------- <S> <C> <C> <C> <C> <C> <C> <C> BALANCE, December 31, 1999 13,471,085 $134,710 $115,880,885 $ 0 0 $ 0 $116,015,595 Issuance of common stock 18,038,722 180,387 180,206,833 0 0 0 180,387,220 Treasury stock purchased 0 0 0 0 (141,297) (1,412,969) (1,412,969) Net income 0 0 0 8,552,967 0 0 8,552,967 Dividends ($.73 per share) 0 0 (7,276,452) (8,552,967) 0 0 (15,829,419) Sales commission 0 0 (17,002,554) 0 0 0 (17,002,554) Other offering expenses 0 0 (5,369,228) 0 0 0 (5,369,228) ----------- -------- ------------ ------------ ---------- ------------ ------------- BALANCE, December 31, 2000 31,509,807 315,097 266,439,484 0 (141,297) (1,412,969) 265,341,612 Issuance of common stock 6,617,471 66,176 66,108,529 0 0 0 66,174,705 Treasury stock purchased 0 0 0 0 (77,655) (776,555) (776,555) Net income 0 0 0 3,275,345 0 0 3,275,345 Dividends ($.19 per share) 0 0 (2,982,460) (3,275,345) 0 0 (6,257,805) Sales commission 0 0 (6,212,824) 0 0 0 (6,212,824) Other offering expenses 0 0 (1,961,945) 0 0 0 (1,961,945) ----------- -------- ------------ ------------ ---------- ------------ ------------- BALANCE, March 31, 2001 38,127,278 $381,273 $321,390,784 $ 0 (218,952) $(2,189,524) $319,582,533 =========== ======== ============ ============ ========== ============ ============= </TABLE> See accompanying condensed notes to financial statements. -5-
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> Three Months Ended --------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,275,345 $ 1,691,288 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of joint ventures (709,713) (481,761) Depreciation 3,187,179 1,180,258 Amortization of deferred financing costs 214,757 22,603 Changes in assets and liabilities: Accounts receivable (264,416) 0 Deferred rental income (142,888) 0 Prepaid expenses and other assets, net 2,557,480 (2,819,583) Accounts payable and accrued expenses 96,828 80,001 Due to affiliates 20,742 1,354,887 ------------ ------------ Net cash provided by operating activities 8,235,314 1,027,693 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate (2,703,858) (65,329,686) Investment in joint ventures (5,749) 0 Deferred project costs paid (2,288,936) (940,738) Distributions received from joint ventures 734,286 648,354 ------------ ------------ Net cash used in investing activities (4,264,257) (65,622,070) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 5,800,000 54,991,145 Repayment of notes payable (56,923,187) (10,407,472) Dividends paid (6,213,236) (2,177,672) Issuance of common stock 66,174,705 27,048,365 Sales commissions paid (6,212,824) (2,553,429) Offering costs paid (1,961,945) (806,346) Treasury stock purchased (776,555) (170,163) ------------ ------------ Net cash (used in) provided by financing activities (113,042) 65,924,428 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 3,858,016 1,330,051 CASH AND CASH EQUIVALENTS, beginning of year 4,298,301 2,929,804 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 8,156,316 $ 4,259,855 ============ ============ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: Deferred project costs applied to real estate assets $ 1,430,111 $ 749,613 ============ ============ Deferred offering costs due to affiliate $ 0 $ 94,233 ============ ============ Write-off of deferred offering costs due to affiliate $ 709,686 $ 0 ============ ============ </TABLE> See accompanying condensed notes to financial statements. -6-
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY CONDENSED NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General Wells Real Estate Investment Trust, Inc. (the "Company") is a Maryland corporation formed on July 3, 1997. The Company is the sole general partner of Wells Operating Partnership, L.P. ("Wells OP"), a Delaware limited partnership organized for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income-producing commercial properties for investment purposes. On January 30, 1998, the Company commenced a public offering of up to 16,500,000 shares of common stock at $10 per share pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The Company commenced active operations on June 5, 1998, when it received and accepted subscriptions for 125,000 shares. The Company terminated its initial public offering on December 19, 1999, and on December 20, 1999, the Company commenced a second follow-on public offering of up to 22,200,000 shares of common stock at $10 per share. As of March 31, 2001, the Company had received gross offering proceeds of approximately $73,846,896 from the sale of approximately 7,384,690 shares from its third public offering. Accordingly, as of March 31, 2001, the Wells REIT had received aggregate gross offering proceeds of approximately $381,272,774 from the sale of 38,127,278 shares of its common stock. After payment of $13,267,914 in Acquisition and Advisory Fees and Acquisition Expenses, payment of $47,385,406 in selling commissions and organization and offering expenses, and capital contributions and acquisition expenditures by Wells OP of $313,889,969 in property acquisitions and common stock redemptions of $776,555 pursuant to the Company's share repurchase program, the Company was holding net offering proceeds of $5,952,930 available for investment in properties. Wells OP owns interests in properties directly and through equity ownership in the following joint ventures: (i) a joint venture among Wells OP and Wells Real Estate Fund IX, L.P., Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P. (the "Fund IX-X-XI-REIT Joint Venture"), (ii) Wells/Fremont Associates (the "Fremont Joint Venture"), a joint venture between Wells OP and Fund X and Fund XI Associates, which is a joint venture between Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P. (the "Fund X-XI Joint Venture"), (iii) Wells/Orange County Associates (the "Cort Joint Venture"), a joint venture between Wells OP and the Fund X-XI Joint Venture, (iv) a joint venture among Wells OP, Wells Real Estate Fund XI, L.P., and Wells Real Estate Fund XII, L.P. (the "Fund XI-XII-REIT Joint Venture"), (v) a joint venture between Wells OP and Wells Real Estate Fund XII, L.P. (the "Fund XII-REIT Joint Venture"), and (vi) the Fund VIII-IX-REIT Joint Venture, a joint venture between Wells OP and the Fund VIII-IX Joint Venture, which is a joint venture between Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P. -7-
As of March 31, 2001, Wells OP owned interests in the following properties either directly or through its interest in the foregoing joint ventures: (i) a three-story office building in Knoxville, Tennessee (the "Alstom Power-Knoxville Building"), (ii) a two-story office building in Louisville, Colorado (the "Ohmeda Building"), (iii) a three-story office building in Broomfield, Colorado (the "360 Interlocken Building"), (iv) a one-story office building in Oklahoma City, Oklahoma (the "Avaya Technologies Building"), (v) a one-story warehouse and office building in Ogden, Utah (the "Iomega Building"), all five of which are owned by the Fund IX-X-XI- REIT Joint Venture, (vi) a two-story warehouse office building in Fremont, California (the "Fremont Building"), which is owned by the Wells/ Fremont Joint Venture, (vii) a one-story warehouse and office building in Fountain Valley, California (the "Cort Building"), which is owned by the Wells/Orange County Joint Venture, (viii) a four-story office building in Tampa, Florida (the "PWC Building"), (ix) a four-story office building in Harrisburg, Pennsylvania (the "AT&T Harrisburg Building"), which are owned directly by Wells OP, (x) a two-story manufacturing and office building located in Fountain Inn, South Carolina (the "EYBL CarTex Building"), (xi) a three-story office building located in Leawood, Kansas (the "Sprint Building"), (xii) a one story office building and warehouse in Tredyffrin Township, Pennsylvania (the "Johnson Matthey Building"), (xiii) a two-story office building in Ft. Meyers, Florida (the "Gartner Building"), all four of which are owned by Fund XI-XII-REIT Joint Venture, (xiv) a two-story office building located in Lake Forest, California (the "Matsushita Building"), (xv) a four-story office building located in Richmond, Virginia (the "Alstom Power-Richmond Building"), (xvi) a two-story office building and warehouse in Wood Dale, Illinois (the "Marconi Building"), (xvii) a five-story office building in Plano, Texas (the "Cinemark Building"), (xviii) a three-story office building in Tulsa, Oklahoma (the "Metris Building"), (xix) a two-story office building in Scottsdale, Arizona (the "Dial Building"), (xx) a two-story office building in Tempe, Arizona (the "ASML Building"), (xxi) a two-story office building in Tempe, Arizona (the "Motorola-Arizona Building"), (xxii) a two-story office building in Tempe, Arizona (the "Avnet Building"), (xxiii) a three-story office building in Troy, Michigan (the "Delphi Building") all ten of which are owned directly by Wells OP, (xxiv) a three-story office building in Troy, Michigan (the "Siemens Building"), which is owned by the Fund XII-REIT Joint Venture, (xxv) a two-story office building in Orange County, California (the "Quest Building"), formerly the Bake Parkway Building, previously owned by Fund VIII-IX Joint Venture, which is now owned by Fund VIII-IX-REIT Joint Venture, (xxvi) a three-story office building in South Plainfield, New Jersey (the "Motorola-New Jersey Building"), (xxvii) a nine-story office building in Minnetonka, Minnesota (the "Metris Minnetonka Building"), (xxviii) a six-story office building in Houston, Texas (the "Stone and Webster Building"), all three of which are owned directly by Wells OP, and (xxix) a one-story and a two-story office building (the "AT&T-Oklahoma Buildings"), which is owned by the Fund XII-REIT Joint Venture. (b) Deferred Project Costs The Company pays a percentage of shareholder contributions to the Advisor for acquisition and advisory services. These payments, are stipulated in the prospectus. These payments may not exceed 3 1/2% of shareholders' capital contributions. Acquisition and Advisory Fees and Acquisition Expenses paid as of March 31, 2001, amounted to $13,267,914 and represented approximately 3 1/2% of shareholders' capital contributions received. These fees are allocated to specific properties as they are purchased or developed and are included in capitalized assets of the joint venture, or real estate assets. Deferred project costs at March 31, 2001 and December 21, 2000, represent fees not yet applied to properties. -8-
(c) Deferred Offering Costs Offering expenses, to the extent that they exceed 3% of gross offering proceeds, will be paid by the Advisor and not by the Company. Offering expenses do not include sales or underwriting commissions but do include such costs as legal and accounting fees, printing costs, and other offering expenses. As of March 31, 2001, the Advisor paid offering expenses on behalf of the Company in an aggregate amount of $11,372,498, which did not exceed the 3% limitation. (d) Employees The Company has no direct employees. The employees of the Advisor, perform a full range of real estate services including leasing and property management, accounting, asset management and investor relations for the Company. (e) Insurance Wells Management Company, Inc., an affiliate of the Company and the Advisor, carries comprehensive liability and extended coverage with respect to all the properties owned directly and indirectly by the Company. In the opinion of management, the properties are adequately insured. (f) Competition The Company will experience competition for tenants from owners and managers of competing projects, which may include its affiliates. As a result, the Company may be required to provide free rent, reduced charges for tenant improvements and other inducements, all of which may have an adverse impact on results of operations. At the time the Company elects to dispose of its properties, the Company will also be in competition with sellers of similar properties to locate suitable purchasers for its properties. (g) Basis of Presentation Substantially all of the Company's business will be conducted through Wells OP. On December 31, 1997, Wells OP issued 20,000 limited partner units to the Advisor in exchange for a capital contribution of $200,000. The Company is the sole general partner in Wells OP; consequently, the accompanying consolidated balance sheet of the Company includes the amounts of the Company and Wells OP. The consolidated financial statements of the Company have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These quarterly statements have not been examined by independent accountants, but in the opinion of the Board of Directors, the statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary to present a fair presentation of the results for such periods. For further information, refer to the financial statements and footnotes included in the Company's Form 10-K for the year ended December 31, 2000. (h) Distribution Policy The Company will make distributions each taxable year (not including a return of capital for federal income tax purposes) equal to at least 90% of its real estate investment trusts taxable income. The Company intends to make regular quarterly distributions to holders of the shares. Distributions will be made to those shareholders who are shareholders as of the record date selected by the Directors. -9-
Distributions will be declared on a monthly basis and paid on a quarterly basis during the offering period and declared and paid quarterly thereafter. No distributions are paid to the Advisor. (i) Income Taxes The Company has made an election under Section 856 (C) of the Internal Revenue Code 1986, as amended (the "Code"), to be taxed as a Real Estate Investment Trust ("REIT") under the Code beginning with its taxable year ended December 31, 1998. As a REIT for federal income tax purposes, the Company generally will not be subject to federal income tax on income that it distributes to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to federal income tax on its taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost. Such an event could materially adversely affect the Company's net income and net cash available to distribute to shareholders. However, the Company believes that it is organized and operates in such a manner as to qualify for treatment as a REIT and intends to continue to operate in the foreseeable future in such a manner so that the Company will remain qualified as a REIT for federal income tax purposes. (j) Statement of Cash Flows For the purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments. 2. INVESTMENT IN JOINT VENTURES The Company owned interests in 29 properties through its ownership in Wells OP, which owns interests in six joint ventures. The Company does not have control over the operations of these joint ventures; however, it does exercise significant influence. Accordingly, investment in joint venture is recorded using the equity method. 3. NOTES PAYABLE Notes payable consists of loans of (i) $50,440,000 due to SouthTrust Bank secured by a first mortgage against the Cinemark, ASML, Dial, PWC, Motorola, Avnet and Alstom Power Buildings, (ii) $8,000,000 due to Richter- Schroeder Company, Inc. secured by a first mortgage against the Metris Building, and (iii) $18,100,000 due to Guarantee Federal secured by a first mortgage on the Stone and Webster Building. 4. DUE TO AFFILIATES Due to affiliates consists of amounts due to the Advisor for Acquisitions and Advisory Fees and Acquisition Expenses, deferred offering costs, and other operating expenses paid on behalf of the Company. Also included in due to affiliates is the amount due to the Fund VIII-IX Joint Venture related to the Matsushita lease guarantee, which is explained in detail in the December 31, 2000 Form 10-K. Payments of $601,963 have been made as of March 31, 2000 toward funding the obligation under the Matsushita agreement. -10-
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 of the Company and notes thereto. This report contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including discussion and analysis of the financial condition of the Company, anticipated capital expenditures required to complete certain projects, and certain other matters. Readers of this report should be aware that there are various factors that could cause actual results to differ materially from any forward-looking statements made in this report, which include construction costs which may exceed estimates, construction delays, lease-up risks, inability to obtain new tenants upon the expiration of existing leases, and the potential need to fund tenant improvements or other capital expenditures out of operating cash flow. Liquidity and Capital Resources The Company began active operations on June 5, 1998, when it received and accepted subscriptions for 125,000 shares pursuant to its initial public offering, which commenced on January 30, 1998. The Company terminated its initial public offering on December 19, 1999, and on December 20, 1999, the Company commenced a follow-on public offering of up to 22,200,000 shares of common stock at $10 per share. As of December 31, 1999, the Company had raised an aggregate of $134,710,850 in offering proceeds through the sale of 13,471,085 shares. As of December 31, 1999, the Company had paid $4,714,880 in Acquisition Advisory Fees and Acquisition Expenses, $16,838,857 in selling commissions and organizational offering expenses, and $112,287,969 in capital contributions to Wells Operating Partnership, L.P. ("Wells OP"), the operating partnership of the Company, for investments in joint ventures and acquisitions of real properties. Between December 31, 1999, and March 31, 2001, the Company raised an additional $246,561,924 in offering proceeds through the sale of an additional 24,656,192 shares. Accordingly, as of March 31, 2001, the Company had raised a total of $381,272,774 in offering proceeds through the sale of 38,127,278 shares of common stock. As of March 31, 2001, the Company had paid a total of $13,267,914 in Acquisition and Advisory Fees and Acquisition Expenses, had paid a total of $47,385,406 in selling commissions and organizational offering expenses, had made capital contributions of $313,889,969 to Wells OP for investments in joint ventures and acquisitions of real property, had utilized $776,555 for the retirement of stock pursuant to the Company's share redemption program, and was holding net offering proceeds of $5,952,930 available for investment and additional properties. Cash and cash equivalents at March 31, 2001 and 2000 were $8,156,316 and $4,259,855, respectively. The increase in cash and cash equivalents resulted primarily from raising additional capital, which was offset by new investments in real property acquisitions. Operating cash flows are expected to increase as additional properties are added to the Company's investment portfolio. Dividends to be distributed to the shareholders are determined by the Board of Directors and are dependent upon a number of factors relating to the Company, including funds available for payment of dividends, financial condition, capital expenditure requirements and annual distribution requirements in order to maintain the Company's status as a REIT under the Internal Revenue Code. -11-
As of March 31, 2001, the Company had acquired interests in 29 real estate properties. These properties are generating sufficient cash flows to cover the operating expenses of the Company and pay quarterly dividends. Dividends declared for the first quarter of 2001 and the first quarter of 2000 totaled $0.188 and $0.175, respectively, per share, which were declared on a daily record date basis to the shareholders of record at the close of business of each day during the quarter. Cash Flows from Operating Activities Net cash provided by operating activities was $8,235,314 for the three months ended March 31, 2001 and $1,027,693 for the three months ended March 31, 2000. The increase in net cash provided by operating activities resulted primarily from additional rental revenues and income in equity of joint ventures generated from the properties acquired during the three months ended March 31, 2001. Cash Flows from Investing Activities Net cash used in investing activities decreased from $65,622,070 for the three months ended March 31, 2000 compared to $4,264,257 for the three months ended March 31, 2001 primarily due to acquiring less properties during the first quarter of 2001 compared to the same period in 2000. Cash Flows from Financing Activities Net cash generated through financing activities decreased from inflows of $65,924,428 for the three months ended March 31, 2000 to outflows of $113,042 for the three months ended March 31, 2001 primarily due to repayments of notes payable, and was partially offset by raising additional capital. The Company raised $66,174,705 in offering proceeds for the three months ended March 31, 2001, as compared to $27,048,365 for the three months ended March 31, 2000. In addition, the Company received loan proceeds from financings secured by properties of $5,800,000 and repaid notes payable in the amount of $56,923,187 during the first quarter of 2001. Results of Operations As of March 31, 2001, the properties owned by the Company were 100% occupied. Gross revenues for the three months ended March 31, 2001, as compared to the three months ended March 31, 2000, increased to $10,669,713 from $3,710,409, respectively, primarily as a result of additional rental revenues and equity in income of joint ventures generated from property acquired during the three months ended March 31, 2001. The purchase of interests in additional properties also resulted in increases in operating expenses, management and leasing fees, depreciation expense, administrative costs, legal and accounting fees, financing costs, and interest expense. As a result, net income increased to $3,275,345 for 2001 as compared to $1,691,288 for 2000. -12-
2. PROPERTY OPERATIONS As of March 31, 2001, the Company owned interests in the following operational properties: Alstom Power Building-Knxoville/Fund IX-X-XI-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended -------------------------- March 31, March 31, 2001 2000 --------- --------- <S> <C> <C> Revenues: Rental income $ 295,634 $ 315,165 Interest income 20,255 17,728 --------- --------- 315,889 332,893 --------- --------- Expenses: Depreciation 99,934 98,454 Management and leasing expenses 24,003 25,253 Other operating expenses, net of reimbursements 9,361 (6,063) --------- --------- 133,298 117,644 --------- --------- Net income $ 182,591 $ 215,249 ========= ========= Occupied percentage 100% 100% ========= ========= Company's ownership percentage 3.71% 3.72% ========= ========= Cash distributions to the Company $ 10,340 $ 11,534 ========= ========= Net income allocated to the Company $ 6,777 $ 8,009 ========= ========= </TABLE> Net income decreased in 2001, compared to 2000, due to a rental adjustment made in the first quarter of 2000. Total expenses increased due to increases in janitorial costs and repairs and maintenance costs associated with common floor space. Other operating expenses were negative for 2000 due to offsetting reimbursement billings for operating costs, and management and leasing expenses related to 1999. Cash distributions decreased in 2001 compared to 2000 due to a combination of decreased rental income and increased expenses. -13-
Ohmeda Building/Fund IX-X-XI-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ---------------------------- March 31, March 31, 2001 2000 ----------- ---------- <S> <C> <C> Revenues: Rental income $256,830 $256,829 ---------- --------- Expenses: Depreciation 81,576 81,576 Management and leasing expenses 12,545 17,001 Other operating expenses, net of reimbursements 3,982 27,594 ---------- --------- 98,103 126,171 ---------- --------- Net income $158,727 $130,658 ========== ========= Occupied percentage 100% 100% ========== ========= Company's ownership percentage 3.71% 3.72% ========== ========= Cash distributions to Company $ 8,707 $ 7,684 ========== ========= Net income allocated to Company $ 5,891 $ 4,861 ========== ========= </TABLE> Net income increased in 2001 as compared to 2000 due to an overall decrease in expenses. Operating expenses decreased significantly due to a reduction in real estate taxes resulting from to an appeal in 2000 to the taxing authorities. Management and leasing expenses decreased due to a decrease in reimbursement collections in 2001, as these fees are assessed based on cash collections. Cash distributions have increased because of the increase in net income. The Company's ownership percentage decreased due to additional capital contributions made to the Fund IX-X-XI-REIT Joint Venture by Wells Fund X during the third quarter of 2000. -14-
360 Interlocken Building/Fund IX-X-XI-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ----------- ---------- <S> <C> <C> Revenues: Rental income $206,628 $206,189 --------- --------- Expenses: Depreciation 71,797 71,670 Management and leasing expenses 22,346 20,907 Other operating expenses, net of reimbursements 7,722 (16,920) --------- --------- 101,865 75,657 --------- --------- Net income $104,763 $130,532 ========= ========= Occupied percentage 100% 100% ========= ========= Company's ownership percentage 3.71% 3.72% ========= ========= Cash distributions to the Company $ 6,695 $ 7,573 ========= ========= Net income allocated to the Company $ 3,888 $ 4,857 ========= ========= </TABLE> Net income decreased in 2001 as compared to 2000 due to a increase in operating expenses. Other operating expenses are negative for 2000 due to an adjustment of tenant reimbursements of operating costs and management and leasing fees. Tenants are billed an estimated amount for current year common-area maintenance reimbursement which are reconciled the following year, and the difference is billed or credited to the tenants. Cash distributions and net income allocated to the Company for the quarter decreased in 2001 compared to 2000 due to the decrease in net income. The Company's ownership interest in the Fund IX-X-XI-REIT Joint Venture decreased due to additional capital contributions made by Wells Fund X to the Joint Venture during the third quarter of 2000. -15-
Avaya Technologies Building/Fund IX-X-XI-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ----------- ---------- <S> <C> <C> Revenues: Rental income $145,752 $145,752 --------- --------- Expenses: Depreciation 45,801 45,801 Management and leasing expenses 5,485 5,370 Other operating expenses 4,104 3,481 --------- --------- 55,390 54,652 --------- --------- Net income $ 90,362 $ 91,100 ========= ========= Occupied percentage 100% 100% ========= ========= Company's ownership percentage 3.71% 3.72% ========= ========= Cash distributions to the Company $ 4,627 $ 4,702 ========= ========= Net income allocated to the Company $ 3,354 $ 3,389 ========= ========= </TABLE> Rental income, net income and distributions remained relatively stable as compared to 2000 due to the stable occupancy. The Company's ownership interest in the Fund IX-X-XI-REIT Joint Venture decreased due to additional capital contributions made by Wells Fund X to the Joint Venture during the third quarter of 2000. -16-
Iomega Building/Fund IX-X-XI-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ---------- ---------- <S> <C> <C> Revenues: Rental income $168,250 $168,250 --------- --------- Expenses: Depreciation 55,062 55,062 Management and leasing expenses 7,462 7,280 Other operating expenses, net of reimbursements 3,733 5,148 --------- --------- 66,257 67,490 --------- --------- Net income $101,993 $100,760 ========= ========= Occupied percentage 100% 100% ========= ========= Company's ownership percentage 3.71% 3.72% ========= ========= Cash distributions to the Company $ 5,650 $ 5,618 ========= ========= Net income allocated to the Company $ 3,785 $ 3,749 ========= ========= </TABLE> Rental income, net income and cash distributions remained stable for 2001, as compared to 2000, due to the stable occupancy. -17-
Cort Building/Wells/Orange County Joint Venture <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ----------- ---------- <S> <C> <C> Revenues: Rental income $199,586 $198,885 ---------- ---------- Expenses: Depreciation 46,641 46,641 Management and leasing expenses 8,107 7,590 Other operating expenses 11,085 11,171 ---------- ---------- 65,833 65,402 ---------- ---------- Net income $133,753 $133,483 ========== ========== Occupied percentage 100% 100% ========== ========== Company's ownership percentage 43.7% 43.7% ========== ========== Cash distributions to the Company $ 74,477 $ 74,665 ========== ========== Net income allocated to the Company $ 58,406 $ 58,288 ========== ========== </TABLE> Rental income, expenses and net income remained stable in 2001, as compared to 2000. -18-
Fairchild Building/Wells/Fremont Joint Venture <TABLE> <CAPTION> Three Months Ended -------------------------- March 31, March 31, 2001 2000 --------- --------- <S> <C> <C> Revenues: Rental income $225,210 $225,195 -------- -------- Expenses: Depreciation 71,382 71,382 Management and leasing expenses 9,044 9,175 Other operating expenses 2,172 3,770 -------- -------- 82,598 84,327 -------- -------- Net income $142,612 $140,868 ======== ======== Occupied percentage 100% 100% ======== ======== Company's ownership percentage 77.5% 77.5% ======== ======== Cash distributions to the Company $164,512 $158,409 ======== ======== Net income allocated to the Company $110,530 $109,178 ======== ======== </TABLE> Rental income, depreciation, and management and leasing expenses and net income remained stable in 2001, as compared to 2000. -19-
PCW Building <TABLE> <CAPTION> Three Months Ended --------------------------- March 31, March 31, 2001 2000 ---------- ---------- <S> <C> <C> Revenues: Rental income $552,298 $552,298 -------- -------- Expenses: Depreciation 206,037 206,037 Management and leasing expenses 39,447 38,945 Other operating expenses, net of reimbursements (20,408) (36,029) -------- -------- 225,076 208,953 -------- -------- Net income $327,222 $343,345 ======== ======== Occupied percentage 100% 100% ======== ======== Company's ownership percentage 100% 100% ======== ======== Cash generated to the Company $494,157 $496,230 ======== ======== Net income generated to the Company $327,222 $343,345 ======== ======== </TABLE> Other operating expenses were negative due to common area maintenance billings which includes management and leasing fee reimbursement. Tenants are billed an estimated amount for current year common area maintenance reimbursements which are reconciled the following year, and the difference is billed or credited to the tenants. -20-
AT&T - Harrisburg Building <TABLE> <CAPTION> Three Months Ended ---------------------------- March 31, March 31, 2001 2000 --------- --------- <S> <C> <C> Revenues: Rental income $340,816 $340,832 -------- -------- Expenses: Depreciation 120,744 120,744 Management and leasing expenses 18,050 15,338 Other operating expenses 3,897 6,874 Interest expense 849 3,206 -------- -------- 143,540 146,162 -------- -------- Net income $197,276 $194,670 ======== ======== Occupied percentage 100% 100% ======== ======== Company's ownership percentage 100% 100% ======== ======== Cash generated to the Company $220,157 $324,414 ======== ======== Net income generated to the Company $197,276 $194,670 ======== ======== </TABLE> Rental income, expenses and net income are relatively stable comparing 2001 to 2000. Cash generated to the Company decreased in 2001, as compared to 2000, due to the payoff of the Bank of America note related to this building during the first quarter of 2001. -21-
EYBL CarTex Building/Wells Fund XI-XII-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ---------------------------- March 31, March 31, 2001 2000 --------- --------- <S> <C> <C> Revenues: Rental income $ 140,089 $140,089 Interest income 8,659 0 --------- -------- 148,748 140,089 --------- -------- Expenses: Depreciation 49,901 49,901 Management and leasing expenses 5,721 5,721 Other operating expenses 12,951 9,840 --------- -------- 68,573 65,462 --------- -------- Net income $ 80,175 $ 74,627 ========= ======== Occupied percentage 100% 100% ========= ======== Company's ownership percentage 56.8% 56.8% ========= ======== Cash distributions to the Company $ 60,611 $ 56,928 ========= ======== Net income allocated to the Company $ 45,510 $ 42,361 ========= ======== </TABLE> Rental income remained stable for 2001, as compared to 2000, due to the stable occupancy rate. Net income increased due to an increase in interest income in 2001 over 2000 due to establishing new interest bearing bank accounts. Total expenses increased for 2001 over 2000 due to an increase in operating costs which includes a charge for a property condition report not incurred in 2000. Cash distributions increased due to the increase in net income. -22-
Sprint Building/Fund X-XII-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ---------------------------- March 31, March 31, 2001 2000 --------- --------- <S> <C> <C> Revenues: Rental income $265,997 $265,997 -------- -------- Expenses: Depreciation 81,779 81,779 Management and leasing expenses 11,239 11,239 Other operating expenses 2,351 6,324 -------- -------- 95,369 99,342 -------- -------- Net income $170,628 $166,655 ======== ======== Occupied percentage 100% 100% ======== ======== Company's ownership percentage 56.8% 56.8% ======== ======== Cash distributions to the Company $134,059 $131,801 ======== ======== Net income allocated to the Company $ 96,854 $ 94,597 ======== ======== </TABLE> Rental income and cash distributions remained stable for 2001, as compared to 2000, while net income increased due to an offset for reimbursement received from a tenant for an expense incurred in the fourth quarter of 2000. -23-
Johnson Matthey Building/Fund XI-XIII-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> Revenues: Rental income $ 214,474 $ 214,474 ----------- ------------ Expenses: Depreciation 63,869 63,869 Management and leasing expenses 9,104 8,885 Other operating expenses 4,777 4,877 ----------- ------------ 77,750 77,631 ----------- ------------ Net income $ 136,724 $ 136,843 =========== ============ Occupied percentage 100% 100% =========== ============ Company's ownership percentage 56.8% 56.8% =========== ============ Cash distributions to the Company $ 106,959 $ 104,258 =========== ============ Net income allocated to the Company $ 77,609 $ 77,675 =========== ============ </TABLE> Rental income, net income and cash distributions remained stable in 2001, as compared to 2000, due to the stable occupancy. -24-
Gartner Building/Fund XI-XII-REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> Revenues: $ 212,205 $ 204,241 Rental income ------------ ------------ Expenses: Depreciation 77,623 77,623 Management and leasing expenses 10,103 10,162 Other operating expenses (2,271) (15,311) ------------ ------------ 85,455 72,474 ------------ ------------ Net income $ 126,750 $ 131,767 ============ ============ Occupied percentage 100% 100% ============ ============ Company's ownership percentage 56.8% 56.8% ============ ============ Cash distributions to the Company $ 109,622 $ 108,131 ============ ============ Net income allocated to the Company $ 71,947 $ 74,795 ============ ============ </TABLE> Rental income increased for 2001, as compared to 2000, due to a straight line rent adjustment. Depreciation and management and leasing expenses remained stable while total expenses increased. Other operating expenses were negative due to an offset of tenant reimbursements in operating costs. Tenants are billed an estimated amount for the current year common area maintenance which is then reconciled the following year and the difference billed to the tenants. -25-
Marconi Building <TABLE> <CAPTION> Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> Revenues: Rental income $ 817,819 $ 817,819 ------------ ------------ Expenses: Depreciation 293,352 293,352 Management and leasing expenses 36,750 37,453 Other operating expenses 7,614 6,635 ------------ ------------ 337,716 337,440 ------------ ------------ Net income $ 480,103 $ 480,379 ============ ============ Occupied percentage 100% 100% ============ ============ Company's ownership percentage 100% 100% ============ ============ Cash generated to the Company $ 671,344 $ 671,165 ============ ============ Net income generated to the Company $ 480,103 $ 480,379 ============ ============ </TABLE> Rental income, expenses, net income and cash generated to the Company remained stable in 2001, as compared to 2000. -26-
Matsushita Building <TABLE> <CAPTION> Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> Revenues: Rental income $ 531,508 $ 524,609 ------------ ------------ Expenses: Depreciation 258,144 254,757 Management and leasing expenses 49,493 44,103 Other operating expenses 30,826 17,315 ------------ ------------ 338,463 316,175 ------------ ------------ Net income $ 193,045 $ 208,434 ============ ============ Occupied percentage 100% 100% ============ ============ Company's ownership percentage 100% 100% ============ ============ Cash generated to the Company $ 455,593 $ 273,249 ============ ============ Net income generated to the Company $ 193,045 $ 208,434 ============ ============ </TABLE> Rental income in 2001 remained relatively stable as compared to 2000. Expenses were greater in 2001 primarily due to increased expenditures in accounting, travel and administrative salaries. Cash generated to the Company increased in 2001, as compared to 2000, primarily due to the one time lease acquisition fee which was paid in the first quarter of 2000. -27-
Cinemark Building <TABLE> <CAPTION> Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ------------ ------------ <S> <C> <C> Revenues: Rental income $ 705,563 $ 701,604 ------------ ------------ Expenses: Depreciation 212,241 212,276 Management and leasing expenses 37,254 32,700 Other operating expenses, net of reimbursements 180,402 165,590 ------------ ------------ 429,897 410,566 ------------ ------------ Net income $ 275,666 $ 291,038 ============ ============ Occupied percentage 100% 100% ============ ============ Company's ownership percentage 100% 100% ============ ============ Cash generated to the Company $ 453,833 $ 455,916 ============ ============ Net income generated to the Company $ 275,666 $ 291,038 ============ ============ </TABLE> Net income decreased in 2001, as compared to 2000, primarily due to increased utility costs at the property. -28-
Metris Building <TABLE> <CAPTION> The Period from Three Months February 11, Ended 2000 Through ------------------ ------------------ March 31, March 31, 2001 2000 ------------------ ------------------ <S> <C> <C> Revenues: Rental income $309,275 $172,492 ------------------ ------------------ Expenses: Depreciation 120,633 77,130 Management and leasing expenses 19,211 7,373 Other operating expenses, net of reimbursements 7,287 2,916 ------------------ ------------------ 147,131 87,419 ------------------ ------------------ Net income $162,144 $ 85,073 ================== ================== Occupied percentage 100% 100% ================== ================== Company's ownership percentage 100% 100% ================== ================== Cash generated to the Company $272,151 $154,675 ================== ================== Net income generated to the Company $162,144 $ 85,073 ================== ================== </TABLE> Revenue, expenses and cash generated to the Company increased during 2001, as the Metris Building was purchased in February of 2000. -29-
Dial Building <TABLE> <CAPTION> The Period from Three Months March 29, 2000 Ended Through ------------------ ------------------ March 31, March 31, 2001 2000 ------------------ ------------------ <S> <C> <C> Revenues: Rental income $346,918 $11,191 ------------------ ------------------ Expenses: Depreciation 112,407 3,894 Management and leasing expenses 15,611 0 Other operating expenses, net of reimbursements 13,298 0 ------------------ ------------------ 141,316 3,894 ------------------ ------------------ Net income $205,602 $ 7,297 ================== ================== Occupied percentage 100% 100% ================== ================== Company's ownership percentage 100% 100% ================== ================== Cash generated to the Company $322,453 $11,191 ================== ================== Net income generated to the Company $205,602 $ 7,297 ================== ================== </TABLE> Revenue, expenses, and cash generated to the Company increased during 2001, as the Dial Building was purchased in March of 2000. -30-
ASML Building <TABLE> <CAPTION> The Period from Three Months March 29, 2000 Ended Through ------------------ ------------------ March 31, March 31, 2001 2000 ------------------ ------------------ <S> <C> <C> Revenues: Rental income $538,509 $15,547 ------------------ ------------------ Expenses: Depreciation 182,242 6,279 Management and leasing expenses 23,153 0 Other operating expenses, net of reimbursements 55,986 1,503 ------------------ ------------------ 261,381 7,782 ------------------ ------------------ Net income $277,128 $ 7,765 ================== ================== Occupied percentage 100% 100% ================== ================== Company's ownership percentage 100% 100% ================== ================== Cash generated to the Company $408,171 $14,044 ================== ================== Net income generated to the Company $277,128 $ 7,765 ================== ================== </TABLE> Revenue, expenses, cash generated to the Company increased during 2001, as the ASML Building was purchased in March of 2000. -31-
Motorola Arizona Building <TABLE> <CAPTION> The Period from Three Months March 29, 2000 Ended Through ------------------ ------------------ March 31, March 31, 2001 2000 ------------------ ------------------ <S> <C> <C> Revenues: Rental income $490,790 $14,870 ------------------ ------------------ Expenses: Depreciation 167,058 5,789 Management and leasing expenses 21,527 0 Other operating expenses, net of reimbursements 71,529 1,967 ------------------ ------------------ 260,114 7,756 ------------------ ------------------ Net income $230,676 $ 7,114 ================== ================== Occupied percentage 100% 100% ================== ================== Company's ownership percentage 100% 100% ================== ================== Cash generated to the Company $372,142 $12,903 ================== ================== Net income generated to the Company $260,676 $ 7,114 ================== ================== </TABLE> Revenue, expenses, and cash generated to the Company increased in 2001, as the Motorola Building was purchased in March of 2000. -32-
Siemens Building/Fund XII - REIT Joint Venture <TABLE> <CAPTION> Three Months Ended ---------------- March 31, 2001 ---------------- <S> <C> Revenues: Rental income $364,205 Interest income 5,566 ---------------- 369,771 ---------------- Expenses: Depreciation 160,326 Management and leasing expense 14,979 Other operating expenses 7,108 ---------------- 182,413 ---------------- Net income $187,358 ================ Occupied percentage 100% ================ Company's ownership percentage 46.85% ================ Cash distributions to the Company $148,211 ================ Net income allocated to the Company $ 87,778 ================ </TABLE> Since the Siemens Building was purchased in May 2000, comparable income and expense figures for the prior year are not available. -33-
Avnet Building <TABLE> <CAPTION> Three Months Ended ---------------- March 31, 2001 ---------------- <S> <C> Revenues: Rental income $418,065 ---------------- Expenses: Depreciation 138,228 Management and leasing expenses 17,685 Other operating expenses, net of reimbursements 64,313 ---------------- 220,226 ---------------- Net income $197,839 ================ Occupied percentage 100% ================ Company's ownership percentage 100% ================ Cash generated to the Company $297,781 ================ Net income generated to the Company $197,839 ================ </TABLE> Comparable income and expense information is not available for the three months ended March 31, 2000, as the Avnet Building was purchased in June of 2000, -34-
Delphi Building Three Months Ended ----------- March 31, 2001 ----------- Revenues: Rental income $515,424 ---------- Expenses: Depreciation 206,883 Management and leasing expenses 21,685 Other operating expenses 4,126 ---------- 232,694 ---------- Net income $282,730 ========== Occupied percentage 100% ========== Company's ownership percentage 100% ========== Cash generated to the Company $456,082 ========== Net income generated to the Company $282,730 ========== Comparable income and expense information is not available for the three months ended March 31, 2000, as the Delphi Building was purchased in June of 2000, -35-
Quest Building/Fund VIII - IX - REIT Joint Venture Three Months Ended ------------ March 31, 2001 ------------ Revenues: Rental income $267,385 ----------- Expenses: Depreciation 114,930 Management and leasing expenses 10,759 Other operating expenses 36,663 ----------- 162,352 ----------- Net income $105,033 =========== Occupied percentage 100% =========== Company's ownership percentage 15.7% =========== Cash generated to the Company $ 39,536 =========== Net income generated to the Company $ 16,530 =========== On June 15, 2000, the Fund VIII-IX-REIT Joint Venture was formed between Wells OP and Fund VIII and Fund IX Associates, a Georgia joint venture partnership between Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P. (the "Fund VII-IX Joint Venture"). On July 1, 2000, the Fund VIII-IX Joint Venture contributed its interest in the Quest Building (formerly the Bake Parkway Building) to the Fund VIII-IX-REIT Joint Venture. On August 1, 2000, Quest Software, Inc. commenced occupancy of the entire building. Construction of tenant improvements required under the Quest lease cost approximately $1,231,000 and was funded by capital contributions made by the Company. -36-
Alstom Power Richmond Building Three Months Ended ----------- March 31, 2001 ----------- Revenues: Rental income $316,903 --------- Expenses: Depreciation 154,662 Management and leasing expenses 48,985 Other operating expenses, net of reimbursements 1,428 --------- 205,075 --------- Net income $111,828 ========= Occupied percentage 100% ========= Company's ownership percentage 100% ========= Cash generated to the Company $275,616 ========= Net income generated to the Company $111,828 ========= Comparable income and expense information is not available for three months ended March 31, 2000, as the Alstom Power Building was completed in July of 2000. -37-
Motorola - New Jersey Building Three Months Ended ------------- March 31, 2001 ------------- Revenues: Rental income $ 860,280 ------------ Expenses: Depreciation 171,375 Management and leasing expenses 42,160 Other operating expenses, net of reimbursements 23,002 ------------ 236,537 ------------ Net income $ 623,743 ============ Occupied percentage 100% ============ Company's ownership percentage 100% ============ Cash generated to the Company $ 779,046 ============ Net income generated to the Company $ 623,743 ============ Comparable income and expense information is not available for the three months ended March 31, 2000, as the Motorola Building was purchased in November of 2000. -38-
Metris Minnetonka Building Three Months Ended ---------------- March 31, 2001 ---------------- Revenues: Rental income $1,366,234 ---------------- Expenses: Depreciation 465,000 Management and leasing expenses 74,737 Other operating expenses, net of reimbursements 168,600 ---------------- 708,337 ---------------- Net income $ 657,897 ================ Occupied percentage 100% ================ Company's ownership percentage 100% ================ Cash generated to the Company $1,044,765 ================ Net income generated to the Company $ 657,897 ================ Comparable income and expense information is not available for the three months ended March 31, 200, as the Metris Minnetonka Building was purchased in December of 2000. -39-
Stone & Webster Building Three Months Ended -------------- March 31, 2001 --------------- Revenues: Rental income $1,750,839 --------------- Expenses: Depreciation 379,173 Management and leasing expenses 83,830 Other operating expenses, net of reimbursements 545,520 --------------- 1,008,523 --------------- Net income $ 742,316 =============== Occupied percentage 100% =============== Company's ownership percentage 100% =============== Cash generated to the Company $1,036,494 =============== Net income generated to the Company $ 742,316 =============== Comparable income and expense information is not available for the three months ended March 31, 200, as the Stone & Webster Building was purchased in December of 2000. -40-
AT&T Oklahoma Buildings - Fund XII - REIT Joint Venture Three Months Ended ----------- March 31, 2001 ----------- Revenues: Rental income $423,550 ----------- Expenses: Depreciation 140,267 Management and leasing expense 17,706 Other operating expenses 7,615 ----------- 165,588 ----------- Net income $257,962 =========== Occupied percentage 100% =========== Company's ownership percentage 46.85% =========== Cash distributions to the Company $176,307 =========== Net income allocated to the Company $120,854 =========== Since the AT&T Oklahoma Buildings were purchased in December 2000, comparable income and expense figures for the prior year are not available. -41-
PART II. OTHER INFORMATION ITEM 6 (b.) On February 9, 2001, the Registrant filed a Form 8-K/A dated December 21, 2000, providing required financial statements relating to the acquisition by the Registrant of interests in the Stone & Webster Building located in Houston, Texas and the Metris Minnetonka Building located in Minnetonka, Minnesota. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WELLS REAL ESTATE INVESTMENT TRUST, INC. (Registrant) Dated: May 11, 2001 By: /s/ Leo F. Wells, III --------------------- Leo F. Wells, III President, Director, and Chief Financial Officer -42-