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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



| | x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | - |  | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005 or



| |  ̈ |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | - |  | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 0-25606



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WELLS REAL ESTATE FUND VII, L.P.

(Exact name of registrant as specified in
its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                        |  | 58-2022629                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy.,Norcross, Georgia                       |  | 30092-3365                             
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         



---

(Former name, former address, and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes  x     No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund VII, L.P. (the
Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in
particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will,
expect, intend, anticipate, estimate, believe, continue, or other similar words. Specifically, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements.



Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is
filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ
materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



Any such forward-looking statements are subject to known and unknown risks, uncertainties and
other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that
our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations; provide distributions to limited partners; and maintain the value of our real
estate properties, may be significantly hindered. Some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in certain forward-looking statements follow:



General economic risks



| |  |  | Adverse changes in general or local economic conditions; and
| | - |  | ------------------------------------------------------------



| |  |  | Adverse economic conditions affecting the particular industry of one or more tenants in properties owned by our joint ventures.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



Enterprise risks



| |  |  | Our dependency on Wells Capital, Inc. (Wells Capital) and its affiliates and their key personnel for various administrative services; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wells Capitals ability to attract and retain high quality personnel who can provide acceptable service levels and generate economies of scale over time.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



Real estate risks



| |  |  | Ability to achieve appropriate occupancy levels resulting in rental amounts sufficient to cover operating costs;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Supply of or demand for similar or competing rentable space, which may adversely impact retaining or obtaining new tenants upon lease expiration at acceptable rental amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tenant ability or willingness to satisfy obligations relating to our existing lease agreements;
| | - |  | -----------------------------------------------------------------------------------------------



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



| |  |  | Ability to secure adequate insurance at reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to fund foreseen and unforeseen capital expenditures, including those related to tenant build-out projects, tenant improvements, and lease-up costs, out of operating cash
flow or net property sale proceeds; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any and all closing conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



Other operational risks



| |  |  | Our reliance on Wells Management Company, Inc. (Wells Management) or third parties to manage our properties;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Increases in our administrative operating expenses, including increased expenses associated with operating as a public company in the current regulatory environment;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to comply with governmental, tax, real estate, environmental, and zoning laws or regulations and funding the related costs of compliance; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Actions of our joint venture partners including potential bankruptcy, business interests differing from ours, or other actions that may adversely impact the operations of joint
ventures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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WELLS REAL ESTATE FUND VII, L.P.





TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                            |  |         
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                            |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsMarch 31, 2005 (unaudited) and December 31, 2004                                                            |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2005 (unaudited) and 2004 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2004 and the Three Months Ended March 31, 2005 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2005 (unaudited) and 2004 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 14      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |  | 23      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                    |  | 23      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                          |  | 24      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 24      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                            |  | 24      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 24      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                          |  | 24      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                   |  | 24      



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WELLS REAL ESTATE FUND VII, L.P.





BALANCE SHEETS



ASSETS



|                                                                                                                            |  |                          |            |                  |   |           
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---------------- | - | ----------
|                                                                                                                            |  | March 31,2005(unaudited) |            | December 31,2004
|Investment in joint ventures                                                                                                |  | $                        | 5,213,991  |                  | $ | 9,225,694 
|Cash and cash equivalents                                                                                                   |  |                          | 8,068,004  |                  |   | 3,884,551 
|Due from joint ventures                                                                                                     |  |                          | 275,373    |                  |   | 370,802   
|                                                                                                                            |  |                          |            |                  |   |           
|Total assets                                                                                                                |  | $                        | 13,557,368 |                  | $ | 13,481,047
|                                                                                                                            |  |                          |            |                  |   |           
|                                                                                                                           
|LIABILITIES AND PARTNERS CAPITAL                                                                                          
|                                                                                                                            |  |                         
|LIABILITIES:                                                                                                                |  |                          |            |                  |   |           
|Accounts payable and accrued expenses                                                                                       |  | $                        | 52,131     |                  | $ | 50,333    
|Due to affiliates                                                                                                           |  |                          | 7,918      |                  |   | 6,213     
|                                                                                                                            |  |                          |            |                  |   |           
|Total liabilities                                                                                                           |  |                          | 60,049     |                  |   | 56,546    
|                                                                                                                            |  |                         
|PARTNERS CAPITAL:                                                                                                          |  |                          |            |                  |   |           
|Limited partners:                                                                                                           |  |                          |            |                  |   |           
|Class A2,152,348 units and 2,147,148 units issued and outstanding as of March 31, 2005 and December 31, 2004,
respectively |  |                          | 13,060,598 |                  |   | 12,916,741
|ClassB265,669 units and 270,869 units issued and outstanding as of March 31, 2005 and December 31, 2004, respectively      |  |                          | 436,721    |                  |   | 507,760   
|General partners                                                                                                            |  |                          | 0          |                  |   | 0         
|                                                                                                                            |  |                          |            |                  |   |           
|Total partners capital                                                                                                     |  |                          | 13,497,319 |                  |   | 13,424,501
|                                                                                                                            |  |                          |            |                  |   |           
|Total liabilities and partners capital                                                                                     |  | $                        | 13,557,368 |                  | $ | 13,481,047
|                                                                                                                            |  |                          |            |                  |   |           



See accompanying notes.



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WELLS REAL ESTATE FUND VII, L.P.





STATEMENTS OF OPERATIONS

(unaudited)



|                                                             |  |                              |           |   |      |   |           |  
|------------------------------------------------------------ |  | ---------------------------- | --------- | - | ---- | - | --------- | -
|                                                             |  | Three Months Ended March 31, |          
|                                                             |  | 2005                         |           |   | 2004 |  
|EQUITY IN INCOME OF JOINT VENTURES                           |  | $                            | 89,965    |   |      | $ | 269,084   |  
|                                                             |  |                             
|EXPENSES:                                                    |  |                              |           |   |      |   |           |  
|Partnership administration                                   |  |                              | 31,239    |   |      |   | 21,793    |  
|Legal and accounting                                         |  |                              | 13,307    |   |      |   | 6,853     |  
|Other general and administrative                             |  |                              | 370       |   |      |   | 393       |  
|                                                             |  |                              |           |   |      |   |           |  
|Total expenses                                               |  |                              | 44,916    |   |      |   | 29,039    |  
|                                                             |  |                             
|INTEREST AND OTHER INCOME                                    |  |                              | 27,769    |   |      |   | 2,170     |  
|                                                             |  |                              |           |   |      |   |           |  
|NET INCOME                                                   |  | $                            | 72,818    |   |      | $ | 242,215   |  
|                                                             |  |                              |           |   |      |   |           |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:             |  |                              |           |   |      |   |           |  
|CLASS A                                                      |  | $                            | 134,110   |   |      | $ | (229,668  | )
|                                                             |  |                              |           |   |      |   |           |  
|CLASS B                                                      |  | $                            | (61,292   | ) |      | $ | 471,883   |  
|                                                             |  |                              |           |   |      |   |           |  
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                              |           |   |      |   |           |  
|CLASS A                                                      |  | $                            | 0.06      |   |      | $ | (0.11     | )
|                                                             |  |                              |           |   |      |   |           |  
|CLASS B                                                      |  | $                            | (0.23     | ) |      | $ | 1.55      |  
|                                                             |  |                              |           |   |      |   |           |  
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |                              |           |   |      |   |           |  
|CLASS A                                                      |  |                              | 2,152,348 |   |      |   | 2,112,847 |  
|                                                             |  |                              |           |   |      |   |           |  
|CLASS B                                                      |  |                              | 265,669   |   |      |   | 305,170   |  
|                                                             |  |                              |           |   |      |   |           |  



See accompanying notes.



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WELLS REAL ESTATE FUND VII, L.P.





STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND THE THREE MONTHS ENDED MARCH 31, 2005 (unaudited)



|                                                                                                                 |  |                  |  |        |                 |   |                       |         |   |        |   |            |   |  |   |   |  |   |            |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------ | --------------- | - | --------------------- | ------- | - | ------ | - | ---------- | - |  | - | - |  | - | ---------- | -
|                                                                                                                 |  | Limited Partners |  |        | GeneralPartners |   | TotalPartnersCapital |        
|                                                                                                                 |  | Class A          |  |        | Class B         |   |                       |        
|                                                                                                                 |  | Units            |  | Amount |                 |   | Units                 |         |   | Amount |   |            |  
|BALANCE, December 31, 2003                                                                                       |  | 2,105,697        |  | $      | 14,500,664      |   |                       | 312,320 |   |        | $ | 0          |   |  | $ | 0 |  | $ | 14,500,664 |  
|                                                                                                                 |  |                  |  |        |                 |  
|Class B conversion elections                                                                                     |  | 41,451           |  |        | 139,085         |   |                       | (41,451 | ) |        |   | (139,085   | ) |  |   | 0 |  |   | 0          |  
|Net income                                                                                                       |  | 0                |  |        | 1,416,306       |   |                       | 0       |   |        |   | 2,925,908  |   |  |   | 0 |  |   | 4,342,214  |  
|Distributions of operating cash flows ($0.22 per Class A weighted-average Unit)                                  |  | 0                |  |        | (470,378        | ) |                       | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (470,378   | )
|Distributions of net sale proceeds ($1.26 and $7.76 per Class A and Class B weighted-average Unit, respectively) |  | 0                |  |        | (2,668,936      | ) |                       | 0       |   |        |   | (2,279,063 | ) |  |   | 0 |  |   | (4,947,999 | )
|                                                                                                                 |  |                  |  |        |                 |   |                       |         |   |        |   |            |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2004                                                                                       |  | 2,147,148        |  |        | 12,916,741      |   |                       | 270,869 |   |        |   | 507,760    |   |  |   | 0 |  |   | 13,424,501 |  
|                                                                                                                 |  |                  |  |        |                 |  
|Class B conversion elections                                                                                     |  | 5,200            |  |        | 9,747           |   |                       | (5,200  | ) |        |   | (9,747     | ) |  |   | 0 |  |   | 0          |  
|Net income (loss)                                                                                                |  | 0                |  |        | 134,110         |   |                       | 0       |   |        |   | (61,292    | ) |  |   | 0 |  |   | 72,818     |  
|                                                                                                                 |  |                  |  |        |                 |   |                       |         |   |        |   |            |   |  |   |   |  |   |            |  
|BALANCE, March 31, 2005                                                                                          |  | 2,152,348        |  | $      | 13,060,598      |   |                       | 265,669 |   |        | $ | 436,721    |   |  | $ | 0 |  | $ | 13,497,319 |  
|                                                                                                                 |  |                  |  |        |                 |   |                       |         |   |        |   |            |   |  |   |   |  |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND VII, L.P.





STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                  |  |                              |           |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ---------- | -
|                                                                                  |  | Three Months Ended March 31, |          
|                                                                                  |  | 2005                         |           |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                              |           |   |      |   |            |  
|Net income                                                                        |  | $                            | 72,818    |   |      | $ | 242,215    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |           |   |      |   |            |  
|Equity in income of joint ventures                                                |  |                              | (89,965   | ) |      |   | (269,084   | )
|Operating distributions received from joint ventures                              |  |                              | 220,599   |   |      |   | 410,593    |  
|Changes in operating assets and liabilities:                                      |  |                              |           |   |      |   |            |  
|Due to affiliates                                                                 |  |                              | 1,705     |   |      |   | 0          |  
|Accounts payable and accrued expenses                                             |  |                              | 1,798     |   |      |   | (4,110     | )
|                                                                                  |  |                              |           |   |      |   |            |  
|Total adjustments                                                                 |  |                              | 134,137   |   |      |   | 137,399    |  
|                                                                                  |  |                              |           |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                              | 206,955   |   |      |   | 379,614    |  
|                                                                                  |  |                             
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                              |           |   |      |   |            |  
|Investment in joint ventures                                                      |  |                              | (164,191  | ) |      |   | (277,371   | )
|Net sale proceeds received from joint ventures                                    |  |                              | 4,140,689 |   |      |   | 0          |  
|                                                                                  |  |                              |           |   |      |   |            |  
|Net cash provided by (used in) investing activities                               |  |                              | 3,976,498 |   |      |   | (277,371   | )
|                                                                                  |  |                             
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                              |           |   |      |   |            |  
|Net sale proceeds distributions paid to limited partners                          |  |                              | 0         |   |      |   | (735,001   | )
|Operating distributions paid to limited partners                                  |  |                              | 0         |   |      |   | (368,496   | )
|                                                                                  |  |                              |           |   |      |   |            |  
|Net cash used in financing activities                                             |  |                              | 0         |   |      |   | (1,103,497 | )
|                                                                                  |  |                             
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |  |                              | 4,183,453 |   |      |   | (1,001,254 | )
|                                                                                  |  |                             
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                              | 3,884,551 |   |      |   | 1,078,108  |  
|                                                                                  |  |                              |           |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                            | 8,068,004 |   |      | $ | 76,854     |  
|                                                                                  |  |                              |           |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                              |           |   |      |   |            |  
|Partnership distributions payable                                                 |  | $                            | 0         |   |      | $ | 156,490    |  
|                                                                                  |  |                              |           |   |      |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND VII, L.P.





CONDENSED NOTES TO FINANCIAL STATEMENTS



MARCH 31, 2005 (unaudited)



|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------



Wells Real Estate Fund VII, L.P. (the Partnership) is a Georgia public limited partnership, with Leo F. Wells, III and Wells Partners, L.P. (Wells
Partners), a Georgia nonpublic limited partnership, serving as its general partners (collectively, the General Partners). Wells Capital, Inc. (Wells Capital) serves as the corporate general partner of Wells Partners.
Wells Capital is a wholly-owned subsidiary of Wells Real Estate Funds, Inc. Leo F. Wells, III is the president and sole director of Wells Capital and the sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on December 1, 1992 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 annual accounting period. Limited partners may vote to, among other
things: (a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; and (c) add or remove a general partner. A majority vote on any of the above-described matters
will bind the Partnership, without the concurrence of the General Partners. Each limited partnership unit has equal voting rights, regardless of class.



On April 6, 1994, the Partnership commenced an offering of up to $25,000,000 of Class A or Class B limited partnership units pursuant to a Registration Statement filed on
Form S-11 under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 units on April 26, 1994. The offering was terminated on January 5, 1995, at which time the Partnership had
sold approximately 1,678,810 Class A Units and 739,207 Class B Units representing capital contributions of $24,180,174.



The Partnership owns interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners. During the periods
presented, the Partnership owned interests in the following joint ventures (the Joint Ventures) and properties:



|                                                                           |  |                                                                                                                                           |  |                                                                                                                                                                                            
|-------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                              |  | Joint Venture Partners                                                                                                                    |  | Properties                                                                                                                                                                                 
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates)      |  |    Fund II and Fund III
Associates(Fund II-III Associates)(1)    Wells Real Estate Fund VI, L.P.    Wells Real Estate Fund VII, L.P. |  | 1. Holcomb Bridge Property(2) An office/retail center located in
Roswell, Georgia                                                                                                          
|Fund V, Fund VI and Fund VII Associates (Fund V-VI-VII Associates)       |  |    Wells Real Estate Fund V,
L.P.    Wells Real Estate Fund VI, L.P.    Wells Real Estate Fund VII, L.P.                               |  | 2. Marathon Building(3) A three-story office building located in
Appleton, Wisconsin                                                                                                       
|Fund VI and Fund VII Associates (Fund VI-VII Associates)                 |  |    Wells Real Estate Fund VI,
L.P.    Wells Real Estate Fund VII, L.P.                                                                  |  | 3. Stockbridge Village III(4) Two retail buildings located in
Stockbridge, Georgia 4. Stockbridge Village I Expansion(4) A retail shopping center expansion
located in Stockbridge, Georgia
|Fund VI, Fund VII and Fund VIII Associates (Fund VI-VII-VIII Associates) |  |    Wells Real Estate Fund VI,
L.P.    Wells Real Estate Fund VII, L.P.    Wells Real Estate Fund VIII, L.P.                            |  | 5. BellSouth Building A four-story office building located in Jacksonville, Florida 6. Tanglewood Commons(5) A retail center in Clemmons, North Carolina                                   



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##### Table of Contents

|                                                               |  |                                                                            |  |                                                                                                                                               
|-------------------------------------------------------------- |  | -------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                  |  | Joint Venture Partners                                                     |  | Properties                                                                                                                                    
|Fund VII and Fund VIII Associates (Fund VII-VIII Associates) |  |    Wells Real Estate Fund VII,
L.P.    Wells Real Estate Fund VIII, L.P. |  | 7. Hannover Center(4) A retail center located in Stockbridge, Georgia 8. CH2M Hill Building An office building located in Gainesville, Florida



| | (1) |  | Fund II-III Associates is a joint venture between Fund II-IIOW Associates and Wells Real
Estate Fund III, L.P.
| | --- |  | --------------------------------------------------------------------------------------------------------------

| | (2) |  | This property was sold in July 2004.
| | --- |  | ------------------------------------

| | (3) |  | This property was sold in December 2004.
| | --- |  | ----------------------------------------

| | (4) |  | These properties were sold in April 2004.
| | --- |  | -----------------------------------------

| | (5) |  | An outparcel of this property was sold in October 2002 and the shopping center was sold in
April 2005.
| | --- |  | ------------------------------------------------------------------------------------------------------



Wells Real Estate Fund I, Wells Real Estate Fund
II, Wells Real Estate Fund II-OW, Wells Real Estate Fund III, L.P., Wells Real Estate Fund VI, L.P, and Wells Real Estate Fund VIII, L.P. are affiliated with the Partnership through one or more common general partners. 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 Form 10-K for the year ended December 31, 2004.



On April 29, 2004, four Wells-affiliated Joint Ventures, including Fund VI-VII Associates and
Fund VII-VIII Associates, sold five real properties, including Stockbridge Village I Expansion, Stockbridge Village III, and Hannover Center, to an unrelated third party for a gross sale price of $23,750,000. As a result of the sale of Stockbridge
Village I Expansion, the Partnership received net sale proceeds of approximately $2,300,000, and was allocated a gain of approximately $944,000. As a result of the sale of Stockbridge Village III, the Partnership received net sale proceeds of
approximately $1,600,000 and was allocated a gain of approximately $237,000. As a result of the sale of the Hannover Center, the Partnership received net sale proceeds of approximately $624,000, and was allocated a gain of approximately $168,000.



On July 1, 2004, two Wells-affiliated Joint Ventures, including Fund
II-III-VI-VII Associates, sold two real properties, including the Holcomb Bridge Property, to an unrelated third party for a gross sale price of $9,500,000. As a result of the sale of the Holcomb Bridge Property, the Partnership received net sale
proceeds of approximately $3,474,000 and was allocated a gain of approximately $1,019,000, of which approximately $81,000 was deferred. The deferred gain represents the Partnerships pro-rata allocation of maximum exposure under an
eighteen-month rental guarantee provided to the purchaser in connection with the sale. As of March 31, 2005, the Partnership recognized approximately $9,800 of the deferred gain.



On December 29, 2004, Fund V-VI-VII Associates sold the Marathon Building to an unrelated third party for a gross sales price of
$10,250,000. As a result of the sale, the Partnership received net proceeds of approximately $4,100,000 and was allocated a gain of approximately $1,400,000.



|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 Securities and Exchange Commission, including the instructions to Form 10-Q and Article 10 of
Regulation S-X, in accordance with such rules and regulations, and 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



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recurring nature and necessary to fairly present the results for these periods. Results for interim periods are not necessarily indicative of full-year
results. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2004.



Distribution of Net Cash from Operations



Net cash from operations, if available, is generally distributed to limited partners quarterly. In accordance with the partnership agreement, such distributions are paid
first to the Class A limited partners until such limited partners have received a 10% per annum return on their respective adjusted capital contributions, as defined. Cash from operations is then paid to the General Partners until the General
Partners have received an amount equal to 10% of distributions. Any remaining cash from operations is split between the limited partners holding Class A Units and the General Partners on a basis of 90% and 10%, respectively. No cash distributions
will be made to the limited partners holding Class B Units.



Distribution of
Sales Proceeds



Upon sales of properties, the net sale proceeds are
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 such
limited partners 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 such limited partners have received an amount necessary to equal the net cash
available for distribution received by the Class A limited partners;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners, on a per-unit basis, until the limited partners have received 100% of their respective adjusted capital contributions, as defined;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners until the limited partners have received a cumulative 10% per annum return on their respective adjusted capital contributions, as defined;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until the limited partners have received an amount equal to their respective cumulative 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 respective capital contributions, as defined;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | To the General Partners until they have received 100% of their respective capital contributions; in the event that limited partners have received aggregate cash distributions from
the Partnership over the life of their investment in excess of a return of their net capital contributions plus their cumulative limited partner return, then the General Partners shall receive an additional sum equal to 25% of such excess; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 80% to the limited partners 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 and 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



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proportions 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, it 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 a qualified income offset provision in the partnership agreement;
(b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; (c) allocations to Class B limited partners in amounts equal to 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; and (d) allocations to Class A limited partners and General
Partners in amounts equal to the deductions for depreciation and amortization previously allocated to them with respect to the specific partnership 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.



Reclassifications



Certain prior year amounts have been reclassified to conform with the current year financial
statement presentation.



|3. | 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 consideration for the management and leasing of the Partnerships properties, the Joint Ventures pay Wells Management management and leasing fees equal to (a) of the gross revenues collected monthly, 3% of the gross revenues for
management and 3% of the gross revenues for leasing (aggregate maximum of 6%), plus a separate 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 or (b) in the case of commercial properties which are leased on a long-term net basis (ten or more years), 1% of the gross revenues except for
initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. Management and leasing fees are paid by the Joint Ventures and, accordingly, included in equity in income of joint venture in the accompanying
statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred though the Joint Ventures is $14,164 and $41,308 for the three months ended March 31, 2005 and 2004, respectively.



Administration Reimbursements



Wells Capital, the general partner of Wells Partners, one of our general partners, and Wells
Management perform certain administrative services for the Partnership, relating to accounting and other partnership administration, and incurs the related expenses. Such expenses are allocated among the 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 reimbursed Wells
Capital and Wells Management for administrative expenses of $24,666 and $18,516 for the three months ended March 31, 2005 and 2004, respectively. As of December 31, 2004, administrative reimbursements of $4,726 are included in due to affiliates in
the accompanying balance sheet. In



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addition, Wells Capital pays for certain operating expenses (bill-backs) of the Partnership directly and invoices the Partnership for the
reimbursement thereof on a monthly basis. As of December 31, 2004, bill-backs of $1,487 are included in due to affiliates in the accompanying balance sheet. As of March 31, 2005, administrative reimbursements due to Wells Management and Wells
Capital of $7,918 are included in due to affiliates in the accompanying balance sheet.



|4. | INVESTMENT IN JOINT VENTURES
|-- | ----------------------------



Basis of Presentation



The Partnership owned interests in eight properties during the periods presented through its ownership in the Joint Ventures. The Partnership does not have control over the operations of the Joint Ventures; however,
it does exercise significant influence. Approval by the Partnership, as well as the other joint venture partners, is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments.
Accordingly, investments in the Joint Ventures are recorded using the equity method of accounting. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31,
2004.



Summary of Operations



Condensed financial information for the Joint Ventures for the three months ended March 31,
2005 and 2004, respectively, is presented below:



|                              |  |                              |         |                                        |   |         |                                          |   |                              |   |  |      |         |   |      |   |         |   |  |      |         |  |   |         |   |  |   |        
|----------------------------- |  | ---------------------------- | ------- | -------------------------------------- | - | ------- | ---------------------------------------- | - | ---------------------------- | - |  | ---- | ------- | - | ---- | - | ------- | - |  | ---- | ------- |  | - | ------- | - |  | - | -------
|                              |  | Total Revenues               |         | Income (Loss) FromContinuingOperations |   |         | Income (Loss) FromDiscontinuedOperations |   | Net Income (Loss)           
|                              |  | Three Months Ended March 31, |         | Three Months Ended March 31,           |   |         | Three Months Ended March 31,             |   | Three Months Ended March 31,
|                              |  | 2005                         |         | 2004                                   |   | 2005    |                                          |   | 2004                         |   |  | 2005 |         |   | 2004 |   | 2005    |   |  | 2004
|Fund II-III-VI-VII Associates |  | $                            | 0       |                                        | $ | 0       |                                          | $ | 1,212                        |   |  | $    | 0       |   |      | $ | (901    | ) |  | $    | 94,378  |  | $ | 311     |   |  | $ | 94,378 
|Fund V-VI-VII Associates      |  |                              | 0       |                                        |   | 0       |                                          |   | (9,010                       | ) |  |      | (6,248  | ) |      |   | (3,307  | ) |  |      | 80,187  |  |   | (12,317 | ) |  |   | 73,939 
|Fund VI-VII Associates        |  |                              | 0       |                                        |   | 0       |                                          |   | (13,141                      | ) |  |      | (6,704  | ) |      |   | 0       |   |  |      | 156,971 |  |   | (13,141 | ) |  |   | 150,267
|Fund VI-VII-VIII Associates   |  |                              | 461,266 |                                        |   | 458,949 |                                          |   | 145,536                      |   |  |      | 109,190 |   |      |   | 148,431 |   |  |      | 122,345 |  |   | 293,967 |   |  |   | 231,535
|Fund VII-VIII Associates      |  |                              | 219,284 |                                        |   | 251,872 |                                          |   | 10,996                       |   |  |      | 40,761  |   |      |   | 0       |   |  |      | 42,190  |  |   | 10,996  |   |  |   | 82,951 
|                              |  |                              |         |                                        |   |         |                                          |   |                              |   |  |      |         |   |      |   |         |   |  |      |         |  |   |         |   |  |   |        
|                              |  | $                            | 680,550 |                                        | $ | 710,821 |                                          | $ | 135,593                      |   |  | $    | 136,999 |   |      | $ | 144,223 |   |  | $    | 496,071 |  | $ | 279,816 |   |  | $ | 633,070
|                              |  |                              |         |                                        |   |         |                                          |   |                              |   |  |      |         |   |      |   |         |   |  |      |         |  |   |         |   |  |   |        



|4. | SUBSEQUENT EVENT
|-- | ----------------



On April 21, 2005, Fund VI-VII-VIII Associates sold Tanglewood Commons, a retail center containing approximately 67,320 rentable square feet located on approximately ten acres of land including available space for
expansion and approximately one acre of land known as Outparcel 4, in Clemmons, North Carolina to Tanglewood Investors, LLC, an unaffiliated third party, for a gross sales price of $11,500,000, less closing costs. The sale excludes two outparcels of
land, approximately two acres of which Fund VI-VII-VIII Associates will retain ownership. As a result of the sale, the Partnership received net sale proceeds of approximately $3,753,000 and was allocated a gain of approximately $1,812,000. The gain
recognized from the sale of Tanglewood Commons may be adjusted as additional information becomes available in subsequent periods.



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|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 the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual
Report on Form 10-K for the year ended December 31, 2004.



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 real estate
assets are owned and operated by the Partnership during the initial lease terms of the tenants. Strategic dispositions could occur during this phase in order to capitalize on market conditions;



| |  |  | Positioning-for-sale phase
| | - |  | --------------------------

The period during which
the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the
real estate assets, evaluate various options for disposition, and market the real estate assets for sale; and



| |  |  | Disposition-and-liquidation phase
| | - |  | ---------------------------------

The period
during which the Partnership sells its real estate investments, distributes net sale proceeds to the partners, liquidates, and terminates the Partnership.



Portfolio Overview



We are currently in the disposition-and-liquidation phase of our life cycle. We have now sold seven assets with the closing of the Tanglewood Commons shopping center after the close of the quarter. Our focus on the
remaining assets involves re-leasing and marketing efforts that we believe will result in the best disposition pricing for our investors.



The sale of Tanglewood Commons was a great start for 2005. The sale price of $11,500,000 was well above the original purchase price for this asset. We also announced the
next net sale proceeds distribution to limited partners, scheduled for the second quarter 2005, totaling approximately $7,250,000 from the sales of the Stockbridge Village I Expansion, Stockbridge Village III, the Hannover Center, the Holcomb Bridge
Property, and the Marathon Building. After the close of the quarter, BellSouth Advertising & Publishing Corporation (BellSouth) signed a lease extension at the BellSouth Building. The lease term has been extended an additional three
years, however under terms of the amendment, BellSouth will reduce their leased square footage by approximately 12,000 square feet beginning in May 2006.



As a result of the re-leasing costs at the CH2M Hill Building, the General Partners are currently reserving operating cash and the remaining net sale proceeds from the
sale of the Marathon Building. The General Partners anticipate that operating distributions may remain low in the near term, considering the number of property sales that have been completed.



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Property Summary



Information related to the properties owned by the Joint Ventures follows:



| |  |  | The Cherokee Commons property was sold in 2001, and the Partnership received net sale proceeds of approximately $886,000. Approximately $151,000 was used to fund the
Partnerships pro-rata share of operating expenses and re-leasing cost at the Marathon Building. The remaining net sale proceeds of approximately $735,000 were distributed to the limited partners in January 2004.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Holcomb Bridge Property was sold on July 1, 2004, and the Partnership received net sale proceeds of approximately $3,474,000. These proceeds are currently scheduled to be
distributed to the limited partners in the second quarter 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Marathon Building was sold in December 2004, following the restabilization of the asset with two long-term leases. The Partnership received net sale proceeds of approximately
$4,141,000 in January 2005, and approximately $3,442,000 is currently scheduled to be distributed to the limited partners in the second quarter 2005. As set forth above, the remaining proceeds are being reserved to fund potential capital costs at
the remaining assets in the Partnership.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Stockbridge Village III, Stockbridge Village I Expansion, and Hannover Center were sold on April 29, 2004, and the Partnership received net sale proceeds of approximately
$1,606,000, $2,268,000, and $624,000, respectively, from these sales. Approximately $4,164,000 of these proceeds was distributed to the limited partners in November 2004, and the remaining sale proceeds of approximately $334,000 are currently
scheduled to be distributed in the second quarter of 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The BellSouth Building in Jacksonville, Florida, is currently 100% leased. After the close of the quarter, BellSouth, the majority tenant, signed a lease extension through April
2009. As a result of the lease extension, BellSouth will reduce their leased square footage by approximately 12,000 square feet in May 2006. American Express leases the remainder of the building and their lease expires in April 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tanglewood Commons was sold on April 21, 2005, and the Partnership received net sale proceeds of approximately $3,800,000. Fund VI-VII-VIII Associates had previously sold a land
outparcel at Tanglewood in 2002, resulting in net sale proceeds received by the Partnership of approximately $175,000. We have used approximately $126,000 of these proceeds to fund the Partnerships pro-rata share of operating expenses and
re-leasing costs at the Marathon Building. Approximately $49,000 was distributed to the limited partners in November 2004. The Partnership retains an ownership interest in two remaining outparcels, which will be marketed for sale now that the
shopping center has been sold. The General Partners will evaluate the capital needs of the Partnership to determine if all, or a portion of, the proceeds from the Tanglewood Commons shopping center sale can be distributed in 2005.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The CH2M Hill Building is located in Gainesville, Florida. We renewed the CH2M Hill lease in the fourth quarter 2004 for an additional five years, extending the lease term to
November 2010. As part of the negotiation, the tenant reduced the size of its space, resulting in a lower occupancy of 83% for the building. We are aggressively marketing the remaining vacant space in this property.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we move further into the disposition-and-liquidation phase, we will continue to focus on
re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we seek to maximize returns to the limited partners by negotiating long-term leases at market rental rates while attempting to minimize
downtime, re-leasing expenditures, ongoing property level costs, and portfolio costs. As properties are positioned for sale, our attention will shift to locating suitable buyers and negotiating purchase and sale contracts that will attempt to
maximize the total return to the limited partners and minimize contingencies and our post-closing involvement with the buyers.



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Industry Factors



Our results continue to be impacted by a number of factors influencing the real estate industry.



General Economic and Real Estate Market Commentary



Management reviews a number of economic forecasts and market commentaries in order to evaluate general economic conditions
and formulate a view of the current environments effect on the real estate markets in which we operate.



Management believes that the U.S. economy is continuing on the path of slow, but steady recovery. Job growth is improving, with 2.2 million jobs created
in 2004, and with another 2.4 to 2.8 million projected to be added in 2005. Gross Domestic Product growth and renewed business confidence are fueling the job growth. However, uncertainty still exists in the economy, primarily due to high oil prices,
the war in Iraq, the trade deficit, and other global issues.



The U.S. office real estate market has begun to show modest improvement. The strength of the overall economy is having a positive impact on office real estate fundamentals. Positive absorption of office space combined with a decline in new
construction has contributed to the increase in office occupancy rates for three consecutive quarters. Although occupancy rates have increased, management does not expect that they will rise by more than 200 basis points annually. As a result,
management anticipates that it could be a minimum of two to three years before vacancy rates reach the equilibrium level of ten to twelve percent. Average asking rates stabilized in the second half of 2004. Management believes that renewed
employment growth should benefit the office market; however, the uncertainty that still exists in the economy is causing many firms to continue to be more cautious with their investment and hiring decisions. Importantly, management believes the pace
and strength of the recovery for office real estate will vary by market. Market conditions vary widely by geographical region, metropolitan area, submarket, and property.



The real estate capital transaction market continues to be very active. Capitalization rates (cap rates) have
continued to decline in spite of the fact that the Federal Reserve (the Fed) increased the Federal Funds Rate five times in 2004. Management believes that the decline in cap rates is predominately driven by increased capital flows into
real estate. The spread between average cap rates and 10-year U.S. Treasuries narrowed in 2004; however, this was primarily due to a drop in cap rates rather than a rise in 10-year U.S. Treasuries. In managements opinion, absent a significant
move in interest rates or a significant decrease in the number of parties interested in acquiring real estate, cap rates are not expected to significantly increase from their current levels in 2005.



Real Estate Funds with Current Vacancy or Near-term Rollover Exposure



Real estate funds, such as the Partnership, that own
interests in properties with current vacancies or near-term tenant rollover may face a challenging leasing environment. The properties within these funds will generally face lower rents and higher concession packages to the tenants in order to
re-lease vacant space.



From a valuation standpoint, it is
generally preferable to either renew an existing tenant lease or re-lease the property prior to marketing it for sale. Generally, buyers will heavily discount their offering prices to compensate for existing or pending vacancies.



Results of Operations



Equity in Income of Joint Ventures



Equity in income of Joint Ventures was $89,965 and $269,084 for the three months ended March 31, 2005 and 2004, respectively. The 2005 decrease is primarily attributable
to (i) foregone operating income due to the sales of Stockbridge Village III, Stockbridge Village I Expansion, and the Hannover Center in April 2004, the Holcomb Bridge Property in July 2004, and the Marathon Building in December 2004, partially
offset by (ii) a decrease in depreciation expense for all buildings owned through the Joint Ventures due to changing the estimated weighted-average composite useful life from 25 years to 40 years effective July 1, 2004.



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We expect equity in income of Joint Ventures to increase for the second quarter of 2005 as a result of recognizing the
Partnerships pro rata allocation of the gain on sale of Tanglewood Commons in April 2005, and decline going forward as a result of foregone operating income from Tanglewood Commons.



Expenses of the Partnership



Our total expenses were $44,916 and $29,039 for the three months ended March 31, 2005 and 2004, respectively. The 2005 increase is primarily attributable to increases in
administrative salaries, accounting fees, legal fees, postage and delivery, and printing costs, substantially all of which resulted from increased reporting and regulatory requirements. We anticipate additional increases related to implementing and
adhering to such reporting and regulatory requirements on a going-forward basis.



Liquidity and Capital Resources



Our operating strategy
entails funding expenses related to the recurring operations of the properties owned by the Joint Ventures with operating cash flows, and assessing the amount of remaining cash flows that will be required to fund portfolio expenses, known re-leasing
costs and other capital improvements. Any residual operating cash flows are distributed from the Joint Ventures to the Partnership, and are considered available for distribution to the limited partners. Distributions are generally paid to the
limited partners quarterly. As a result, the ongoing monitoring of our cash position is critical to ensuring that adequate liquidity and capital resources are available. Economic downturns in one or more of our core markets could adversely impact
the ability of the Joint Ventures tenants to honor lease payments and our ability to assist the Joint Ventures in re-leasing space on favorable terms as leases expire or space otherwise becomes vacant. In the event of either situation, cash
flows and, consequently, our ability to provide funding for capital needs would be adversely affected.



Short-Term Liquidity



During the three
months ended March 31, 2005, we generated net operating cash flows, including operating distributions received from the Joint Ventures, of approximately $207,000, as compared to approximately $380,000 for the three months ended March 31, 2004. The
2005 decrease is primarily attributable to a corresponding decrease in operating distributions received from the Joint Ventures described below. Operating distributions from the Joint Ventures are generally representative of rental revenues and
tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures.



Operating distributions from the Joint Ventures have declined in 2005 primarily as a result of (i) the sales of properties in the previous periods and (ii) funding
re-leasing costs at the CH2M Hill Building and building improvements at the BellSouth Building. Future operating distributions from the Joint Ventures are expected to continue to decline as a result of selling Tanglewood Commons in April 2005 and as
a result of selling additional properties in subsequent periods. At this time, we expect to continue to generate cash flows from operations, including distributions from the Joint Ventures, sufficient to cover our estimated future expenses but may
use net sale proceeds to fund large capital expenditures as necessary. Future operating distributions paid to limited partners will be largely dependent upon the amount of cash generated from the Joint Ventures, our expectations of future cash
flows, and determination of near-term cash needs for tenant re-leasing costs and other capital improvements for properties owned by the Joint Ventures.



During the three months ended March 31, 2005, we received net proceeds from the sale of the Marathon Building of approximately $4,141,000.



We believe that the cash on hand and operating distributions due from the Joint Ventures are
sufficient to cover our working capital needs, including liabilities of approximately $60,000 as of March 31, 2005. During the remainder of 2005, our General Partners anticipate that we will be able to fund our proportionate share of capital
expenditures noted above.



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Long-Term Liquidity



We expect that our future sources of capital will be primarily derived from operating cash flows generated from the Joint Ventures, and net proceeds generated from the
selective and strategic sale of properties. Our future long-term liquidity requirements will include, but not be limited to, tenant improvements, renovations, expansions, and other significant capital improvements necessary for properties owned
through the Joint Ventures. We expect to continue to use substantially all future net cash flows from operations. Future cash flows from operating activities will be primarily affected by distributions received from the Joint Ventures, which are
dependent upon the net operating income generated by the Joint Ventures properties, less reserves for known capital expenditures.



Capital Resources



The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties or investing in joint ventures formed for the same purpose, and has invested all of
the partners original capital contributions. Thus, it is unlikely that we will acquire interests in any additional properties or joint ventures. Historically, our investment strategy has generally involved acquiring properties that are
pre-leased to creditworthy tenants on an all cash basis through joint ventures with affiliated partnerships.



The Joint Ventures fund capital expenditures primarily related to building improvements for the purpose of maintaining the quality of the properties, and tenant improvements for the purpose of readying its properties
for re-leasing. As leases expire, we will work with the Joint Ventures to attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require
less capital than those funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates. Any capital or other
expenditures not provided for by the operations of the Joint Ventures will be funded by the Partnership and the respective Joint Venture partners on a pro-rata basis.



Operating cash flows, if available, are generally distributed from the Joint Ventures to the Partnership during the first month following
each calendar quarter-end. Our cash management policy typically includes first utilizing current period operating cash flow until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event
that current and prior period accumulated operating cash flows are insufficient to fund such costs, net property sale proceeds reserves would then be utilized.



As of March 31, 2005, we have received, used, and held net proceeds from the sale of properties as presented below:



|                                               |  |              |           |                                       |      |         |                                              |   |                                  |  |                                 |         |                                                |                                              |  |   |           |  |   |          
|---------------------------------------------- |  | ------------ | --------- | ------------------------------------- | ---- | ------- | -------------------------------------------- | - | -------------------------------- |  | ------------------------------- | ------- | ---------------------------------------------- | -------------------------------------------- |  | - | --------- |  | - | ---------
|Property Sold                                  |  | Net Proceeds |           | Partnerships Approximate Ownership % |      |         | Net Proceeds Attributable to the Partnership |   | Cumulative Net Proceeds Invested |  | Distributed to Partners to date |         | Undistributed NetProceeds as of March 31, 2005
|                                               |  |              |           | Amount                                |      | Purpose |                                              |  
|Cherokee Commons (sold in 2001)                |  | $            | 8,414,089 |                                       | 10.9 | %       |                                              | $ | 886,212                          |  | $                               | 151,211 |                                                |     Re-leasing the Marathon Building (2004) |  | $ | 735,001   |  | $ | 0        
|Tanglewood Commons Outparcel (sold in 2002)    |  |              | 524,398   |                                       | 33.4 | %       |                                              |   | 175,149                          |  |                                 | 126,160 |                                                |     Re-leasing the Marathon Building (2004) |  |   | 48,989    |  |   | 0        
|Stockbridge Village III (sold in 2004)         |  |              | 2,909,853 |                                       | 55.2 | %       |                                              |   | 1,606,248                        |  |                                 | 0       |                                                |                                              |  |   | 1,486,947 |  |   | 119,301  
|Stockbridge Village I Expansion (sold in 2004) |  |              | 4,108,277 |                                       | 55.2 | %       |                                              |   | 2,267,781                        |  |                                 | 0       |                                                |                                              |  |   | 2,099,346 |  |   | 168,435  
|Hannover Center (sold in 2004)                 |  |              | 1,703,431 |                                       | 36.6 | %       |                                              |   | 624,067                          |  |                                 | 0       |                                                |                                              |  |   | 577,716   |  |   | 46,351   
|Holcomb Bridge Property (sold in 2004)         |  |              | 6,889,379 |                                       | 50.4 | %       |                                              |   | 3,473,625                        |  |                                 | 0       |                                                |                                              |  |   | 0         |  |   | 3,473,625
|Marathon Building (sold in 2004)               |  |              | 9,927,330 |                                       | 41.7 | %       |                                              |   | 4,140,689                        |  |                                 | 0       |                                                |                                              |  |   | 0         |  |   | 4,140,689
|                                               |  |              |           |                                       |      |         |                                              |   |                                  |  |                                 |         |                                                |                                              |  |   |           |  |   |          
|Total                                          |  |              |           |                                       |      |         |                                              | $ | 13,173,771                       |  | $                               | 277,371 |                                                |                                              |  | $ | 4,947,999 |  | $ | 7,948,401
|                                               |  |              |           |                                       |      |         |                                              |   |                                  |  |                                 |         |                                                |                                              |  |   |           |  |   |          



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Upon evaluating the capital needs of the properties in which we currently hold an interest, our General Partners
determined to hold reserves of net sale proceeds of approximately $698,000 as of March 31, 2005. Our General Partners anticipate distributing residual net sale proceeds of approximately $7,250,000 in the second quarter of 2005 as further described
below. Net sale proceeds of approximately $3,753,000 attributable to the Partnership from the April 21, 2005 sale of the Tanglewood Commons shopping center were held at Fund VI-VII-VIII Associates and transferred to the Partnership in April 2005.



Contractual Obligations and Commitments



Distribution of Net Sale Proceeds



In December 2004, the General Partners announced their intention to distribute net sale
proceeds of approximately $7,250,000 in the second quarter of 2005 to the limited partners of record as of March 31, 2005, which, under the terms of the partnership agreement, does not include limited partners acquiring units after December 31,
2004. This distribution has not been formally declared by the General Partners. In accordance with the terms of the partnership agreement, the General Partners may elect to retain reserves deemed reasonably necessary for the Partnership at the sole
discretion of the General Partners. Thus, should a change in circumstances prior to the intended distribution date require the General Partners to reevaluate the Partnerships reserve requirements, it is possible that this distribution may not
occur, or that distributions may be made at a lower amount.



Related-Party
Transactions



Related-Party Fees and Reimbursements



We have entered into agreements with Wells Capital, Wells Management, an affiliate of our
General Partners, and their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells Management, and their affiliates for asset management, the management and leasing of our properties; administrative services
relating to accounting, property management, and other partnership administration; and incur the related expenses. See Note 3 to our financial statements included in this report for a description of these fees and expense reimbursements we have
incurred.



Economic Dependency



We have engaged Wells Capital and its affiliates and Wells Management, to provide certain
services that are essential to the Partnership, including asset management services, supervision of the management and leasing of properties owned through the Joint Ventures, asset acquisition and disposition services, as well as other
administrative responsibilities for the Partnership including accounting services, shareholder communications, and investor relations. These agreements are terminable by either party on 60 days written notice. As a result of these
relationships, the Partnership is dependent upon Wells Capital and Wells Management.



Wells Capital and Wells Management are all owned and controlled by Wells Real Estate Funds, Inc. (WREF). The operations of Wells Capital and Wells Management represent substantially all of the business of WREF. Accordingly, the
Partnership focuses on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF were to become unable to meet its obligations as they become due, the Partnership might be
required to find alternative service providers.



WREFs net income was
approximately $5.5 million for the three months ended March 31, 2005. Future net income generated by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of
investor proceeds raised from the sale of common stock of Wells Real Estate Investment Trust II, Inc., an affiliated real estate investment trust for which Wells Capital serves as the advisor, and the volume of future acquisitions and dispositions
of real estate assets by Wells-sponsored programs. As of March 31, 2005 and December 31, 2004, WREF held cash balances of approximately $16.2 million and $6.3 million, respectively. WREF believes that it has adequate liquidity available in the form
of cash on hand and current receivables necessary to meet its obligations as they become due.



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Litigation Against Related Parties



During early 2004, a putative class action complaint was filed against, among others, Leo F. Wells, III, our General Partner, Wells Capital,
the corporate general partner of our other General Partner, and Wells Management. The Court granted the plaintiffs motion to permit voluntary dismissal of this suit, and it was dismissed without prejudice. In November 2004, the same plaintiffs
filed a second putative class action complaint against, among others, Mr. Wells, Wells Capital, and Wells Management. On January 28, 2005, the defendants filed motions to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed
briefs in opposition to the defendants motions to dismiss. The Court has not yet ruled on these pending motions. The details of both complaints are outlined below.



As a matter of background, on or about March 12, 2004, a putative class action complaint (the Original Complaint) was filed by
four individuals (the plaintiffs) against Wells Real Estate Fund I, and Wells Capital, and Leo F. Wells, III (collectively, the General Partners of Wells Real Estate Fund I), as well as Wells Management and Wells Investment
Securities, Inc. (WIS) (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2). Wells Real Estate Fund I is a public limited partnership. The plaintiffs filed the
Original Complaint purportedly on behalf of all limited partners holding B units of Wells Real Estate Fund I as of January 15, 2003. The Original Complaint alleged, among other things, that (a) the General Partners of Wells Real Estate Fund I, WIS,
and Wells Real Estate Fund I negligently and fraudulently made false statements and material omissions in connection with the initial sale (September 6, 1984September 5, 1986) of the B units to investors of Wells Real Estate Fund I by making
false statements and omissions in sales literature relating to the distribution of net sale proceeds to holders of B units, among other things; (b) the General Partners of Wells Real Estate Fund I and Wells Real Estate Fund I negligently and
fraudulently misrepresented and concealed disclosure of, among other things, alleged discrepancies between such statements and provisions in the partnership agreement for a period of time in order to delay such investors from taking any legal,
equitable, or other action to protect their investments in Wells Real Estate Fund I, among other reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners; and
(d) the General Partners of Wells Real Estate Fund I and Wells Real Estate Fund I breached fiduciary duties to the limited partners. On June 3, 2004, the Court granted the plaintiffs motion to permit voluntary dismissal, and the Original
Complaint was dismissed without prejudice.



On or about November 24, 2004, the
plaintiffs filed a second putative class action complaint (the Complaint) against Mr. Wells, Wells Capital, Wells Management, and Wells Real Estate Fund I (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett
County, Georgia, Civil Action No. 04A-13051 6) (the Hendry Action). The plaintiffs filed the Complaint purportedly on behalf of all limited partners holding B units of Wells Real Estate Fund I as of January 9, 2002. The Complaint
alleges, among other things, that the General Partners of Wells Real Estate Fund I breached their fiduciary duties to the limited partners by, among other things, (a) failing to timely disclose alleged inconsistencies between sales literature and
the partnership agreement relating to the distribution of net sale proceeds; (b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale
proceeds; and (c) not accepting a settlement offer proposed by a holder of A units and a holder of A and B units in other litigation naming Wells Real Estate Fund I as a defendant, in which other litigation the court subsequently granted summary
judgment in favor of Wells Real Estate Fund I. The Complaint also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be materially misleading. In addition,
the Complaint alleges, among other things, that the General Partners of Wells Real Estate Fund I and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to an alleged waiver
of deferred management fees.



The plaintiffs seek, among other remedies, the
following: judgment against the General Partners of Wells Real Estate Fund I, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by the General Partners directly or through their affiliates; a
declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of the June 2000 consent solicitation to waive Wells Managements deferred management fees;
and an award to



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plaintiffs of their attorneys fees, costs and expenses. The Complaint states that Wells Real Estate Fund I is named only as a necessary party defendant
and that the plaintiffs seek no money from or relief at the expense of Wells Real Estate Fund I. On January 28, 2005, the defendants filed motions to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed briefs in opposition
to the defendants motions to dismiss. The Court has not yet ruled on these pending motions. Due to the uncertainties inherent in the litigation process, it is not possible to predict the ultimate outcome of this matter at this time. However,
an adverse outcome could adversely affect the ability of Wells Capital, Wells Management, and Mr. Wells to fulfill their respective duties under the agreements and relationships they have with us.



The Hendry Action states that Wells Real Estate Fund I is named only as a necessary defendant
and that the plaintiffs are seeking no money from or relief at the expense of Wells Real Estate Fund I. Since the partnership agreement of Wells Real Estate Fund I contains no provision for advancing defense costs to the General Partners of Wells
Real Estate Fund I in connection with litigation involving the partnership in instances where the plaintiffs are seeking no monetary relief from the partnership, the General Partners of Wells Real Estate Fund I, currently Wells Capital, are funding
the legal fees, costs, and expenses relating to this litigation. As of March 31, 2005, Wells Capital had incurred approximately $215,000 in legal fees, costs, and expenses related to defending the Hendry Action. At this time, management is unable to
determine whether the likelihood of an unfavorable outcome is either probable or remote.



Conflicts of Interest



Our General
Partners are also general partners of other affiliated public limited partnership (the Wells Real Estate Funds). In addition, Wells Capital sponsors and advises two affiliated real estate investment trusts (the REITs) in
which it retains residual interests. As such, there may exist conflicts of interest whereby the General Partners, in their capacity as general partners of other Wells Real Estate Funds or as the advisor to the REITs, may be in competition with us
with respect to, among other things, locating suitable replacement tenants or prospective acquirers for property dispositions.



Inflation



The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate. However, there are provisions in the majority of tenant leases which should
protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of
operating expenses above a certain per-square-foot allowance. There is no assurance, however, that we would be able to replace existing leases with new leases at higher base rental rates.



Application of Critical Accounting Policies



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 the Partnership 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.



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Investment in Real Estate Assets



We will be required to make subjective assessments as to the useful lives of its depreciable assets. We will consider the period of future
benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Joint Ventures assets by class are as follows:



|                      |  |            
|--------------------- |  | -----------
|Buildings             |  | 40 years   
|Building improvements |  | 10-25 years
|Land improvements     |  | 20 years   
|Tenant improvements   |  | Lease term 



Effective July 1, 2004, the Joint
Ventures extended the weighted average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to our net income for the three months ended March 31, 2005. We believe that this change more appropriately
reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be misstated.



Valuation of Real Estate Assets



We continually monitor events and changes in circumstances that could indicate that the
carrying amounts of the real estate assets in which we have an ownership interest, either directly or through investments in the Joint Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the
carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered through the undiscounted future
operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and
recognizes an impairment loss. We have determined that there has been no impairment in the carrying value of real estate assets held as of March 31, 2005.



Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements,
property operating expenses, discount rates, the number of months it takes to re-lease the property, and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in
an incorrect assessment of the propertys future cash flows and fair value, and could result in the overstatement of the carrying value of real estate assets held by the Joint Ventures and net income of the Partnership.



American Jobs Creation Act of 2004



The American Jobs Creation Act of 2004 (the Act) added Section 470 to the
Internal Revenue Code, which provides certain limitations on the utilization of losses allocable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. Currently, it is unclear as to how the
transition rules and effective dates set forth in the Act will apply to entities such as the Partnership. However, on March 11, 2005, the Internal Revenue Service issued IRS Notice 2005-29 announcing that the IRS will not apply Section 470 to
partnerships for taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. It is important to note that IRS Notice 2005-29 provides relief for partnerships for taxable year 2004 only. Accordingly, unless
Congress passes corrective legislation which addresses this issue or some other form of relief from the provisions of Section 470 of the Act is granted, based on a strict reading of the Act, beginning in 2005 and thereafter, future passive losses
allocable to Class B limited partners may only be used to offset passive income generated from the same property or within the same fund.



Subsequent Event



On April 21, 2005, Fund VI-VII-VIII Associates sold Tanglewood Commons, a retail center containing approximately 67,320 rentable square feet located on approximately ten acres of land including available space



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for expansion and approximately one acre of land know as Outparcel 4, in Clemmons, North Carolina to Tanglewood Investors, LLC, an unaffiliated third party,
for a gross sales price of $11,500,000, less closing costs. The sale excludes two outparcels of land, approximately two acres of which Fund VI-VII-VIII Associates will retain ownership. As a result of the sale, the Partnership received net sale
proceeds of approximately $3,753,000 and was allocated a gain of approximately $1,812,000. The gain recognized from the sale of Tanglewood Commons may be adjusted as additional information becomes available in subsequent periods.



|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 current exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of one of our
General Partners, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnerships disclosure controls and procedures as of the end of the period covered by this
report pursuant to the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were effective.



There were no significant changes in the Partnerships internal control over
financial reporting during the quarter ended March 31, 2005 that have materially affected, or are likely to materially affect, the Partnerships internal control over financial reporting.



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PART II.    OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



We were not involved in any material legal proceedings during the quarter ended March 31, 2005 requiring disclosure under Item 103 of Regulation S-K.



|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 of 1933 during the quarter ended March 31, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | Not applicable.
|--- |  | ---------------



|(c) |  | We did not redeem any securities during the quarter ended March 31, 2005.
|--- |  | -------------------------------------------------------------------------



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



We were not subject to any indebtedness, and therefore, we did not default respect to any indebtedness during the quarter ended March 31, 2005.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



No matters were submitted to a vote of our limited partners during the quarter ended March 31, 2005.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



Not applicable.



|ITEM 6. | EXHIBITS
|------- | --------



The Exhibits required to be filed with this report are set forth on the Exhibit Index to First Quarter Form 10-Q attached hereto.



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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 FUND VII, L.P. (Registrant)                                                                             
|             |  | 
|             |  |  |  | By: WELLS PARTNERS, L.P. (General Partner)                                                                                
|             |  | 
|             |  |  |  | By: WELLS CAPITAL, INC. (Corporate General Partner)                                                                       
|             |  | 
|May 13, 2005 |  |  |  | /s/    LEO F. WELLS, IIILeo F. Wells, III President, Principal Executive Officer, and Sole
Director of Wells Capital, Inc.
|May 13, 2005 |  |  |  | /s/    DOUGLAS P. WILLIAMSDouglas P. Williams Principal Financial Officer of Wells Capital, Inc.                          



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EXHIBIT INDEX

TO FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND VII, L.P.



|            |  |                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                  
|            | 
|10.1        |  | Purchase and Sale Agreement for Tanglewood Commons (previously filed with the Commission as Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund VI, L.P. for the period ending March 31,
2005, Commission File No. 0-23656, and hereby incorporated by this reference)                   
|            | 
|10.2        |  | First Amendment to Purchase and Sale Agreement for Tanglewood Commons (previously filed with the Commission as Exhibit 10.2 to the Form 10-Q of Wells Real Estate Fund VI, L.P. for the period
ending March 31, 2005, Commission File No. 0-23656, and hereby incorporated by this reference)
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                       
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                       
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002