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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, 2006 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 0-30287



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WELLS REAL ESTATE FUND XII, L.P.

(Exact name of registrant as specified in
its charter)



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|                                                                                    |  |                                        
|----------------------------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                                             |  | 58-2438242                             
|(State or other jurisdiction of incorporation or organization)                      |  | (I.R.S. Employer Identification Number)
|                                                                                    | 
|6200 The Corners Pkwy., Norcross, Georgia                                           |  | 30092-3365                             
|(Address of principal executive offices)                                            |  | (Zip Code)                             
|                                                                                    | 
|Registrants telephone number, including area code                                  |  | (770) 449-7800                         
|                                                                                   
|N/A                                                                                
|(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x   No ̈

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark
whether the registrant is a shell company (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 XII, 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, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future
obligations, and the amount and timing of any future distributions to limited partners to be forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this
report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update
or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are
subject to unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or
impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to
stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005 for a discussion of some of the risks
and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.



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WELLS REAL ESTATE FUND XII, L.P.



TABLE
OF CONTENTS



|         |  |                       |  |                                                                                                                        |  |         
|-------- |  | --------------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                        |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                       
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                   |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsMarch 31, 2006 (unaudited) and December 31, 2005                                                        |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                    |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2005 and Three Months Ended March 31, 2006 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                    |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                    |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 15      
|         |  |                       | 
|         |  | Item 3                |  | Quantitative and Qualitative Disclosures about Market Risk                                                             |  | 20      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                |  | 20      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                       
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                      |  | 21      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                           |  | 21      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                            |  | 21      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                        |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                    |  | 21      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                      |  | 21      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                               |  | 21      



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PART I.    FINANCIAL STATEMENTS

The information furnished in the Partnerships accompanying balance
sheets and consolidated statements of operations, partners capital, and cash flows reflects all adjustments that are, in managements opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying financial statements should be read in conjunction with the notes to the Partnerships financial statements and Managements
Discussion and Analysis of Financial Condition and Results of Operations included both in this report on Form 10-Q and in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005. The Partnerships results of
operations for the three months ended March 31, 2006 are not necessarily indicative of the operating results expected for the full year.



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WELLS REAL ESTATE FUND XII, L.P.



BALANCE SHEETS

ASSETS



|                             |  |                            |            |                  |   |           
|---------------------------- |  | -------------------------- | ---------- | ---------------- | - | ----------
|                             |  | (Unaudited) March 31, 2006 |            | December 31,2005
|Investment in joint ventures |  | $                          | 17,739,345 |                  | $ | 17,849,824
|Cash and cash equivalents    |  |                            | 293,914    |                  |   | 373,378   
|Due from joint ventures      |  |                            | 386,393    |                  |   | 392,216   
|Other assets                 |  |                            | 1,262      |                  |   | 0         
|                             |  |                            |            |                  |   |           
|Total assets                 |  | $                          | 18,420,914 |                  | $ | 18,615,418
|                             |  |                            |            |                  |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                                                                                                               |  |   |            |  |   |           
|------------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- |  | - | ----------
|Liabilities:                                                                                                                   |  |   |            |  |   |           
|Accounts payable and accrued expenses                                                                                          |  | $ | 71,315     |  | $ | 21,765    
|Due to affiliates                                                                                                              |  |   | 6,093      |  |   | 7,427     
|Partnership distributions payable                                                                                              |  |   | 308,811    |  |   | 413,761   
|                                                                                                                               |  |   |            |  |   |           
|Total liabilities                                                                                                              |  |   | 386,219    |  |   | 442,953   
|                                                                                                                               |  |  
|Partners capital:                                                                                                             |  |   |            |  |   |           
|Limited partners:                                                                                                              |  |   |            |  |   |           
|Cash Preferred  3,003,500 and 3,000,000 units issued and outstanding as of March 31, 2006 and December 31, 2005,
respectively |  |   | 17,294,286 |  |   | 17,301,510
|Tax Preferred  557,619 and 561,119 units issued and outstanding as of March 31, 2006 and December 31, 2005,
respectively      |  |   | 740,409    |  |   | 870,955   
|General partners                                                                                                               |  |   | 0          |  |   | 0         
|                                                                                                                               |  |   |            |  |   |           
|Total partners capital                                                                                                        |  |   | 18,034,695 |  |   | 18,172,465
|                                                                                                                               |  |   |            |  |   |           
|Total liabilities and partners capital                                                                                        |  | $ | 18,420,914 |  | $ | 18,615,418
|                                                                                                                               |  |   |            |  |   |           

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF OPERATIONS



|                                                             |  |                                         |           |   |      |   |           |  
|------------------------------------------------------------ |  | --------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                             |  | (Unaudited) Three Months EndedMarch 31, |          
|                                                             |  | 2006                                    |           |   | 2005 |  
|                                                             |  |                                        
|EQUITY IN INCOME OF JOINT VENTURES                           |  | $                                       | 258,824   |   |      | $ | 445,874   |  
|                                                             |  |                                        
|EXPENSES:                                                    |  |                                         |           |   |      |   |           |  
|Partnership administration                                   |  |                                         | 81,265    |   |      |   | 49,979    |  
|Legal and accounting                                         |  |                                         | 12,894    |   |      |   | 11,598    |  
|                                                             |  |                                         |           |   |      |   |           |  
|Total expenses                                               |  |                                         | 94,159    |   |      |   | 61,577    |  
|                                                             |  |                                        
|INTEREST AND OTHER INCOME                                    |  |                                         | 6,376     |   |      |   | 7,409     |  
|                                                             |  |                                         |           |   |      |   |           |  
|NET INCOME                                                   |  | $                                       | 171,041   |   |      | $ | 391,706   |  
|                                                             |  |                                         |           |   |      |   |           |  
|                                                             |  |                                        
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:             |  |                                         |           |   |      |   |           |  
|CASH PREFERRED                                               |  | $                                       | 296,154   |   |      | $ | 541,972   |  
|                                                             |  |                                         |           |   |      |   |           |  
|TAX PREFERRED                                                |  | $                                       | (125,113  | ) |      | $ | (150,266  | )
|                                                             |  |                                         |           |   |      |   |           |  
|                                                             |  |                                        
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                                         |           |   |      |   |           |  
|CASH PREFERRED                                               |  | $                                       | 0.10      |   |      | $ | 0.18      |  
|                                                             |  |                                         |           |   |      |   |           |  
|TAX PREFERRED                                                |  | $                                       | (0.22     | ) |      | $ | (0.24     | )
|                                                             |  |                                         |           |   |      |   |           |  
|                                                             |  |                                        
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |                                         |           |   |      |   |           |  
|CASH PREFERRED                                               |  |                                         | 3,003,500 |   |      |   | 2,944,050 |  
|                                                             |  |                                         |           |   |      |   |           |  
|TAX PREFERRED                                                |  |                                         | 557,619   |   |      |   | 617,069   |  
|                                                             |  |                                         |           |   |      |   |           |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2005 AND

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)



|                                                                                                                                   |  |                  |  |        |                  |   |                         |         |   |        |   |            |   |  |   |   |  |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ------- | - | ------ | - | ---------- | - |  | - | - |  | - | ----------- | -
|                                                                                                                                   |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |        
|                                                                                                                                   |  | Cash Preferred   |  |        | Tax Preferred    |   |                         |        
|                                                                                                                                   |  | Units            |  | Amount |                  |   | Units                   |         |   | Amount |   |            |  
|                                                                                                                                   |  |                  |  |        |                  |  
|BALANCE, DECEMBER 31, 2004                                                                                                         |  | 2,939,050        |  | $      | 25,907,456       |   |                         | 622,069 |   |        | $ | 1,992,877  |   |  | $ | 0 |  | $ | 27,900,333  |  
|                                                                                                                                   |  |                  |  |        |                  |  
|Tax preferred conversion elections                                                                                                 |  | 60,950           |  |        | 274,586          |   |                         | (60,950 | ) |        |   | (274,586   | ) |  |   | 0 |  |   | 0           |  
|Net income                                                                                                                         |  | 0                |  |        | 2,256,111        |   |                         | 0       |   |        |   | 3,055,084  |   |  |   | 0 |  |   | 5,311,195   |  
|Distributions of operating cash flow ($0.57 per weighted-average Cash Preferred Unit)                                              |  | 0                |  |        | (1,689,063       | ) |                         | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (1,689,063  | )
|Distributions of net sale proceeds ($3.17 and $6.71 per weighted-average Cash Preferred Unit and Tax Preferred Unit,
respectively) |  | 0                |  |        | (9,447,580       | ) |                         | 0       |   |        |   | (3,902,420 | ) |  |   | 0 |  |   | (13,350,000 | )
|                                                                                                                                   |  |                  |  |        |                  |   |                         |         |   |        |   |            |   |  |   |   |  |   |             |  
|BALANCE, DECEMBER 31, 2005                                                                                                         |  | 3,000,000        |  |        | 17,301,510       |   |                         | 561,119 |   |        |   | 870,955    |   |  |   | 0 |  |   | 18,172,465  |  
|                                                                                                                                   |  |                  |  |        |                  |  
|Tax preferred conversion elections                                                                                                 |  | 3,500            |  |        | 5,433            |   |                         | (3,500  | ) |        |   | (5,433     | ) |  |   | 0 |  |   | 0           |  
|Net income                                                                                                                         |  | 0                |  |        | 296,154          |   |                         | 0       |   |        |   | (125,113   | ) |  |   | 0 |  |   | 171,041     |  
|Distributions of operating cash flow ($0.10 per weighted-average Cash Preferred Unit)                                              |  | 0                |  |        | (308,811         | ) |                         | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (308,811    | )
|                                                                                                                                   |  |                  |  |        |                  |   |                         |         |   |        |   |            |   |  |   |   |  |   |             |  
|BALANCE, MARCH 31, 2006                                                                                                            |  | 3,003,500        |  | $      | 17,294,286       |   |                         | 557,619 |   |        | $ | 740,409    |   |  | $ | 0 |  | $ | 18,034,695  |  
|                                                                                                                                   |  |                  |  |        |                  |   |                         |         |   |        |   |            |   |  |   |   |  |   |             |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF CASH FLOWS



|                                                                                  |  |                                         |          |   |      |   |           |  
|--------------------------------------------------------------------------------- |  | --------------------------------------- | -------- | - | ---- | - | --------- | -
|                                                                                  |  | (Unaudited) Three Months EndedMarch 31, |         
|                                                                                  |  | 2006                                    |          |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                         |          |   |      |   |           |  
|Net income                                                                        |  | $                                       | 171,041  |   |      | $ | 391,706   |  
|Operating distributions received from joint ventures                              |  |                                         | 392,215  |   |      |   | 575,686   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                         |          |   |      |   |           |  
|Equity in income of joint ventures                                                |  |                                         | (258,824 | ) |      |   | (445,874  | )
|Operating changes in assets and liabilities:                                      |  |                                         |          |   |      |   |           |  
|Increase in other assets                                                          |  |                                         | (1,262   | ) |      |   | 0         |  
|Decrease in due from affiliate                                                    |  |                                         | 0        |   |      |   | 1,010     |  
|Increase in accounts payable and accrued expenses                                 |  |                                         | 49,550   |   |      |   | 27,268    |  
|(Decrease) increase in due to affiliates                                          |  |                                         | (1,334   | ) |      |   | 3,946     |  
|                                                                                  |  |                                         |          |   |      |   |           |  
|Net cash provided by operating activities                                         |  |                                         | 351,386  |   |      |   | 553,742   |  
|                                                                                  |  |                                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                         |          |   |      |   |           |  
|Investment in joint ventures                                                      |  |                                         | (17,089  | ) |      |   | 0         |  
|                                                                                  |  |                                         |          |   |      |   |           |  
|                                                                                  |  |                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                         |          |   |      |   |           |  
|Operating distributions paid to limited partners                                  |  |                                         | (413,761 | ) |      |   | (440,857  | )
|                                                                                  |  |                                         |          |   |      |   |           |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              |  |                                         | (79,464  | ) |      |   | 112,885   |  
|                                                                                  |  |                                        
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                         | 373,378  |   |      |   | 1,885,089 |  
|                                                                                  |  |                                         |          |   |      |   |           |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                                       | 293,914  |   |      | $ | 1,997,974 |  
|                                                                                  |  |                                         |          |   |      |   |           |  
|                                                                                  |  |                                        
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                                         |          |   |      |   |           |  
|Partnership distributions payable                                                 |  | $                                       | 308,811  |   |      | $ | 533,609   |  
|                                                                                  |  |                                         |          |   |      |   |           |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



CONDENSED NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2006 (unaudited)



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

Wells Real Estate Fund XII, L.P. (the
Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. (Wells Partners), a Georgia non-public 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 president, sole director, and sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on September 15, 1998 for the purpose of acquiring, developing, constructing, owning, operating, improving,
leasing and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elect to treat their units as Cash Preferred Units or Tax Preferred Units. Thereafter, the limited partners have the right to
change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred Units one time during each quarterly accounting period. The limited partners may vote to, among other things: (a) amend the
Partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; (c) add or remove a general partner; (d) elect a new general partner; (e) dissolve the
Partnership; and (f) approve a sale involving all or substantially all of the Partnerships assets, subject to certain limitations. The majority vote on any of the matters described above will bind the Partnership without the concurrence
of the General Partners. Each limited partnership unit has equal voting rights regardless of class.

The Partnership was formed to acquire and operate
commercial real estate properties, including properties, which are either to be developed, are currently under construction, are newly constructed, or have operating histories.

On September 15, 1998, the Partnership was organized under the laws of the state of Georgia. On March 22, 1999, the Partnership commenced an offering of up to $70,000,000 of Cash Preferred or Tax Preferred
limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 units on
June 1, 1999. The offering was terminated on March 21, 2001, at which time the Partnership had sold approximately 2,688,861 Cash Preferred Units and 872,258 Tax Preferred Units to 1,227 and 106 Cash Preferred and Tax Preferred Limited
Partners, respectively, for total limited partner capital contributions of $35,611,192.

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                                                                                                       
|The Wells Fund XIFund XIIREIT Joint Venture (Fund XI-XII-REIT Associates) |  |   Wells Real Estate Fund XI, L.P.   Wells Real Estate Fund XII, L.P.   Wells Operating Partnership, L.P.(1) |  | 1. 111 Southchase Boulevard A two-story manufacturing and office building located in Fountain Inn, South Carolina
|                                                                              |  |                                                                                                                |  | 2. 20/20 Building A three-story office building located in Leawood, Kansas                                       
|                                                                              |  |                                                                                                                |  | 3. Gartner Building(2) A two-story office building located in
Ft. Myers, Florida                                 



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|                                                                           |  |                                                                             |  |                                                                                                                            
|-------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                              |  | Joint Venture Partners                                                      |  | Properties                                                                                                                 
|Wells Fund XII-REIT Joint Venture Partnership (Fund XII-REIT Associates) |  |   Wells Real Estate Fund XII, L.P.   Wells Operating Partnership, L.P.(1) |  | 4. Siemens Building A three-story office building located in Troy, Michigan                                                
|                                                                           |  |                                                                             |  | 5. AT&T Oklahoma Building(2) A one-story office building and a
two-story office building located in Oklahoma City, Oklahoma
|                                                                           |  |                                                                             |  | 6. Comdata Building A three-story office building located in Brentwood, Tennessee                                          



| | (1) | Wells Operating Partnership, L.P. (Wells OP) is a Delaware limited partnership
with Wells Real Estate Investment Trust, Inc. (Wells REIT) serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These properties were sold in April 2005.
| | --- | -----------------------------------------

Wells Real Estate Fund XI, L.P. is affiliated with the Partnership through common general partners. Each of the properties described above was acquired on an all-cash
basis. For further information regarding the Joint Ventures and foregoing properties, refer to the Partnerships Form 10-K for the year ended December 31, 2005.

On April 13, 2005, Fund XI-XII-REIT Associates sold the Gartner Building to an unrelated third party for a gross sale price of approximately $12,520,000. As a result of the sale of the Gartner Building, the
Partnership received net sale proceeds of approximately $2,118,000 and was allocated a gain of approximately $766,000.

On April 13, 2005, the Fund
XII-REIT Associates sold the AT&T Oklahoma Building to an unrelated third party for a gross sale price of $21,430,000. As a result of the sale of the AT&T Oklahoma Building, the Partnership received net sale proceeds of approximately
$9,586,000 and was allocated a gain of approximately $3,259,000.



|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, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles
(GAAP) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and
consistently present the results for these periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnerships Form
10-K for the year ended December 31, 2005.

Investment in Joint Ventures

The Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities under the provisions of Financial Accounting Standards Board Interpretation No. (FIN) 46(R),
Consolidation of Variable Interest Entities, which supersedes FIN 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements. 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, upon applying the provisions of Statement of Financial Accounting Standard (SFAS) No. 94, Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and



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##### Table of Contents

Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in the Joint
Ventures using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint
venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint
venture partners on a quarterly basis.

Other Assets

As of March 31, 2006, other assets is comprised of interest income receivable.

Distributions of Net Cash from Operations

Net cash from operations, if available, is generally distributed quarterly to the limited partners as follows:



| |  |  | First, to all Cash Preferred limited partners until each limited partner has received distributions equal to a 10% per annum return on his respective net capital contributions,
as defined.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, to the General Partners until the General Partners receive distributions equal to 10% of the total cumulative distributions paid by the Partnership to date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, to the Cash Preferred limited partners and the General Partners allocated on a basis of 90% and 10%, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

No distributions of net cash from operations will be made to limited partners holding Tax Preferred Units.

Distributions of Sale Proceeds

Upon the sale of properties, unless
reserved, net sale proceeds will be distributed in the following order:



| |  |  | In the event that the particular property sold is sold for a price that is less than the original property purchase price, to the limited partners holding Cash Preferred Units until
they have received an amount equal to the excess of the original property purchase price over the price for which the property was sold, limited to the amount of depreciation, amortization, and cost recovery deductions taken by the limited partners
holding Tax Preferred Units with respect to such property;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners holding units which at any time have been treated as Tax Preferred Units until each limited partner has received an amount necessary to equal the net cash
available for distribution received by the limited partners holding Cash Preferred Units on a per-unit basis;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until each limited partner has received 100% of his net capital contributions, as defined;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners on a per-unit basis until each limited partner has received a cumulative 10% per annum return on his net capital contributions, as defined;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until each limited partner has received an amount equal to his preferential limited partner return (defined as the sum of a 10% per
annum cumulative return on net capital contributions for all periods during which the units were treated as Cash Preferred Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were
treated as Tax Preferred Units);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To the General Partners until they have received 100% of their capital contributions, as defined;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Then, if limited partners have received any excess limited partner distributions (defined as distributions to limited partners over the life of their investment in the Partnership
in excess of their net capital contributions, as defined, plus their preferential limited partner return), to the General Partners until they have received distributions equal to 20% of the sum of any such excess limited partner distributions plus
distributions made to the General Partners pursuant to this provision; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 80% to the limited partners on a per-unit basis and 20% to the General Partners.
| | - |  | --------------------------------------------------------------------------------------------



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##### Table of Contents

Allocations of Net Income, Net Loss, and Gain on Sale

For the purpose of determining allocations per the partnership agreement, net income is defined as Net Income recognized by the Partnership, excluding deductions for
depreciation, amortization, and cost recovery and the gain on the sale of assets. Net Income, as defined, of the Partnership is generally allocated each year in the same proportion that net cash from operations is distributed to the partners holding
Cash Preferred Units and the General Partners. To the extent the Partnerships Net Income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners holding Cash Preferred Units and 1% to the General
Partners.

Net loss, depreciation, amortization, and cost recovery deductions for each fiscal year will be allocated as follows: (a) 99% to the
limited partners holding Tax Preferred Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then to any partner having a positive balance in his capital account in an amount not to exceed such positive
balance; and (c) thereafter to the General Partners.

Gains on the sale or exchange of the Partnerships properties will be allocated generally
in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement;
(b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the deductions for
depreciation, amortization, and cost recovery 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.

Recent Accounting Pronouncements

In June 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces
Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in
accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in
circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the
period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting
pronouncements. The adoption of this statement is not expected to have a material effect on the Partnerships financial statements.



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##### Table of Contents

|3. | INVESTMENT IN JOINT VENTURES
|-- | ----------------------------

Summary of Financial Information

Condensed financial information for the Joint Ventures for the three months ended March 31, 2006 and 2005, respectively, is presented below:



|                            |  |                             |           |                                         |   |           |                                    |   |                             |   |  |      |          |      |  |      |     |  |      |         |  |   |          |   |  |   |           |  
|--------------------------- |  | --------------------------- | --------- | --------------------------------------- | - | --------- | ---------------------------------- | - | --------------------------- | - |  | ---- | -------- | ---- |  | ---- | --- |  | ---- | ------- |  | - | -------- | - |  | - | --------- | -
|                            |  | Total Revenues              |           | Income (Loss) FromContinuing Operations |   |           | Income FromDiscontinued Operations |   | Net Income (Loss)           |  
|                            |  | Three Months EndedMarch 31, |           | Three Months EndedMarch 31,             |   |           | Three Months EndedMarch 31,        |   | Three Months EndedMarch 31, |  
|                            |  | 2006                        |           | 2005                                    |   | 2006      |                                    |   | 2005                        |   |  | 2006 |          | 2005 |  | 2006 |     |  | 2005 |        
|Fund XI-XII-REIT Associates |  | $                           | 0         |                                         | $ | 12,013    |                                    | $ | (267,162                    | ) |  | $    | (226,426 | )    |  | $    | 0   |  | $    | 183,781 |  | $ | (267,162 | ) |  | $ | (42,645   | )
|Fund XII-REIT Associates    |  |                             | 1,070,434 |                                         |   | 1,068,418 |                                    |   | 676,309                     |   |  |      | 671,701  |      |  |      | 493 |  |      | 335,593 |  |   | 676,802  |   |  |   | 1,007,294 |  
|                            |  |                             |           |                                         |   |           |                                    |   |                             |   |  |      |          |      |  |      |     |  |      |         |  |   |          |   |  |   |           |  
|                            |  | $                           | 1,070,434 |                                         | $ | 1,080,431 |                                    | $ | 409,147                     |   |  | $    | 445,275  |      |  | $    | 493 |  | $    | 519,374 |  | $ | 409,640  |   |  | $ | 964,649   |  
|                            |  |                             |           |                                         |   |           |                                    |   |                             |   |  |      |          |      |  |      |     |  |      |         |  |   |          |   |  |   |           |  

The Partnership allocates income (loss) from operations and from the sale of properties generated by the Joint
Ventures to its Cash Preferred and Tax Preferred limited partners pursuant to the respective partnership agreement provisions outlined in Note 2. The income from discontinued operations presented above is entirely comprised of income from operating
activities.

Due from Joint Ventures

As presented in
the accompanying balance sheets, due from joint ventures as of March 31, 2006 and December 31, 2005 represents operating cash flow generated by the Joint Ventures for the three months ended March 31, 2006 and December 31, 2005,
respectively, which is attributable to the Partnership.



|4. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, receives compensation for the management and
leasing of the Partnerships properties owned through the Joint Ventures equal to the lesser of (a) of the gross revenues collected monthly, 2.5% for management services and 2% for leasing services, plus a separate competitive fee for the
one-time initial lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in
the case of commercial properties leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial
leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Management and leasing fees are paid by the Joint Ventures and, accordingly, included in equity in income (loss) of joint
ventures in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures is $20,479 and $40,798 for the three months ended March 31, 2006
and 2005.

Administration Reimbursements

Wells
Capital, the corporate general partner of Wells Partners, one of our General Partners, and Wells Management perform certain administrative services for the Partnership, relating to accounting, property management, and other partnership
administration, and incur the related expenses. Such expenses are allocated among other entities affiliated with the General Partners based on time spent on 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 $16,804 and $21,800 for the three months ended March 31, 2006 and 2005, respectively. In
addition, Wells Capital pays for certain operating expenses of the Partnership (bill-backs) directly and invoices the Partnership for the reimbursement thereof. As of March 31, 2006 and December 31, 2005, the due to affiliates
balances represent administrative reimbursements and bill-backs due to Wells Management and/or Wells Capital.



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##### Table of Contents

Economic Dependency

We have engaged Wells Capital and Wells Management to provide certain essential services, including supervision of the management and leasing of our properties, asset acquisition and disposition services, as well as other administrative
responsibilities for us including accounting services, investor communications and relations. These agreements are terminable by either party upon 60 days written notice. As a result of these relationships, we are 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, we focus on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF
was to become unable to meet its obligations as they become due, we might be required to find alternative service providers.

Future net income generated
by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the
volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs. As of March 31, 2006, the General Partners believe that WREF generates adequate cash flow from operations and has adequate liquidity available in
the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.

Litigation Against Related
Parties

During early 2004, a putative class action complaint was filed against, among others, Leo. F. Wells, III, one of our General Partners, Wells
Capital, the corporate general partner of Wells Partners, our other general partner, and Wells Management (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791-2). The Court
granted the plaintiffs motion to permit voluntary dismissal of this suit, and the case was subsequently 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 (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia Civil Action No. 04A-13051-6). The second action alleges, among other things, that:
(i) Mr. Wells and Wells Capital breached their fiduciary duties to the limited partners of Wells Real Estate Fund I (Fund I), a previously syndicated real estate partnership having common general partners, in connection with
certain disclosures and prior actions relating to the distribution of net sale proceeds, (ii) the defendants breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners of Fund I relating to an alleged
waiver of deferred management fees, and (iii) certain misrepresentations and omissions in an April 2002 consent solicitation to the limited partners of Fund I caused that consent solicitation to be materially misleading. The plaintiffs seek,
among other remedies, judgment against Mr. Wells and Wells Capital, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by the General Partners; enforcement of the alleged contract relating
to the alleged waiver of deferred management fees; and an award to the plaintiffs of their attorneys fees, costs, and expenses. On January 28, 2005, the defendants filed motions for summary judgment and motions to dismiss the
plaintiffs claims. Pursuant to orders entered July 1, 2005, the Court granted the defendants motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action has now been dismissed, subject to the
plaintiffs right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion
for reconsideration or notice of appeal. On February 15, 2006, the Court heard argument on the plaintiffs motion to vacate and to re-enter the judgments previously entered on July 1, 2005. Following the argument, the Court stated
orally from the bench that he would grant the motion, so the judgments could be re-entered to allow the plaintiffs thirty days within which to file a notice of appeal. The Court has not yet entered an order granting this motion.

On or about August 8, 2005, the defendants filed a motion for attorneys fees and expenses of litigation. On or about August 12, 2005, the plaintiffs
filed a motion for attorneys fees and expenses of litigation as to one defense asserted by the defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects of the defendants and the plaintiffs
motions for attorneys fees and expenses. The Court has not yet ruled on either partys motion.



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##### Table of Contents

|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, 2005.

Overview

The Partnership typically operates in the following five
life cycle phases and, during which, typically focuses on the following key operating objectives. 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 fund-raising phase, less upfront fees, into the acquisition of real estate assets;



| |  |  | Holding phase
| | - |  | -------------

The period during which the
Partnership owns and operates its real estate assets during the initial lease terms of the tenants;



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

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



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

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

Portfolio Overview

We are currently operating in the holding phase of our life cycle. We currently own interests in four properties,
following the sale of the Gartner Building and the AT&T Oklahoma Building in April 2005. Two of the buildings in which we currently own interests are 100% leased to tenants in the early to middle stages of their lease terms, and the other two
buildings are vacant. Our focus at this time involves leasing the two vacant properties and maximizing the operating performance of the remaining assets in order to deliver what we believe will be the best overall performance for our limited
partners.

While the forgoing property sales have delivered positive results, we are also facing some near-term leasing issues with regard to the two
vacant properties. These leasing challenges may impact future operating performance; however, we are aggressively working with prospective tenants in the respective markets in an attempt to minimize negative financial effects.

Operating distributions payable to the Cash Preferred limited partners for the first quarter of 2006 declined slightly from prior quarter. The General Partners
anticipate that operating distributions will continue to decline in the near-term, given the reduced cash flow from the property sales and funding our pro-rata share of anticipated capital improvements and re-leasing costs for the 20/20 Building and
111 Southchase Boulevard, and the anticipated capital improvements for the Comdata Building.



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##### Table of Contents

Property Summary

As
we continue to operate in the holding 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 will seek to maximize returns to the limited partners by
negotiating long-term leases at market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs and portfolio costs. Later as we move into the positioning-for-sale and disposition-and-liquidation
phases, our attention will shift to locating suitable buyers and negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners, and minimize contingencies and our post-closing involvement with the buyer.

Information relating to the properties owned, or previously owned, by the Joint Ventures is provided below:



| |  |  | The Johnson Matthey Building was sold on October 5, 2004.
| | - |  | ---------------------------------------------------------



| |  |  | The Gartner Building was sold on April 13, 2005.
| | - |  | ------------------------------------------------



| |  |  | The AT&T Oklahoma Building was sold on April 13, 2005.
| | - |  | ------------------------------------------------------



| |  |  | The 111 Southchase Boulevard property, located in Greenville, South Carolina, is currently vacant. We are pursuing a number of market opportunities for this asset.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The 20/20 Building, located in Kansas City, Kansas, is currently vacant. We have engaged our local leasing team and are marketing this asset aggressively for lease.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Siemens Building, located in Detroit, Michigan, is 100% leased through 2010.
| | - |  | --------------------------------------------------------------------------------



| |  |  | The Comdata Building, located in Brentwood, Tennessee, outside Nashville, is 100% leased through May 2016.
| | - |  | ----------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources

Overview

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

Short-Term Liquidity

During the three months ended March 31,
2006, we generated net operating cash flows, including operating distributions received from the Joint Ventures, of approximately $351,000, as compared to approximately $554,000 for the three months ended March 31, 2005. The 2006 decline is
primarily due to a decline in operating distributions received from Joint Ventures as a result of the sales of the Gartner Building and the AT&T Oklahoma Building in April 2005. 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.

Our General Partners anticipate that future operating distributions to limited partners will decline in the near term as we fund our pro-rata share of anticipated capital improvements for the Comdata Building and anticipated capital
improvements and re-leasing costs for the 20/20 Building and 111 Southchase Boulevard, both of which are currently vacant.



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##### Table of Contents

We believe that the cash on hand and operating distributions due from Joint Ventures are sufficient to cover our working
capital needs, including liabilities of approximately $386,000, as of March 31, 2006. We anticipate using operating cash flow to fund our proportionate share of capital expenditures noted above over the next twelve months.

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,
funding 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,
including distributions received from the Joint Ventures, less, expenses related to the recurring operations of the properties and the portfolio and reserves for known capital expenditures, to pay operating distributions to the limited partners.

Capital Resources

The Partnership is an investment
vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties and has invested all of the partners original capital contributions. Thus, it is unlikely that we will acquire interests in any additional
properties. 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 our properties, and tenant
improvements for the purpose of readying our properties for re-leasing. As leases expire, we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in
connection with lease renewals require less capital than those funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as
rental rates.

Operating cash flows, if available, are generally distributed from the Joint Ventures to the Partnership approximately one month following
quarter-ends. However, the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management policy typically includes first utilizing current period
operating cash 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, if available, would then be utilized. Any capital or other expenditures not provided for by the operations of the Joint Ventures will be required to be funded by the Partnership and the respective joint venture
partners on a pro-rata basis.

As March 31, 2006, we have received, used, distributed, and held net sale proceeds allocated to the Partnership from
the sale of properties as presented below:



|                                       |  |                  |            |                                     |       |         |                                             |   |                          |  |                                                             |   |                                                   |   |  |   |            |  |   |      
|-------------------------------------- |  | ---------------- | ---------- | ----------------------------------- | ----- | ------- | ------------------------------------------- | - | ------------------------ |  | ----------------------------------------------------------- | - | ------------------------------------------------- | - |  | - | ---------- |  | - | -----
|Property Sold                          |  | Net SaleProceeds |            | PartnershipsApproximateOwnership % |       |         | Net SaleProceedsAllocated to thePartnership |   | Use of Net Sale Proceeds |  | Net SaleProceeds Distributed toPartners as ofMarch 31, 2006 |   | UndistributedNet SaleProceeds as ofMarch 31, 2006
|                                       |  |                  |            | Amount                              |       | Purpose |                                             |  
|                                       |  |                  |            |                                     |       |         |                                            
|Johnson Matthey Building(sold in 2004) |  | $                | 9,675,000  |                                     | 17.10 | %       |                                             | $ | 1,653,361                |  | $                                                           | 0 |                                                   |  |  | $ | 1,653,361  |  | $ | 0    
|                                       |  |                  |            |                                     |       |         |                                            
|Gartner Building(sold in 2005)         |  | $                | 12,396,859 |                                     | 17.10 | %       |                                             |   | 2,118,499                |  |                                                             | 0 |                                                   |  |  |   | 2,117,051  |  |   | 1,448
|                                       |  |                  |            |                                     |       |         |                                            
|AT&T Oklahoma Building(sold in 2005)   |  | $                | 21,307,577 |                                     | 44.99 | %       |                                             |   | 9,585,853                |  |                                                             | 0 |                                                   |  |  |   | 9,579,588  |  |   | 6,265
|                                       |  |                  |            |                                     |       |         |                                             |   |                          |  |                                                             |   |                                                   |   |  |   |            |  |   |      
|                                       |  |                  |            |                                     |       |         |                                            
|Total                                  |  |                  |            |                                     |       |         |                                             | $ | 13,357,713               |  | $                                                           | 0 |                                                   |   |  | $ | 13,350,000 |  | $ | 7,713
|                                       |  |                  |            |                                     |       |         |                                             |   |                          |  |                                                             |   |                                                   |   |  |   |            |  |   |      



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##### Table of Contents

Results of Operations

Equity in Income of Joint Ventures

Equity in income of the Joint Ventures was $258,824 and $445,874 for the three months ended
March 31, 2006 and 2005, respectively. The decrease for the three months ended March 31, 2006, as compared to the three months ended March 31, 2005, is primarily attributable to a decline in operating income resulting from the sales
of the Gartner Building and the AT&T Oklahoma Building in April 2005. We expect equity in income of Joint Ventures to remain at similar levels going forward until the vacant space at 111 Southchase Boulevard and the 20/20 Building is
re-leased.

Expenses

Total expenses of the Partnership
were $94,159 and $61,577 for the three months ended March 31, 2006 and 2005, respectively. The increase is primarily a result of an adjustment to 2005 estimated Tennessee partnership franchise and excise taxes incurred in the first quarter of
2006. We estimate Tennessee partnership franchise and excise taxes based on an estimate of the apportionment of income allocable to the Partnership from properties in Tennessee relative to income allocable to the Partnership from all properties as
if earned ratably during the calendar year. Thus, our future estimates of Tennessee partnership franchise and excise tax expenses will fluctuate as the relationship of income earned by the Partnership from properties in Tennessee fluctuates relative
to income earned by the Partnership from all properties in the future. Accordingly, nonrecurring items, such as gains on the sales of properties, will have a significant impact on these estimates. We also anticipate additional increases in
administrative expenses in future periods resulting from increased costs relating to compliance with reporting and regulatory requirements.

Interest
and Other Income

Interest and other income was $6,376 and $7,409 for the three months ended March 31, 2006 and 2005, respectively. The 2006
decrease, as compared to 2005, is primarily a result of a decrease in the average amount of net sale proceeds held during 2006, primarily as a result of the distribution of net proceeds in May 2005 and November 2005. Future levels of interest income
will be largely dependent upon the timing of future dispositions and net sale proceeds distributions to the investors.

Inflation

We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our
tenant leases that would protect us from the impact of inflation. These provisions include rent steps, 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. However, due to the long-term nature of our leases, the leases may not readjust their reimbursement rates frequently enough to cover inflation.

Application of Critical Accounting Policies

Summary

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP
requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If managements judgment or interpretation of the facts and circumstances relating to various transactions had been different,
it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our
results of operations to those of companies in similar businesses.



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Below is a discussion of the accounting policies that management considers to be critical in that they may require
complex judgment in their application or require estimates about matters that are inherently uncertain.

Investment in Real Estate Assets

We will be required to make subjective assessments as to the useful lives of our 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 |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant improvements   |  | Shorter of lease term or economic life

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, as defined by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values
are calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash
flows, including estimated salvage value. We have determined that there has been no impairment in the carrying value of any of the real estate assets held by the Partnership as of March 31, 2006.

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 any of the real estate assets held by the Joint Ventures and net income of the Partnership.

Related-Party Transactions and Agreements

We have entered into
agreements with Wells Capital and Wells Management, affiliates 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 4 to our financial statements included in this report for a
description of these fees and expense reimbursements we have incurred.



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Potential Tax Impact on Limited Partners Holding Tax Preferred Units  American Jobs Creation Act of 2004

The American Jobs Creation Act of 2004 added Section 470 to the Internal Revenue Code, which provides certain limitations on the utilization of
losses by investors that are allocable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. In March 2005, the Internal Revenue Service (IRS) issued IRS Notice 2005-29,
which announced that the IRS would not apply Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS issued IRS Notice 2006-2
extending the period for transitional relief through the 2005 tax year; however, it is important to note that IRS Notices 2005-29 and 2006-2 provide relief for partnerships only for tax years 2004 and 2005. Although the IRS has indicated that it is
continuing to study the application of Section 470 to partnerships, such as the Partnership, unless further legislation is enacted to address this issue, or some other form of relief from the provisions of Section 470 of the American Jobs
Creation Act of 2004 is granted, beginning in tax year 2006, and thereafter, passive losses allocable to limited partners holding Class B Units may only be used to offset passive income generated from the same property or within the same fund.



|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
|------- | -----------------------

We 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 our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal
Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that
information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.

There were no significant changes in our internal control over financial reporting during the quarter ended March 31, 2006 that have
materially affected, or are likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II.    OTHER INFORMATION



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

We are from time to time a party to other legal
proceedings, which arise in the ordinary course of our business. We are not currently involved in any litigation the outcome of which would, in managements judgment based on information currently available, have a material adverse effect on
our results of operations or financial condition, nor is management aware of any such litigation threatened against us during the quarter ended March 31, 2006, requiring disclosure under Item 103 of Regulation S-K.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes from the risk
factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005.



|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, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended March 31, 2006.
|--- | -------------------------------------------------------------------------



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



|(a) | We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended March 31, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



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



|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, 2006.



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



|(a) | During the quarter ended March 31, 2006, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

The Exhibits to this report are set forth on Exhibit
Index to 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 XII, L.P. (Registrant)                                                     
|             |  |  | 
|             |  |  |  | By:                                                                                                |  | WELLS PARTNERS, L.P. (General Partner)         
|             |  |  | 
|             |  |  |  | By:                                                                                                |  | WELLS CAPITAL, INC. (Corporate General Partner)
|             |  | 
|May 11, 2006 |  |  |  | /S/    LEO F. WELLS,
III                                                                          
|             |  |  |  | Leo F. Wells, III President, Principal
Executive Officer, and Sole Director of Wells Capital, Inc.
|             |  | 
|May 11, 2006 |  |  |  | /S/    DOUGLAS P.
WILLIAMS                                                                        
|             |  |  |  | Douglas P. Williams Principal Financial
Officer of Wells Capital, Inc.                            



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##### Table of Contents

EXHIBIT INDEX

TO

FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND XII, L.P.



|            |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                   
|            | 
|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