<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   Form 10-Q


(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the quarterly period ended September 30, 1999 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    33-66657       (1933 Act)
                      ------------------  ---------

                       Wells Real Estate Fund XII, L.P.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           Georgia                                      58-2438242
------------------------------                   -------------------------
(State of other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification no.)

3885 Holcomb Bridge Road, Norcross, Georgia                  30092
--------------------------------------------     ----------------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code (770) 449-7800
                                                   --------------


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

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

Yes   X   No____
    ----
<PAGE>

                                   Form 10-Q
                                   ---------

                       Wells Real Estate Fund XII, L.P.
                       --------------------------------

                                     INDEX
                                     -----

<TABLE>
<CAPTION>
                                                                                                 Page No.
                                                                                                 --------
<S>                                                                                              <C>
PART I.   FINANCIAL INFORMATION

          Item 1. Financial Statements

                    Balance Sheets - September 30, 1999
                     and December 31, 1998.......................................................    3

                    Statement of Income for the Three Months and Four
                     Months ended September 30, 1999.............................................    4

                    Statement of Partners' Capital for the Nine Months
                     Ended September 30, 1999....................................................    5

                    Statement of Cash Flows for the Nine Months
                     Ended September 30, 1999....................................................    6

                    Condensed Notes to Financial Statements......................................    7

          Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of
                    Operations...................................................................   14

PART II.  OTHER INFORMATION......................................................................   21
</TABLE>

                                       2
<PAGE>

                       WELLS REAL ESTATE FUND XII, L.P.
                    (a Georgia Public Limited Partnership)

                                BALANCE SHEETS


<TABLE>
<CAPTION>
                      Assets                     September 30, 1999          December 31, 1998
                      ------                     ------------------          -----------------
<S>                                              <C>                         <C>
Investment in joint venture (Note 2)                     $5,501,071                   $      0
Cash and cash equivalents                                   667,399                        600
Deferred project costs (Note 3)                              25,940                          0
Deferred offering costs (Note 4)                            257,560                    109,139
Due from affiliates                                          61,486                          0
                                                         ----------                   --------
     Total assets                                        $6,513,456                   $109,739
                                                         ==========                   ========


        Liabilities and Partners' Capital
        ---------------------------------

Liabilities:
 Sales commissions payable                               $   27,399                   $      0
 Due to affiliates (Note 5)                                 273,000                    109,139
  Partnership distribution payable                           62,935                          0
                                                         ----------                   --------
     Total liabilities                                      363,334                    109,139
                                                         ----------                   --------

Partners' capital:
 General partners                                               243                        500
 Original limited partner                                         0                        100
 Limited partners:
  Class A - 552,134 Units outstanding
   at September 30, 1999                                  4,837,150                          0
  Class B - 152,938 Units outstanding
   at September 30, 1999                                  1,312,729                          0
                                                         ----------                   --------

     Total partners' capital                              6,150,122                        600
                                                         ----------                   --------
     Total liabilities and partners' capital             $6,513,456                   $109,739
                                                         ==========                   ========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       3
<PAGE>

                       WELLS REAL ESTATE FUND XII, L.P.
                    (a Georgia Public Limited Partnership)

                              STATEMENT OF INCOME


<TABLE>
<CAPTION>
                                                           Three Months Ended           Four Months Ended
                                                           September 30, 1999           September 30, 1999
                                                       --------------------------  ----------------------------
<S>                                                    <C>                         <C>
Revenues:
  Equity in income of joint ventures                           $  41,721                    $  41,721
   Interest income                                                19,946                       19,946
                                                               ---------                    ---------
                                                                  61,667                       61,667

Expenses:
     Legal and accounting                                          6,034                        6,034
     Computer costs                                                1,623                        2,423
     Partnership administration                                    8,224                       10,039
                                                               ---------                    ---------
                                                                  15,881                       18,496
                                                               ---------                    ---------

  Net income                                                   $  45,786                    $  43,171
                                                               =========                    =========

Net loss allocated to General Partners                         $    (231)                   $    (257)

Net income allocated to Class A Limited Partners               $  68,910                    $  68,910

Net loss allocated to Class B Limited Partners                 $ (22,893)                   $ (25,482)

Net income per Class A weighted average Limited
      Partner Unit                                             $    0.28                    $    0.28

Net loss per Class B weighted average Limited
      Partner Unit                                             $   (0.21)                   $   (0.24)

Cash distribution per Class A Limited Partner Unit             $    0.26                    $    0.26
</TABLE>

           See accompanying condensed notes to financial statements.

                                       4
<PAGE>

                       WELLS REAL ESTATE FUND XII, L.P.
                    (a Georgia Public Limited Partnership)

                        STATEMENT OF PARTNERS' CAPITAL
                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999



<TABLE>
<CAPTION>
                                                             Limited Partners                              Total
                                               --------------------------------------------
                                                      Class A                Class B          General    Partners'
                                                      -------                -------
                                    Original    Units     Amounts      Units     Amounts     Partners     Capital
                                    --------    -----     -------      -----     -------     --------     -------
<S>                                 <C>        <C>      <C>           <C>      <C>           <C>        <C>
BALANCE,
 December 31, 1998                  $    100         -   $        -         -   $        -   $    500    $      600
 Limited partner contributions                 552,134    5,521,342   152,938    1,529,384          -     7,050,726
 Partnership distributions                 -                (62,935)        -            -          -       (62.935)
 Net income (loss)                         -         -       68,910         -      (25,482)      (257)       43,171
 Sales commissions                         -         -     (524,527)        -     (145,291)         -      (669,818)
 Other offering expenses                   -         -     (165,640)        -     ( 45,882)         -      (211,522)
 Return of original limited
      partner investment                (100)        -            -         -            -          -          (100)
                                    --------   -------   ----------   -------   ----------   --------    ----------
BALANCE,
 September 30, 1999                 $      0   552,134   $4,837,150   152,938   $1,312,729   $    243    $6,150,122
                                    ========   =======   ==========   =======   ==========   ========    ==========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       5
<PAGE>

                       WELLS REAL ESTATE FUND XII, L.P.
                    (a Georgia Public Limited Partnership)

                            STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    Nine Months Ended
                                                                    September 30, 1999
                                                                    ------------------
<S>                                                                 <C>
Cash flows from operating activities:
  Net income                                                            $  43,171
  Adjustments to reconcile net income to net cash
     provided by operating activities:
         Equity in income of joint venture                                (41,721)
         Changes in assets and liabilities:
          Increase due to affiliates                                       15,441
                                                                      -----------

  Net cash provided by operating activities                                16,890
                                                                      -----------

Cash flow from investing activities:
  Deferred project costs                                                 (246,775)
  Investment in joint ventures                                         (5,300,000)
                                                                      -----------
  Net cash used in investing activities                                (5,546,775)
                                                                      -----------

Cash flow from financing activities:
  Limited partners' contributions                                       7,050,726
  Sales commissions                                                      (642,420)
  Offering costs                                                         (211,522)
  Return of original limited partner investment                              (100)
                                                                      -----------
        Net cash provided by financing activities                       6,196,684
                                                                      -----------

Net increase in cash and cash equivalents                                 666,799

Cash and cash equivalents, beginning of year                                  600
                                                                      -----------

Cash and cash equivalents, end of period                              $   667,399
                                                                      ===========

Supplemental disclosure of noncash
    investing activities:
        Deferred project costs applied to joint venture
             property                                                 $   220,835
                                                                      ===========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       6
<PAGE>

                       WELLS REAL ESTATE FUND XII, L.P.
                    (A Georgia Public Limited Partnership)

                    Condensed Notes to Financial Statements

                              September 30, 1999

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

     (a) General
     -----------

     Wells Real Estate Fund XII, L.P. (the "Partnership") is a Georgia public
     limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
     General Partners. The Partnership was formed on September 15, 1998, for the
     purpose of acquiring, developing, owning, operating, improving, leasing,
     and otherwise managing for investment purposes, income producing commercial
     properties.

     On March 22, 1999, the Partnership commenced a public offering of up to
     $70,000,000 of limited partnership units ($10.00 per unit) pursuant to a
     Registration Statement on Form S-11 filed under the Securities Act of 1933.
     The Partnership commenced active operations on June 1, 1999, when it
     received and accepted subscriptions for 125,000 units. An aggregate
     requirement of $2,500,000 of offering proceeds was reached on June 30,
     1999, thus allowing for the admission of New York and Pennsylvania
     investors in the Partnership. As of September 30, 1999, the Partnership had
     sold 552,134 Class A Status Units, and 152,938 Class B Status Units, held
     by a total of 682 and 28 Limited Partners, respectively, for total Limited
     Partner capital contributions of $7,050,726. After payment of $246,775 in
     acquisition and advisory fees and acquisition expenses, the payment of
     $881,341 in selling commissions and organization and offering expenses and
     the investment of $5,300,000 in the Fund XI-XII-REIT Joint Venture, as of
     September 30, 1999, the Partnership was holding net offering proceeds of
     $622,610 available for investment in properties.

     (b) Employees
     -------------

     The Partnership has no direct employees. The employees of Wells Capital,
     Inc., the sole general partner of Wells Partners, L.P., perform a full
     range of real estate services including leasing and property management,
     accounting, asset management and investor relations for the Partnership.

     (c) Insurance
     -------------

     Wells Management Company, Inc., an affiliate of the General Partners,
     carries comprehensive liability and extended coverage with respect to all
     the properties owned directly or indirectly by the Partnership. In the
     opinion of management of the Registrant, the properties are adequately
     insured.

                                       7
<PAGE>

     (d) Competition
     ---------------

     The Partnership will experience competition for tenants from owners and
     managers of competing projects which may include the General Partners and
     their affiliates. As a result, the Partnership may be required to provide
     free rent, reduced charges for tenant improvements and other inducements,
     all of which may have an adverse impact on results of operations. At the
     time the Partnership elects to dispose of its properties, the Partnership
     will also be in competition with sellers of similar properties to locate
     suitable purchasers for its properties.

     (e) Basis of Presentation
     -------------------------

     The financial statements of Wells Real Estate Fund XII, L.P. (the
     "Partnership") have been prepared in accordance with instructions to Form
     10-Q and do not include all of the information and footnotes required by
     generally accepted accounting principles for complete financial statements.
     These quarterly statements have not been examined by independent
     accountants, but in the opinion of the General Partners, the statements for
     the unaudited interim periods presented include all adjustments, which are
     of a normal and recurring nature, necessary to present a fair presentation
     of the results for such periods.

     (f) Partnership Distributions
     -----------------------------

     Net Cash From Operations, as defined in the Partnership Agreement, will be
     distributed first to Limited Partners holding Class A Status Units on a per
     Unit basis until they have received a 10% annual return on their Net
     Capital Contributions, as defined in the Partnership Agreement. Further
     distributions of Net Cash From Operations will be made to the General
     Partners until they receive distributions equal to 10% of the total amount
     of Net Cash From Operations distributed. Thereafter, the Limited Partners
     holding Class A Status Units will receive 90% of Net Cash From Operations
     and the General Partners will receive 10%. No Net Cash From Operations will
     be distributed to Limited Partners holding Class B Status Units.

     (g) Income Taxes
     ----------------

     The Partnership has not requested a ruling from the Internal Revenue
     Service to the effect that it will be treated as a partnership and not an
     association taxable as a corporation for Federal income tax purposes. The
     Partnership requested an opinion of counsel as to its tax status, but such
     opinion is not binding upon the Internal Revenue Service.

                                       8
<PAGE>

     (h) Statement of Cash Flows
     ---------------------------

     For the purpose of the statement of cash flows, the Partnership considers
     all highly liquid debt instruments purchased with an original maturity of
     three months or less to be cash equivalents. Cash equivalents include cash
     and short-term investments.

(2)  Investment in Joint Venture
     ---------------------------

     The Partnership owns interests in four office buildings through its
     ownership in a joint venture. The Partnership does not have control over
     the operations of the joint venture; however, it does exercise significant
     influence. Accordingly, investments in joint ventures is recorded on the
     equity method.

     The following describes additional information about the properties in
     which the Partnership owns an interest as of September 30, 1999:

     Fund XI - Fund XII - REIT Joint Venture
     ---------------------------------------

     On June 21, 1999, the Partnership was admitted to the Wells Fund XI - Fund
     XII - REIT  Joint Venture (the "Fund XI-XII-REIT Joint Venture").

     The Fund XI-XII-REIT Joint Venture is a joint venture partnership among the
     Partnership, Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), an
     affiliated Georgia limited partnership, and Wells Operating Partnership,
     L.P. ("Wells OP"), a Delaware limited partnership formed to acquire, own
     lease, operate, and manage real properties on behalf of Wells Real Estate
     Investment Trust, Inc. (the "Wells REIT"), an affiliated Maryland
     corporation. This joint venture was originally formed on May 1, 1999, as a
     joint venture between Wells Fund XI and the Wells OP pursuant to a Joint
     Venture Partnership Agreement, which was amended and restated on June 21,
     1999, to admit the Partnership as a joint venture partner. The XI-XII-REIT
     Joint Venture was formed for the purpose of acquisition, ownership,
     development, leasing, operation, sale and management of real properties.
     The investment objectives of Wells Fund XI and the Wells REIT are
     substantially identical to those of the Partnership. As of September 30,
     1999, the Partnership had contributed $5,300,000 for an approximate 17.1%
     equity interest in the Fund XI-XII-REIT Joint Venture, Wells Fund XI has
     made capital contributions of $8,131,135 for an approximate 26.2% equity
     interest, and Wells OP contributed $17,585,310 for an approximate 56.7%
     equity interest in the Fund XI-XII-REIT Joint Venture.

     The Sprint Building
     -------------------

     On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired a three story
     office building with approximately 68,900 rentable square feet, on a 7.12
     acre tract of land, located in Leawood, Johnson County, Kansas (the "Sprint
     Building") from Bridge Information Systems America, Inc. (the "Seller").

                                       9
<PAGE>

     The purchase price for the Sprint Building was $9,500,000. The Joint
     Venture also incurred additional acquisition expenses in connection with
     the purchase of the Sprint Building, including attorneys' fees, recording
     fees and other closing costs, of approximately $46,210.

     The entire 68,900 rentable square feet of the Sprint Building is currently
     under a net Lease Agreement with Sprint dated February 14, 1997 (the
     "Lease"). The landlord's interest in the Lease was assigned to the Joint
     Venture at the closing.

     The initial term of the Lease is ten years which commenced on May 19, 1997
     and expires on May 18, 2007. Sprint has the right to extend the lease for
     two additional five year periods.

     The monthly base rent payable under the Lease is $83,254.17 ($14..50 per
     square foot) through May 18, 2002 and $91,866.67 ($16.00 per square foot)
     for the remainder of the Lease term. The monthly base rent payable for each
     extended term of the Lease will be equal to 95% of the then "current market
     rate" which is calculated as a full-service rental rate less anticipated
     annual operating expenses on a rentable square foot basis charged for space
     of comparable location, size and conditions in comparable office buildings
     in the suburban south Kansas City, Missouri and south Johnson County,
     Kansas areas.

     Under the Lease, Sprint is required to pay as additional rent all real
     estate taxes, special assessments, utilities, taxes, insurance and other
     operating costs with respect to the Sprint Building during the term of the
     Lease. In addition, Sprint is responsible for all routine maintenance and
     repairs including the interior mechanical and electrical systems, the HVAC
     system, the parking lot and the landscaping to the Spring Building. The
     XI-XII-REIT Joint Venture, as landlord, is responsible for repair and
     replacement of the exterior roof, foundation and structure.

     The Lease contains a termination option which may be exercised by Sprint
     effective as of May 18, 2004, provided that Sprint has not exercised either
     expansion option, as described below. Sprint must provide notice to the
     Joint Venture of its intent to exercise its termination option on or before
     August 21, 2003. If Sprint exercises its termination option, it will be
     required to pay the Joint Venture a termination payment equal to $6.53 per
     square foot, or $450,199.

     Sprint also has an expansion option for an additional 20,000 square feet of
     office space which may be exercises in two expansion phases. Sprint's
     expansion rights involve building on unfinished ground level space that is
     currently used as covered parking within the existing building footprint
     and shell. At each exercise of an expansion option, the remaining Lease
     term will be extended to be a minimum of an additional five years from the
     date of the completion of such expansion space.

                                       10
<PAGE>

     For additional information regarding the Sprint Building, refer to the
     Partnership's Form 8-K dated July 2, 1999, which was filed with the
     Commission on July 16, 1999 (Commission File No. 33-66657).


     The Johnson Matthey Building
     ----------------------------

     On August 17, 1999, the Fund XI - XII - REIT Joint Venture acquired a
     research and development office and warehouse building (the "Johnson
     Matthey Building") located in Chester County, Pennsylvania from Alliance
     Commercial Properties Ltd. ("Alliance").

     Wells Capital, Inc., as original purchaser under the agreement, assigned
     its rights under the agreement to the Fund XI-XII-REIT Joint Venture at
     closing. The purchase price paid for the Johnson Matthey Building was
     $8,000,000. The Fund XI-XII-REIT Joint Venture also incurred additional
     acquisition expenses in connection with the purchase of the Johnson Matthey
     Building, including Attorneys' fees, recording fees and other closing
     costs, of approximately $50,000.

     The Johnson Matthey Building is a 130,000 square foot research and
     development, office and warehouse building that was first constructed in
     1973 as a multi-tenant facility. It was subsequently converted into a
     single-tenant facility in 1998. The site consists of a 10.0 acre tract of
     land located at 434-436 Devon Park Drive in Tredyffrin Township, Chester
     County, Pennsylvania.

     The entire 130,000 rentable square feet of the Johnson Matthey Building is
     currently leased to Johnson Matthey. The Johnson Matthey lease was assigned
     to the Fund XI-XII-REIT Joint Venture at closing with the result that the
     joint venture is now the landlord under the lease. The current lease term
     expires in June 2007. Johnson Matthey has the right to extend the lease for
     two additional three year periods of time. The annual base rent payable
     under the Johnson Matthey lease for the remainder of the lease term is as
     follows: year three: $789,750, year four: $809,250, year five: $828.750,
     year six: $854,750, year seven: $874,250, year eight: $897,000, year nine:
     $916,500, and year ten: $939,250.

     Under its lease, Johnson Matthey is required to pay as additional rent all
     real estate taxes, special assessments, utilities, taxes, insurance and
     other operating costs with respect to the Johnson Matthey Building during
     the term of the Lease. In addition, Johnson Matthey is responsible for all
     routine maintenance and repairs to the Johnson Matthey Building. The Fund
     XI-XII-REIT Joint Venture, as landlord, is responsible for maintenance of
     the footings and foundations and the structural steel columns and girders
     associated with the building.

     Johnson Matthey has a right of first refusal to purchase the Johnson
     Matthey Building in the event that the Fund XI-XII-REIT Joint Venture
     desires to sell the building to an unrelated third-party. The joint venture
     must give Johnson Matthey written notice of its

                                       11
<PAGE>

     intent to sell the Johnson Matthey Building, and Johnson Matthey will have
     ten days from the date of such notice to provide written notice of its
     intent to purchase the building. If Johnson Matthey exercises its right of
     first refusal, it must purchase the Johnson Matthey Building on the same
     terms contained in the offer.

     For additional information regarding the Johnson Matthey Building, refer to
     Supplement No. 1 dated September 1, 1999, to the Prospectus of Wells Real
     Estate Fund XII, L.P. dated March 22, 1999, which is contained in Post-
     Effective Amendement No. 1 to Form S-11 Registration Statement of Wells
     Real Estate Fund XII, L.P. , which was filed with the Commission on
     September 1, 1999 (Commission File No. 33-66657).

     The Gartner Building
     --------------------

     On September 20, 1999, the Fund XI - XII - REIT Joint Venture acquired a
     two story office building with approximately 62,400 rentable square feet on
     a 4.9 acre tract of land located at 12600 Gateway Blvd. in Fort Meyers, Lee
     County, Florida (the "Gartner Building") from Hogan Triad Ft. Meyers I,
     Ltd., a Florida limited partnership (the "Seller").

     The rights under the Contract were assigned by Wells Capital, Inc., the
     original purchaser under the Contract, to the Joint Venture at closing. The
     purchase price for the Gartner Building was $8,320,000. The Joint Venture
     also incurred additional acquisition expenses in connection with the
     purchase of the Gartner Building, including attorneys' fees, recording fees
     and other closing costs of approximately $27,600.

     The entire 62,400 rentable square feet of the Gartner Building is currently
     under a net lease agreement with Gartner dated July 30, 1997 (the "Lease").
     The landlord's interest in the Lease was assigned to the Joint Venture at
     the closing.

     The initial term of the Lease is ten years which commenced on February 1,
     1998 and expires on January 31, 2008. Gartner has the right to extend the
     Lease for two additional five year periods of time. The yearly base rent
     payable for the remainder of the Lease term is $642,798 through January
     2000, $790,642 though January, 2001, and thereafter will increase by 2.5
     percent through the remainder of the lease.

     Under the Lease, Gartner is required to pay as additional rent all real
     estate taxes, special assessments, utilities, taxes, insurance and other
     operating costs with respect to the Gartner Building during the term of the
     Lease. In addition, Gartner is responsible for all routine maintenance and
     repairs to the Gartner Building. The Joint Venture, as landlord, is
     responsible for repair and replacement of the roof, structure and paved
     parking areas.

     Gartner also has two expansion options for additional buildings under the
     Lease. The two option plans are described in the Lease as the "Small Option
     Building" and the "Large Option Building".

                                       12
<PAGE>

     The "Small Option Building" expansion option allows Gartner the ability to
     expand into a separate, free standing facility on the property containing
     between 30,000 ands 32,000 rentable square feet to be constructed by the
     Joint Venture. Gartner may exercise its expansion right for the Small
     Option Building by providing notice in writing to the Joint Venture on or
     before February 15, 2002.

     The "Large Option Building" expansion option allows Gartner the ability to
     expand into a separate, free standing facility on the property containing
     between 60,000 and 75,000 rentable square feet to be constructed by the
     Joint Venture. Gartner may exercise its expansion right for the Small
     Option Building by providing notice in writing to the Joint Venture on or
     before February 15, 2002.

     For additional information regarding the Gartner Building, refer to the
     Partnership's Form 8-K dated September 20, 1999, which was filed with the
     Commission on October 5, 1999 (Commission File No. 33-66657).

(3)  Deferred Project Costs
     ----------------------

     The Partnership pays acquisition and advisory fees and acquisition expenses
     to the General Partners for acquisition and advisory services and expenses.
     These payments, as provided by the Partnership Agreement, may not exceed
     3.5% of the Limited Partners' capital contributions. Acquisition and
     advisory fees and acquisitions expenses paid as of September 30, 1999,
     amounted to $246,775 and represented approximately 3.5% of the Limited
     Partners' capital contributions received. These fees are allocated to
     specific properties as they are purchased.

(4)  Deferred Offering Costs
     -----------------------

     Wells Capital, Inc. (the "Company"), the general partner of Wells Partners,
     L.P., pays all the offering expenses for the Partnership. The Company may
     be reimbursed by the Partnership to the extent that such offering expenses
     do not exceed 3% of total Limited Partners' capital contributions. As of
     September 30, 1999, the Partnership had reimbursed the Company for $211,522
     in offering expenses, which amounted to approximately 3% of Limited
     Partners' capital contributions.

(5)  Due To Affiliates
     -----------------

     Due to Affliates consists of acquisition and advisory fees and acquisition
     expenses, deferred offering costs, and other operating expenses paid by the
     Company on behalf of the Partnership.

                                       13
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
-------------------------------------------------------------------------
RESULTS OF OPERATION.
---------------------

The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
from any forward-looking statement made in this Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon expiration of existing leases, and
the potential need to fund tenant improvements or other capital expenditures out
of operating cash flow.

The Partnership commenced active operations on June 1, 1999, when it received
and accepted subscriptions for 125,000 units. An aggregate requirement of
$2,500,000 of offering proceeds was reached on June 30, 1999, thus allowing for
the admission of New York and Pennsylvania investors into the Partnership. As of
September 30, 1999, the Partnership had sold 552,134 Class A Status Units and
152,938 Class B Status Units, held by a total of 682 and 28 Limited Partners
respectively, for total Limited Partner contributions of $7,050,726. After
payment of $246,775 in Acquisition and Advisory Fees and Acquisition Expenses,
and the payment of $881,341 in selling commissions and organization and offering
expenses, the investment of $5,300,000 in the Fund XI-XII-REIT Joint Venture as
of September 30, 1999, the Partnership was holding net offering proceeds of
$662,610 available for investment in properties.

Results of Operations
---------------------

As of September 30, 1999, the properties owned by the Partnership were 100%
occupied. Gross revenues of the Partnership of $61,667 for the nine months ended
September 30, 1999 were attributable primarily to interest income earned on
funds held by the Partnership prior to the investment in properties. Expenses of
the Partnership were $18,496 for the nine months period ended September 30, 1999
and consisted primarily of administrative expenses. Since the Partnership did
not commence active operations until it received and accepted subscriptions for
a minimum of 125,000 units on June 1, 1999, there is no comparative financial
data available from the prior fiscal year.

Net income per weighted average unit for Class A Limited Partners was $0.28 for
the nine months ended September 30, 1999. Net loss per weighted average unit for
Class B Limited Partners was $0.24 for the nine months ended September 30, 1999.
Net loss of $257 was allocated to the General Partner.

Net increase in cash and cash equivalents is the result of raising $7,050,726 in
Limited Partners' capital contributions before deducting commissions and
offering costs and the investment of

                                       14
<PAGE>

$5,300,000 in the Joint Venture. The Partnership expects to continue to meet its
short-term liquidity requirements generally through net cash provided by
operations which the Partnership believes will continue to be adequate to meet
both operating requirements and distributions to limited partners. At this time,
given the nature of the joint venture and property in which the Partnership has
invested, there are no known improvements or renovations to the properties
expected to be funded from cash flow from operations.

The Partnership expects to make future real estate investments, directly or
through investments in Joint Ventures from Limited Partner captial
contributions. As of September 30, 1999, the Partnership was holding $622,610 of
net offering proceeds from Limited Partner capital contributions for investments
in additional properties. Since properties are acquired on an all-cash basis,
the Partnership has no permanent long-term liquidity requirements.

Year 2000
---------

The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and was
completed during the first half of 1999. Renovations and replacements of
equipment have been and are being made as warranted. The costs incurred by the
Partnership and its affiliates thus far for renovations and replacements have
been immaterial. As of September 30, 1999, all testing of systems has been
complete.

As to the status of the Partnerships' information technology systems, it is
presently believed that all major systems and software are Year 2000 compliant.
At the present time, it is believed that all major non-information technology
systems are Year 2000 compliant. The cost to upgrade any noncompliance systems
is believed to be immaterial.

The Partnership has confirmed with the Partnership's vendors, including third-
party service providers such as banks, that their systems are Year 2000
compliant.

The Partnership relies on computers and operating systems provided by equipment
manufacturers, and also on application software designed for use with its
accounting, property management and investment portfolio tracking. The
Partnership has preliminary determined that any costs, problems or uncertainties
associated with the potential consequences of Year 2000 issues are not expected
to have a material impact on the future operations or financial condition of the
Partnership. The Partnership will perform due diligence as to the Year 2000
readiness of each property owned by the Partnership and each property
contemplated for purchase by the Partnership.

The Partnership's reliance on embedded computer systems (i.e. microcontrollers)
is limited to facilities related matters, such as office security systems and
environmental control systems.

The Partnership is currently formulating contingency plans to cover any areas of
concern. Alternate means of operating the business are being developed in the
unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the

                                       15
<PAGE>

Partnership could operate is being sought as well as alternate means of
communication with key third-party vendors. A written plan is being developed
for testing and dispensation to each staff member of the General Partner of the
Partnership.

Management believes that the Partnership's risk of Year 2000 problems is
minimal.  In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down,  the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed.  In the event that the security system shuts down, the Partnership
has devised a plan for each building to hire temporary on-site security guards.
In the event that a third-party vendor has Year 2000 problems relating to
investor information, the Partnership intends to perform a full system back-up
of all investor information as of December 31, 1999, so that the Partnership
will have accurate hard-copy investor information.

Property Operations
-------------------

As of September 30, 1999, the Partnership owned interests in the following
operational properties:

Eybl Cartex Building / Fund XI-XII-REIT Joint Venture
-----------------------------------------------------

<TABLE>
<CAPTION>
                                                           Three Months Ended                Five Months Ended
                                                           September 30, 1999                September 30, 1999
                                                           ------------------                ------------------
<S>                                                        <C>                               <C>
Revenues:
   Rental income                                           $       140,047                   $       210,173
                                                                   -------                           -------

Expenses:
   Depreciation                                                     49,902                            83,170
   Management & leasing expenses                                     3,814                            14,663
   Operating costs, net of reimbursements                            5,165                             5,165
                                                                    ------                           -------
                                                                    58,881                           102,998
                                                                    ------                           -------
Net income                                                 $        81,166                   $       107,175
                                                                    ======                           =======

Occupied %                                                             100%                              100%

Partnership ownership %                                              17.09%                            17.09%

Cash distributed to the Partnership                        $        13,709                  $         13,709

Net income allocated to the Partnership                    $         9,402                  $          9,402
</TABLE>

                                       16
<PAGE>

On May 18, 1999, Wells Real Estate, LLC - SC I ("Wells LLC"), a Georgia limited
liability company wholly owned by the Wells Fund XI-REIT Joint Venture (which
later admitted the Partnership as a joint venture partner and changed its name
to the Fund XI - Fund XII - REIT Joint Venture), acquired a manufacturing and
office building containing 169,510 square feet located in Fountain Inn,
unincorporated Greenville, County, South Carolina (the "EYBL CarTex Building")
for a purchase price of $5,085,000 excluding acquisitions costs.

The building is 100% occupied by EYBL CarTex, Inc. with a lease expiration of
February 2008.  The monthly base rent payable under the lease is $42,377.50 with
an increase to $45,905.95 in the 5th year, $49,440.42 in the 7th year and
$50,853.00 in the 9th year.  The lease is a triple net lease, whereby the terms
of the lease require the tenant to reimburse the landlord for certain operating
expenses, as defined in the lease, related to the building.

Since the EYBL CarTex Building was purchase in May of 1999, comparable income
and expense figures for the prior year are not available.



The Sprint Building / Fund X-XII-REIT Joint Venture
---------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                           September 30, 1999
                                                                           ------------------
<S>                                                                        <C>
Revenues:
 Rental income                                                             $    264,654
                                                                                -------

Expenses:
 Depreciation                                                                    81,776
 Management & leasing expenses                                                    7,493
 Operating costs, net of reimbursements                                           1,283
                                                                                -------
                                                                                 90,552
                                                                                -------
Net income                                                                 $    174,102
                                                                                =======

Occupied %                                                                         100%

Partnership ownership %                                                          17.09%

Cash distributed to the Partnership                                        $     27,443

Net income allocated to the Partnership                                    $     19,966
</TABLE>


On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired a three story
office building with approximately 68,900 rentable square feet located in
Leawood, Johnson County, (the "Sprint Building") for the purchase price of
$9,546,210.

                                       17
<PAGE>

The entire Sprint Building is currently under a net lease with Sprint
Communications, Inc., and expires on May 18, 2007.  Sprint has the option under
its lease to extend the initial term for two consecutive five year periods.  The
annual base rent payable during the first five years of the initial term is
$999,050 in equal monthly installments of $83,254.  The annual lease rent during
the last five years of the lease is $1,102,400 in equal monthly installments of
$91,867.  Under the lease, Sprint is responsible for all routine maintenance and
repairs.  The Fund XI-XII-REIT Joint Venture, as landlord, is responsible for
repair and replacement of the exterior, roof, foundation and structure.

Since the Sprint Building was purchased in July, 1999, comparative income and
expense figures are not available for the prior year.


Johnson Matthey Building / Fund XI-XII-REIT Joint Venture
---------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                      Two Months Ended
                                                                                      September 30, 1999
                                                                                      ------------------
<S>                                                                                   <C>
Revenues:
  Rental income                                                                       $       123,566
                                                                                              -------

Expenses:
  Depreciation                                                                                 42,567
  Operating costs, net of reimbursements                                                          470
                                                                                               ------
                                                                                               43,037
                                                                                               ------
Net income                                                                            $        80,529
                                                                                               ======

Occupied %                                                                                       100%

Partnership ownership %                                                                        17.09%

Cash distributed to the Partnership                                                   $        17,210

Net income allocated to the Partnership                                               $        11,220
</TABLE>


On August 17, 1999, the Fund XI-XII-REIT Joint acquired a research and
development office and warehouse building containing approximately 130,000
rentable square feet on a 10 acre tract of land located in Tredyffrim Township,
Chester County, Pennsylvania, for a purchase price of $8,000,000, excluding
acquisition costs.  The entire Johnson Mathey Building is currently under a net
lease with Johnson Matthey, and was assigned to the XI-XII-REIT Joint Venture at
closing.  The lease currently expires in June 2007, and  Johnson Matthey has the
right to extend the lease for two additional three year periods of time.  The
montly lease rent payable under the Johnson Matthey lease for the remainder of
the lease term is $65,812.50 through June 30, 2000; $67,437.54 through June 30,
2001; $69,062.50 through June 30, 2002; $71,229.17 through June 30, 2003;
$72,854.17 through June 30, 2004; $74,750.00 through 2005; $76,375.00 through
June

                                       18
<PAGE>

30, 2006; and $78,270.84 through June 30, 2007.  Under the Lease, Johnson
Matthey is required to pay as additional rent all real estate taxes, special
assessments, utilities, taxes, insurance and other operating costs with respect
to the Johnson Matthey Building during the term of the Lease.  In addition,
Johnson Matthey is responsible for all routine maintenance and repairs to the
Johnson Matthey Building. The XI-XII-REIT Joint Venture, as landlord, is
responsible for maintenance of the footings and foundations and the structural
steel columns and girders associated with the building.

Since the Johnson Matthey Building was purchased in August 1999, comparative
income and expense figures are not available for the prior year.

The Gartner Building / Fund XI-XII-REIT Joint Venture
-----------------------------------------------------


<TABLE>
<CAPTION>
                                                                                       One Month Ended
                                                                                      September 30, 1999
                                                                                      ------------------
<S>                                                                                   <C>
Revenues:
 Rental income                                                                        $      32,502

Expenses:
 Depreciation                                                                                25,874
                                                                                             ------
                                                                                             25,874
                                                                                             ------
Net income                                                                            $       6,628
                                                                                             ======

Occupied %                                                                                      100%

Partnership ownership %                                                                       17.09%

Cash distributed to the Partnership                                                   $       3,123

Net income allocated to the Partnership                                               $       1,133
</TABLE>

On September 20, 1999, The Wells Fund XI-XII-REIT Joint Venture acquired a two
story office building containing approximately 62,400 rentable square feet
located on a 4.9 acre tract of land located in Fort Meyers, Florida for a
purchase price of $8,320,000 excluding acquisition costs.

The entire 62,400 rentable square feet of the Gartner Building is currently
under a net lease agreement with Gartner and was assigned to the Fund XI-XII-
REIT Joint Venture at the closing.  The lease currently expires on January 31,
2008.  Gartner has the right to extend the Lease for two additional five year
periods of time.

                                       19
<PAGE>

The monthly lease rent payable under the Gartner lease for the remainder of the
lease term is $53,566.50 through January 31, 2000; $65,866.83 through January
31, 2001; $67,534.00 through January 31, 2002; $69,222.35 through January 31,
2003; $70,952.89 through January 31, 2005; $74,544.92 through January 31, 2006;
$76,408.54 through January 31, 2007; and $78,318.71 through January 31, 2008.

Under the Lease, Gartner is required to pay as additional rent all real estate
taxes, special assessments, utilities, taxes, insurance and other operating
costs with respect to the Gartner Building during the term of the Lease.  In
addition, Gartner is responsible for all routine maintenance and repairs to the
Gartner Building.  The Joint Venture, as landlord, is responsible for repair and
replacement of the roof, structure and paved parking areas.

Since the Gartner Building was purchased in September, 1999, comparative income
and expense figures are not available for the prior year.

                                       20
<PAGE>

                          PART II - OTHER INFORMATION
                          ---------------------------

ITEM 6 (b).  During the third quarter of 1999, the Registrant filed a Current
Report on Form 8-K dated July 2, 1999, describing the acquisition of the Sprint
Building  by the Fund XI-XII-REIT Joint Venture and a Current Report on Form 8-K
dated September 20, 1999, describing the acquisition of the Gartner Building by
the Fund XI-XII-REIT Joint Venture.

                                  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)


Dated: November 10, 1999  By: /s/ Leo F. Wells, III
                              ---------------------
                          Leo F. Wells, III, as Individual
                          General Partner and as President
                          and Chief Financial
                          Officer of Wells Capital, Inc., the
                          General Partner of Wells Partners, L.P.

                                       21