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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 June 30, 2005 or



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



For the transition period from
 to



Commission file number 0-30287



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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                         



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



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

Yes  x    No ̈



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

Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund 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, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements.



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



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



General economic risks



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



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



Enterprise risks



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



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



Real estate risks



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



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



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



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



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



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



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



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



Other operational risks



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



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



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



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



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WELLS REAL ESTATE FUND XII, L.P.





TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                     |  |         
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                     |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                    
|         |  |                       | 
|         |  | Item 1                |  | Financial Statements                                                                                                |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsJune 30, 2005 (unaudited) and December 31, 2004                                                      |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Six Months Ended June 30, 2005 (unaudited) and 2004 (unaudited)   |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2004 and Six Months Ended June 30, 2005 (unaudited) |  | 8       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Six Months Ended June 30, 2005(unaudited) and 2004 (unaudited)                     |  | 9       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                 |  | 10      
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                               |  | 15      
|         |  |                       | 
|         |  | Item 3                |  | Quantitative and Qualitative Disclosures about Market Risk                                                          |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                             |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                    
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                   |  | 22      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                         |  | 22      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                     |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                 |  | 22      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                   |  | 22      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                            |  | 22      



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WELLS REAL ESTATE FUND XII, L.P.





PART I.    FINANCIAL STATEMENTS



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



The financial
statements should be read in conjunction with the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations included in this report on Form 10-Q and with our Annual Report on
Form 10-K for the year ended December 31, 2004. Our results of operations for the three months and six months ended June 30, 2005 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



|                                                                                                                            |  |                           |            |                  |   |           
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | ---------------- | - | ----------
|                                                                                                                            |  | June 30, 2005 (unaudited) |            | December 31,2004
|Investment in joint ventures                                                                                                |  | $                         | 18,001,435 |                  | $ | 25,918,247
|Cash and cash equivalents                                                                                                   |  |                           | 12,200,148 |                  |   | 1,885,089 
|Due from affiliate                                                                                                          |  |                           | 0          |                  |   | 1,010     
|Due from joint ventures                                                                                                     |  |                           | 423,902    |                  |   | 575,686   
|                                                                                                                            |  |                           |            |                  |   |           
|Total assets                                                                                                                |  | $                         | 30,625,485 |                  | $ | 28,380,032
|                                                                                                                            |  |                           |            |                  |   |           
|                                                                                                                           
|LIABILITIES AND PARTNERS CAPITAL                                                                                          
|                                                                                                                            |  |                          
|LIABILITIES:                                                                                                                |  |                           |            |                  |   |           
|Accounts payable and accrued expenses                                                                                       |  | $                         | 30,987     |                  | $ | 35,707    
|Due to affiliates                                                                                                           |  |                           | 6,737      |                  |   | 3,135     
|Partnership distributions payable                                                                                           |  |                           | 370,306    |                  |   | 440,857   
|                                                                                                                            |  |                           |            |                  |   |           
|Total liabilities                                                                                                           |  |                           | 408,030    |                  |   | 479,699   
|                                                                                                                            |  |                          
|PARTNERS CAPITAL:                                                                                                          |  |                           |            |                  |   |           
|Limited partners:                                                                                                           |  |                           |            |                  |   |           
|Cash Preferred2,976,000 and 2,939,050 units issued and outstanding as of June 30, 2005 and December 31, 2004,
respectively |  |                           | 26,211,365 |                  |   | 25,907,456
|Tax Preferred585,119 and 622,069 units issued and outstanding as of June 30, 2005 and December 31, 2004, respectively      |  |                           | 4,006,090  |                  |   | 1,992,877 
|General partners                                                                                                            |  |                           | 0          |                  |   | 0         
|                                                                                                                            |  |                           |            |                  |   |           
|Total partners capital                                                                                                     |  |                           | 30,217,455 |                  |   | 27,900,333
|                                                                                                                            |  |                           |            |                  |   |           
|Total liabilities and partners capital                                                                                     |  | $                         | 30,625,485 |                  | $ | 28,380,032
|                                                                                                                            |  |                           |            |                  |   |           



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.





STATEMENTS OF OPERATIONS

(unaudited)



|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|------------------------------------------------------------ |  | --------------------------- | --------- | ---- | ------------------------- | --------- | ---- |  | ---- | --------- |  | - | --------- | -
|                                                             |  | Three Months Ended June 30, |           |      | Six Months Ended June 30, |          
|                                                             |  | 2005                        |           | 2004 |                           |           | 2005 |  | 2004 |          
|EQUITY IN INCOME OF JOINT VENTURES                           |  | $                           | 4,323,399 |      | $                         | 438,162   |      |  | $    | 4,769,272 |  | $ | 851,308   |  
|                                                             |  |                             |           |     
|EXPENSES:                                                    |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|Partnership administration                                   |  |                             | 49,142    |      |                           | 67,023    |      |  |      | 98,858    |  |   | 82,750    |  
|Legal and accounting                                         |  |                             | 11,970    |      |                           | 9,936     |      |  |      | 23,568    |  |   | 18,729    |  
|Other general and administrative                             |  |                             | 592       |      |                           | 701       |      |  |      | 855       |  |   | 983       |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|Total expenses                                               |  |                             | 61,704    |      |                           | 77,660    |      |  |      | 123,281   |  |   | 102,462   |  
|                                                             |  |                             |           |     
|INTEREST AND OTHER INCOME                                    |  |                             | 17,637    |      |                           | 115       |      |  |      | 25,047    |  |   | 115       |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|NET INCOME                                                   |  | $                           | 4,279,332 |      | $                         | 360,617   |      |  | $    | 4,671,038 |  | $ | 748,961   |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|CASH PREFERRED                                               |  | $                           | 829,363   |      | $                         | 638,965   |      |  | $    | 1,371,335 |  | $ | 1,305,535 |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|TAX PREFERRED                                                |  | $                           | 3,449,969 |      | $                         | (278,348  | )    |  | $    | 3,299,703 |  | $ | (556,574  | )
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|CASH PREFERRED                                               |  | $                           | 0.28      |      | $                         | 0.22      |      |  | $    | 0.46      |  | $ | 0.45      |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|TAX PREFERRED                                                |  | $                           | 5.90      |      | $                         | (0.44     | )    |  | $    | 5.49      |  | $ | (0.88     | )
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|CASH PREFERRED                                               |  |                             | 2,976,000 |      |                           | 2,934,050 |      |  |      | 2,960,025 |  |   | 2,929,050 |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  
|TAX PREFERRED                                                |  |                             | 585,119   |      |                           | 627,069   |      |  |      | 601,094   |  |   | 632,069   |  
|                                                             |  |                             |           |      |                           |           |      |  |      |           |  |   |           |  



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.





STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND FOR THE SIX MONTHS ENDED JUNE 30, 2005 (unaudited)



|                                                                                                                   |  |                  |   |  |                 |            |                        |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------- | - |  | --------------- | ---------- | ---------------------- | ----- | ------- | - | ------- | - | ---------- | - |  | - | - |  | - | ---------- | -
|                                                                                                                   |  | Limited Partners |   |  | GeneralPartners |            | Total PartnersCapital |      
|                                                                                                                   |  | Cash Preferred   |   |  | Tax Preferred   |            |                        |      
|                                                                                                                   |  | Units            |   |  | Amounts         |            |                        | Units |         |   | Amounts |   |            |  
|BALANCE, December 31, 2003                                                                                         |  | 2,934,050        |   |  | $               | 25,536,652 |                        |       | 627,069 |   |         | $ | 2,354,951  |   |  | $ | 0 |  | $ | 27,891,603 |  
|Cash preferred conversion elections                                                                                |  | (35,000          | ) |  |                 | (305,626   | )                      |       | 35,000  |   |         |   | 305,626    |   |  |   | 0 |  |   | 0          |  
|Tax preferred conversion elections                                                                                 |  | 40,000           |   |  |                 | 125,888    |                        |       | (40,000 | ) |         |   | (125,888   | ) |  |   | 0 |  |   | 0          |  
|Net income (loss)                                                                                                  |  | 0                |   |  |                 | 2,489,975  |                        |       | 0       |   |         |   | (541,812   | ) |  |   | 0 |  |   | 1,948,163  |  
|Distributions of operating cash flows ($0.66 per Cash Preferred Unit)                                              |  | 0                |   |  |                 | (1,939,433 | )                      |       | 0       |   |         |   | 0          |   |  |   | 0 |  |   | (1,939,433 | )
|                                                                                                                   |  |                  |   |  |                 |            |                        |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2004                                                                                         |  | 2,939,050        |   |  |                 | 25,907,456 |                        |       | 622,069 |   |         |   | 1,992,877  |   |  |   | 0 |  |   | 27,900,333 |  
|Tax preferred conversion elections                                                                                 |  | 36,950           |   |  |                 | 110,594    |                        |       | (36,950 | ) |         |   | (110,594   | ) |  |   | 0 |  |   | 0          |  
|Net income                                                                                                         |  | 0                |   |  |                 | 1,371,335  |                        |       | 0       |   |         |   | 3,299,703  |   |  |   | 0 |  |   | 4,671,038  |  
|Distributions of operating cash flows ($0.31 per Cash Preferred Unit)                                              |  | 0                |   |  |                 | (903,916   | )                      |       | 0       |   |         |   | 0          |   |  |   | 0 |  |   | (903,916   | )
|Distributions of net sales proceeds ($0.09 and $1.96 per Cash Preferred Unit and Tax Preferred Unit, respectively) |  | 0                |   |  |                 | (274,104   | )                      |       | 0       |   |         |   | (1,175,896 | ) |  |   | 0 |  |   | (1,450,000 | )
|                                                                                                                   |  |                  |   |  |                 |            |                        |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|BALANCE, June 30, 2005                                                                                             |  | 2,976,000        |   |  | $               | 26,211,365 |                        |       | 585,119 |   |         | $ | 4,006,090  |   |  | $ | 0 |  | $ | 30,217,455 |  
|                                                                                                                   |  |                  |   |  |                 |            |                        |       |         |   |         |   |            |   |  |   |   |  |   |            |  



See accompanying notes.



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##### Table of Contents

WELLS REAL ESTATE FUND XII, L.P.





STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                  |  |                           |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Six Months Ended June 30, |           
|                                                                                  |  | 2005                      |            |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                           |            |   |      |   |            |  
|Net income                                                                        |  | $                         | 4,671,038  |   |      | $ | 748,961    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |            |   |      |   |            |  
|Equity in income of joint ventures                                                |  |                           | (4,769,272 | ) |      |   | (851,308   | )
|Operating distributions received from joint ventures                              |  |                           | 1,151,225  |   |      |   | 1,545,084  |  
|Operating changes in assets and liabilities:                                      |  |                           |            |   |      |   |            |  
|Decrease in due from affiliate                                                    |  |                           | 1,010      |   |      |   | 0          |  
|Decrease in accounts receivable                                                   |  |                           | 0          |   |      |   | 1,377      |  
|Increase in due to affiliates                                                     |  |                           | 3,602      |   |      |   | 0          |  
|Decrease in accounts payable and accrued expenses                                 |  |                           | (4,720     | ) |      |   | (3,385     | )
|                                                                                  |  |                           |            |   |      |   |            |  
|Total adjustments                                                                 |  |                           | (3,618,155 | ) |      |   | 691,768    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                           | 1,052,883  |   |      |   | 1,440,729  |  
|                                                                                  |  |                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                           |            |   |      |   |            |  
|Investment in joint ventures                                                      |  |                           | (17,089    | ) |      |   | 0          |  
|Net sales proceeds received from joint ventures                                   |  |                           | 11,703,732 |   |      |   | 0          |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash provided by investing activities                                         |  |                           | 11,686,643 |   |      |   | 0          |  
|                                                                                  |  |                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                           |            |   |      |   |            |  
|Operating distributions paid to limited partners                                  |  |                           | (974,467   | ) |      |   | (1,280,221 | )
|Net sales proceeds distributions paid to limited partners                         |  |                           | (1,450,000 | ) |      |   | 0          |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash used in financing activities                                             |  |                           | (2,424,467 | ) |      |   | (1,280,221 | )
|                                                                                  |  |                          
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                           | 10,315,059 |   |      |   | 160,508    |  
|                                                                                  |  |                          
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                           | 1,885,089  |   |      |   | 14,922     |  
|                                                                                  |  |                           |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                         | 12,200,148 |   |      | $ | 175,430    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                           |            |   |      |   |            |  
|Partnership distributions payable                                                 |  | $                         | 370,306    |   |      | $ | 440,107    |  
|                                                                                  |  |                           |            |   |      |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.





CONDENSED NOTES TO FINANCIAL STATEMENTS



JUNE 30, 2005 (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 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. Johnson Matthey Building(2) A one-story office building and warehouse located in Wayne, Pennsylvania 4. Gartner Building(3) 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) |  | 5. Siemens Building A three-story office building located in Troy, Michigan 6. AT&T Oklahoma Building(3) A
one-story office building and a two-story office building located in Oklahoma City, Oklahoma 7. Comdata Building A three-story office building located in Brentwood, Tennessee



| | (1) | Wells Operating Partnership, L.P. 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) | This property was sold in October 2004.
| | --- | ---------------------------------------

| | (3) | 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, 2004.



On October 5, 2004, Fund XI-XII-REIT Associates sold the Johnson Matthey
Building to an unrelated third party for a gross sale price of $10,000,000. As a result of the sale, the Partnership received net sale proceeds of approximately $1,653,000 and was allocated a gain of approximately $413,000.



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, the Partnership received net sale proceeds of approximately $2,118,000 and was allocated a gain of approximately $768,000. The gain recognized from the sale of
the Gartner Building may be adjusted as additional information becomes available in subsequent periods.



On April 13, 2005, 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, the Partnership received net sale proceeds of
approximately $9,585,000 and was allocated a gain of approximately $3,259,000. The gain recognized from the sale of the AT&T Oklahoma Building may be adjusted as additional information becomes available in subsequent periods.



|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, 2004.



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Investment in Joint Ventures



The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval
by the Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments. Accordingly, the Partnerships investments in
the Joint Ventures are recorded 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 and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations are distributed to the joint venture
partners on a quarterly basis.



The Partnership adopted FIN 46(R) effective
March 31, 2004. The Partnership owns interests in certain unconsolidated joint venture partnerships (see Note 4). The joint venture partners of the Partnerships unconsolidated joint ventures in which the Partnership owns an interest have
disproportionate voting rights for certain major decisions relative to their obligations to absorb expected losses and rights to receive residual returns of such ventures. However, management has evaluated such joint ventures and has determined that
they are not variable interest entities under the provisions of FIN 46(R) because not substantially all of the activities of the joint ventures are conducted on behalf of a joint venture partner with disproportionately fewer voting rights.
Accordingly, the adoption of FIN 46(R) did not result in the consolidation of any previously unconsolidated entities.



Distribution 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.



Distribution of Sale Proceeds



Upon the sale of properties, the 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
each limited partner has 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;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------



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.



|3. | 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 which are 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 of joint ventures in
the accompanying statements of operations. The Partnerships share of management and leasing



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##### Table of Contents

fees and lease acquisition costs incurred through the Joint Ventures is $17,414 and $28,992 for the three months ended June 30, 2005 and 2004, respectively,
and $58,212 and $72,604 for the six months ended June 30, 2005 and 2004, respectively.



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 $21,565 and $25,028 for the three months ended June 30, 2005 and 2004, respectively, and $43,365 and $41,959 for the six months
ended June 30, 2005 and 2004, respectively. As of December 31, 2004, overpayments to Wells Capital for administrative reimbursements of $1,010 are recorded as due from affiliate in the accompanying balance sheet. As of December 31, 2004,
administrative reimbursements due to Wells Management of $3,135 are recorded as due to affiliates in the accompanying balance sheet. As of June 30, 2005, administrative reimbursements due to Wells Management and Wells Capital of $6,737 are recorded
as due to affiliates in the accompanying balance sheet.



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



Summary of Operations



Condensed financial information for the Joint Ventures for the three months and six months ended June 30, 2005 and 2004, respectively, is presented below:



|                            |  |                             |           |                                          |   |                                     |  |                             |           |   |      |   |           |      |   |            |     |      |   |           |  |   |            |  |   |          
|--------------------------- |  | --------------------------- | --------- | ---------------------------------------- | - | ----------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | ---- | - | ---------- | --- | ---- | - | --------- |  | - | ---------- |  | - | ---------
|                            |  | Total Revenues              |           | Income (Loss) From Continuing Operations |   | Income From Discontinued Operations |  | Net Income                 
|                            |  | Three Months Ended June 30, |           | Three Months Ended June 30,              |   | Three Months Ended June 30,         |  | Three Months Ended June 30,
|                            |  | 2005                        |           | 2004                                     |   | 2005                                |  |                             | 2004      |   | 2005 |   |           | 2004 |   | 2005       |     | 2004
|Fund XI-XII-REIT Associates |  | $                           | 7,996     |                                          | $ | 481,005                             |  | $                           | (211,102  | ) |      | $ | 251,879   |      | $ | 4,509,019  | (1) |      | $ | 263,549   |  | $ | 4,297,917  |  | $ | 515,428  
|Fund XII-REIT Associates    |  |                             | 1,082,890 |                                          |   | 1,064,633                           |  |                             | 697,030   |   |      |   | 552,428   |      |   | 7,280,492  | (2) |      |   | 225,735   |  |   | 7,977,522  |  |   | 778,163  
|                            |  |                             |           |                                          |   |                                     |  |                             |           |   |      |   |           |      |   |            |     |      |   |           |  |   |            |  |   |          
|                            |  | $                           | 1,090,886 |                                          | $ | 1,545,638                           |  | $                           | 485,928   |   |      | $ | 804,307   |      | $ | 11,789,511 |     |      | $ | 489,284   |  | $ | 12,275,439 |  | $ | 1,293,591
|                            |  |                             |           |                                          |   |                                     |  |                             |           |   |      |   |           |      |   |            |     |      |   |           |  |   |            |  |   |          
|                            |  |                             |           |                                         
|                            |  | Total Revenues              |           | Income (Loss) From Continuing Operations |   | Income From Discontinued Operations |  | Net Income                 
|                            |  | Six Months Ended June 30,   |           | Six Months Ended June 30,                |   | Six Months Ended June 30,           |  | Six Months Ended June 30,  
|                            |  | 2005                        |           | 2004                                     |   | 2005                                |  |                             | 2004      |   | 2005 |   |           | 2004 |   | 2005       |     | 2004
|Fund XI-XII-REIT Associates |  | $                           | 20,009    |                                          | $ | 753,278                             |  | $                           | (438,219  | ) |      | $ | 284,622   |      | $ | 4,693,491  | (1) |      | $ | 527,541   |  | $ | 4,255,272  |  | $ | 812,163  
|Fund XII-REIT Associates    |  |                             | 2,151,308 |                                          |   | 2,128,683                           |  |                             | 1,368,732 |   |      |   | 1,086,249 |      |   | 7,616,084  | (2) |      |   | 497,545   |  |   | 8,984,816  |  |   | 1,583,794
|                            |  |                             |           |                                          |   |                                     |  |                             |           |   |      |   |           |      |   |            |     |      |   |           |  |   |            |  |   |          
|                            |  | $                           | 2,171,317 |                                          | $ | 2,881,961                           |  | $                           | 930,513   |   |      | $ | 1,370,871 |      | $ | 12,309,575 |     |      | $ | 1,025,086 |  | $ | 13,240,088 |  | $ | 2,395,957
|                            |  |                             |           |                                          |   |                                     |  |                             |           |   |      |   |           |      |   |            |     |      |   |           |  |   |            |  |   |          

---



| | (1) | Includes a gain of $4,493,322 recognized on the sale of the Gartner Building, of which
$767,864 was attributable to the Partnership and has been allocated to the Cash Preferred and Tax Preferred partners pursuant to the provisions of the partnership agreement(Note 2).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Includes a gain of $7,243,905 recognized on the sale of the AT&T Oklahoma Building, of
which $3,258,888 was attributable to the Partnership and has been allocated to the Cash Preferred and Tax Preferred partners pursuant to the provisions of the partnership agreement(Note 2).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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, 2004.



Overview



Management believes that the Partnership typically operates through the following five key
life cycle phases. The time spent in 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 real estate
assets are owned and operated by the Partnership during the initial lease terms of the tenants. Strategic dispositions could occur during this phase in order to capitalize on market conditions;



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

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



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

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



Portfolio Overview



We are currently 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 investors.



Our portfolio benefited from a number of positive events during the second quarter of 2005. Specifically, the Gartner Building and the AT&T Oklahoma Building were
sold together as part of a large package sale of properties for sale prices well in excess of their respective purchase prices. We completed the first distribution of net sale proceeds to the limited partners in May 2005 of approximately $1,450,000.
We also announced the next planned distribution of net sale proceeds to limited partners of approximately $11,900,000, which is scheduled to be paid in the fourth quarter of 2005.



While the foregoing property sales have delivered positive results, we are also facing some near-term leasing issues with regard to 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.



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##### Table of Contents

Operating distributions payable to the Cash Preferred limited partners for the second quarter of 2005 decreased from the
first quarter of 2005 primarily as a result of a decrease in operating cash flow due to the sale of the Gartner Building and the AT&T Oklahoma Building in the second quarter of 2005. The General Partners anticipate that operating distributions
may decline in the near term, given the reduced cash flow from the property sales and several potential capital issues, including (i) re-leasing costs for the 20/20 Building and 111 Southchase Boulevard; and (ii) other anticipated capital
improvements for the Comdata Building and the 20/20 Building.



Property
Summary



Information related to the properties owned, or previously owned,
by the Joint Ventures follows:



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



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



| |  |  | The Johnson Matthey Building was sold on October 5, 2004 for a gain of approximately $2,419,000, of which approximately $413,000 was allocated to the Partnership.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Gartner Building was sold on April 13, 2005 in connection with a large package sale for a gain of approximately $4,493,000, of which approximately $768,000 was allocated to the
Partnership.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | The AT&T Oklahoma Building was sold on April 13, 2005 in connection with a large package sale for a gain of approximately $7,244,000, of which approximately $3,259,000 was
allocated to the Partnership.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | As of June 30, 2005, the property sales described above generated approximately $13.4 million net sale proceeds allocated to the Partnership, of which approximately $1.5 million has
been distributed to the limited partners, and approximately $11.9 million is earmarked to be distributed to the limited partners in the fourth quarter of 2005 (See Liquidity and Capital Resources below).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



Results of Operations



Equity in Income of Joint Ventures



Equity in income of the Joint Ventures was $4,323,399 and $438,162 for the three months ended June 30, 2005 and 2004, respectively, and $4,769,272 and $851,308 for the
six months ended June 30, 2005 and 2004, respectively. The 2005 increases are primarily attributable to (i) the gains allocated to the Partnership as a result of the sales of the Gartner Building and the AT&T Oklahoma Building in the second
quarter of 2005, and (ii) a decline in depreciation expense as a result of changing the estimated weighted-average composite useful life from 25 years to 40 years for all the buildings owned through the Joint Ventures effective July 1, 2004,
partially offset by (iii) forgone income as a result of the sales of the Johnson Matthey Building in October 2004 and the



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Gartner Building and the AT&T Oklahoma Building in April 2005, and (iv) a decrease in operating income generated by Fund XI-XII-REIT Associates as the
sole tenant of the 20/20 Building vacated the property in May 2004.



We expect
future equity in income of Joint Ventures to decrease as a result of forgone operating income resulting from the sales of the Gartner Building and the AT&T Oklahoma Building in the second quarter of 2005.



Expenses of the Partnership



Total expenses of the Partnership were $61,704 and $77,660 for the three months ended June
30, 2005 and 2004, respectively, and $123,281 and $102,462 for the six months ended June 30, 2005 and 2004, respectively. The decrease for the three months ended June 30, 2005, as compared to the three months ended June 30, 2004, is primarily
attributable to a an increase in the 2003 estimated Tennessee partnership franchise and excise taxes incurred in the second quarter of 2004. The increase for the six months ended June 30, 2005, as compared to the six months ended June 30, 2004, is
primarily a result of (i) an increase in the 2004 estimated Tennessee partnership franchise and excise taxes incurred in the first quarter of 2005, and (ii) an increase in legal and accounting fees resulting from additional reporting and regulatory
requirements. We anticipate additional increases in administrative salaries and accounting expenses in the future related to implementing and adhering to increased reporting and regulatory requirements on a going-forward basis.



Liquidity and Capital Resources



Our operating strategy entails funding expenses related to the recurring operations of the
properties and the portfolio with operating cash flows, including distributions received from the Joint Ventures, and assessing the amount of remaining cash flows that will be required to fund known re-leasing costs and other capital improvements.
Any residual operating cash flows are considered available for distribution to the limited partners and 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 would be adversely affected.



Short-Term Liquidity



During the six months ended June 30, 2005, we generated net operating cash flows, including operating distributions received from the Joint Ventures, of approximately $1.1 million, as compared to approximately $1.4
million for the six months ended June 30, 2004. The 2005 decline is primarily due to a decline in operating distributions received from Joint Ventures as a result of the sales of the Johnson Matthey Building in October 2004, and 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. During the six months ended June 30, 2005, we received approximately $11,704,000 in net sale proceeds from the sales of the Gartner Building and the AT&T Oklahoma Building.



Our General Partners anticipate that future operating distributions to limited partners may
decline or be reserved entirely in the near term due to (i) funding our pro-rata share of anticipated re-leasing costs for the 20/20 Building and 111 Southchase Boulevard, both of which are currently vacant, (ii) funding our pro-rata share of
anticipated capital improvements for the 20/20 Building, and (iii) loss of operating cash flows resulting from the recent sales of the Gartner Building and the AT&T Oklahoma Building in April 2005.



We believe that the cash on hand and operating distributions due from Joint Ventures are
sufficient to cover the Partnerships working capital needs, including liabilities of approximately $408,000, as of June 30, 2005. Our



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General Partners anticipate that the Partnership will be able to fund its proportionate share of the anticipated capital expenditures noted above using cash
on hand and future operating cash flow during 2005.



Long-Term Liquidity



We expect that our future sources of capital will be primarily derived
from operating cash flows generated from the Joint Ventures and net proceeds generated from the selective and strategic sale of properties. Our future long-term liquidity requirements will include, but not be limited to, tenant improvements,
renovations, expansions and other significant capital improvements necessary for properties owned through the Joint Ventures. We expect to continue to use substantially all future net cash flows from operations, 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 following each quarter-end. 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 funded by the Partnership and the respective Joint
Venture partners on a pro-rata basis.



As of June 30, 2005, we have received,
used, distributed, and held net proceeds from the sale of properties as presented below:



|                                        |  |                   |            |                                       |       |         |                                              |   |                                  |  |                                 |   |                                                |  |  |   |           |  |   |           
|--------------------------------------- |  | ----------------- | ---------- | ------------------------------------- | ----- | ------- | -------------------------------------------- | - | -------------------------------- |  | ------------------------------- | - | ---------------------------------------------- |  |  | - | --------- |  | - | ----------
|Property Sold                           |  | Net Sale Proceeds |            | Partnerships Approximate Ownership % |       |         | Net Proceeds Attributable to the Partnership |   | Cumulative Net Proceeds Invested |  | Distributed to Partners to date |   | Undistributed Net Proceeds as of June 30, 2005
|                                        |  |                   |            | Amount                                |       | Purpose |                                              |  
|Johnson Matthey Building (sold in 2004) |  | $                 | 9,675,000  |                                       | 17.1  | %       |                                              | $ | 1,653,361                        |  | $                               | 0 |                                                |  |  | $ | 1,450,000 |  | $ | 203,361   
|Gartner Building (sold in 2005)         |  | $                 | 12,395,896 |                                       | 17.1  | %       |                                              |   | 2,118,335                        |  |                                 | 0 |                                                |  |  |   | 0         |  |   | 2,118,335 
|AT&T Oklahoma Building (sold in 2005)   |  | $                 | 21,306,563 |                                       | 44.99 | %       |                                              |   | 9,585,397                        |  |                                 | 0 |                                                |  |  |   | 0         |  |   | 9,585,397 
|                                        |  |                   |            |                                       |       |         |                                              |   |                                  |  |                                 |   |                                                |  |  |   |           |  |   |           
|Total                                   |  |                   |            |                                       |       |         |                                              | $ | 13,357,093                       |  | $                               | 0 |                                                |  |  | $ | 1,450,000 |  | $ | 11,907,093
|                                        |  |                   |            |                                       |       |         |                                              |   |                                  |  |                                 |   |                                                |  |  |   |           |  |   |           



During the second quarter 2005, we
received net sale proceeds of approximately $2,100,000 and approximately $9,600,000 from the sales of the Gartner Building and the AT&T Oklahoma Building, respectively, and



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distributed approximately $1,500,000 of net sale proceeds to the limited partners from the sale of the Johnson Matthey Building. Upon evaluating the capital
needs of the existing properties in which we hold interests, our General Partners announced their intention to distribute approximately $11,900,000 of these net sale proceeds in the fourth quarter of 2005, as discussed below, and retain the residual
balance of approximately $7,000.



Contractual Obligations and Commitments



Distribution of Net Sale Proceeds



In June 2005, our General Partners announced their intention to distribute net sale proceeds
of approximately $11,900,000 in the fourth quarter of 2005 to the limited partners of record as of September 30, 2005, which, under the terms of the partnership agreement, does not include limited partners acquiring units after June 30, 2005.



This distribution has not been formally declared by our General Partners. In
accordance with the terms of the partnership agreement, our General Partners may elect to retain reserves deemed reasonably necessary for the Partnership in the sole discretion of our General Partners. Thus, should a change in circumstances prior to
the intended distribution date require our General Partners to reevaluate the Partnerships reserve requirements, it is possible that this distribution may not occur, or that distributions may be made at a lower amount.



Related-Party Transactions and Agreements



Related-Party Fees and Reimbursements



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



Economic Dependency



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



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



WREFs net income was
approximately $14.4 million for the six months ended June 30, 2005. Future net income generated by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of
investor proceeds raised from the sale of common stock of Wells Real Estate Investment Trust II, Inc., an affiliated real estate investment trust for which Wells Capital serves as the advisor, and the volume of future acquisitions and dispositions
of real estate assets by Wells-sponsored programs. As of June 30, 2005 and December 31, 2004, WREF held cash balances of approximately $32.2 million and $6.3 million, respectively. WREF believes that it has adequate liquidity available in the form
of cash on hand and current receivables necessary to meet its obligations as they become due.



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Dismissal of Litigation Against Related Parties



During early 2004, a putative class action complaint was filed against, among others, Leo. F. Wells, III, and Wells Capital, our General
Partner, and Wells Management. The Court granted the plaintiffs motion to permit voluntary dismissal of this suit, and it 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. 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 Wells 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 re-enter the orders to give the plaintiffs an opportunity to file a motion for reconsideration or notice of appeal.



Inflation



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



Application of Critical Accounting Policies



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



Below is a discussion of the accounting policies used by the Partnership and the Joint Ventures, which are considered to be critical in that they may require complex
judgment in their application or require estimates about matters that are inherently uncertain.



Investment in Real Estate Assets



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



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



Effective July 1, 2004, the Joint
Ventures extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to our net income for the six months ended June 30, 2005. We believe that this change more appropriately
reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be
misstated.



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Valuation of Real Estate Assets



We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which
we have an ownership interest, either directly or through investments in the Joint Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the
asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. We have determined
that there has been no impairment in the carrying value of any of the real estate assets held by the Partnership at June 30, 2005.



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



Potential Tax Impact for Limited Partners Holding Tax Preferred UnitsAmerican
Jobs Creation Act of 2004



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



The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of one of our General Partners, including the Principal Executive Officer and
Principal Financial Officer, of the effectiveness of the design and operation of the Partnerships disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a  14 under the Securities
Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were effective.



There were no significant changes in the Partnerships internal control over financial
reporting during the quarter ended June 30, 2005 that have materially affected, or are likely to materially affect, the Partnerships internal control over financial reporting.



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PART II.    OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS



We were not involved in any material legal proceedings during the quarter ended June 30, 2005 requiring disclosure under Item 103 of Regulation S-K.



ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



|(a) | We did not sell any equity securities that were not registered under the Securities Act of 1933 during the quarter ended June 30, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended June 30, 2005.
|--- | ------------------------------------------------------------------------



ITEM 3.    DEFAULTS UPON SENIOR SECURITIES



We were not subject to any indebtedness, and therefore, we did not default respect to any indebtedness during the quarter ended June 30, 2005.



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



No matters were submitted to a vote of our limited partners during the quarter ended June 30, 2005.



ITEM 5.    OTHER INFORMATION



|(a) | During the quarter ended June 30, 2005, there was no information which was 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 Second 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)                                                     
|                |  | 
|August 12, 2005 |  |  |  | /s/    LEO F. WELLS, III                                                        
|                |  |  |  | Leo F. Wells, III                                                               
|                |  |  |  | President, Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|                |  | 
|August 12, 2005 |  |  |  | /s/    DOUGLAS P. WILLIAMS                                                      
|                |  |  |  | Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.          



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EXHIBIT INDEX



TO SECOND 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