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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2007 or



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------

For the transition period from
 to

Commission file number 0-30287



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WELLS REAL ESTATE FUND XII, L.P.

(Exact name of registrant as specified in
its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                        |  | 58-2438242                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy., Norcross, Georgia                      |  | 30092-3365                             
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         

N/A

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

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

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund XII, L.P. (the Partnership or the Registrant) other than historical
facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans,
strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended
to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will, expect, intend,
anticipate, estimate, believe, continue, or other similar words. Specifically, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future
obligations, and the amount and timing of any future distributions to limited partners to be forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this
report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update
or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are
subject to unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or
impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide distributions to
partners, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A. in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2006 for a discussion of some of the risks and
uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.



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WELLS REAL ESTATE FUND XII, L.P.



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                            |  |         
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                            |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Balance Sheets  March 31, 2007 (unaudited) and December 31, 2006                                                          |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2006 and the Three Months Ended March 31, 2007 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 14      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |  | 20      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                    |  | 20      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                          |  | 20      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                               |  | 21      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 21      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                            |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 21      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                          |  | 21      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                   |  | 21      



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|PART I. | FINANCIAL INFORMATION
|------- | ---------------------



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

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

The accompanying financial statements should be read in conjunction with the notes to the Partnerships
financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations included both in this report on Form 10-Q and in the Partnerships Annual Report on Form 10-K for the year ended
December 31, 2006. The Partnerships results of operations for the three months ended March 31, 2007 are not necessarily indicative of the operating results expected for the full year.



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WELLS REAL ESTATE FUND XII, L.P.



BALANCE SHEETS

ASSETS



|                             |  |                            |            |                  |   |           
|---------------------------- |  | -------------------------- | ---------- | ---------------- | - | ----------
|                             |  | (Unaudited) March 31, 2007 |            | December 31,2006
|Investment in joint ventures |  | $                          | 17,504,124 |                  | $ | 17,507,984
|Cash and cash equivalents    |  |                            | 122,932    |                  |   | 144,645   
|Due from joint ventures      |  |                            | 416,876    |                  |   | 418,013   
|Other assets                 |  |                            | 709        |                  |   | 1,198     
|                             |  |                            |            |                  |   |           
|Total assets                 |  | $                          | 18,044,641 |                  | $ | 18,071,840
|                             |  |                            |            |                  |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                                        |  |   |            |  |   |           
|------------------------------------------------------- |  | - | ---------- |  | - | ----------
|LIABILITIES:                                            |  |   |            |  |   |           
|Accounts payable and accrued expenses                   |  | $ | 13,751     |  | $ | 16,416    
|Due to affiliates                                       |  |   | 16,694     |  |   | 5,673     
|Partnership distributions payable                       |  |   | 283,077    |  |   | 308,811   
|                                                        |  |   |            |  |   |           
|Total liabilities                                       |  |   | 313,522    |  |   | 330,900   
|                                                        |  |  
|PARTNERS CAPITAL:                                      |  |   |            |  |   |           
|Limited partners:                                       |  |   |            |  |   |           
|Cash Preferred  3,003,500 units issued and outstanding |  |   | 17,493,646 |  |   | 17,375,625
|Tax Preferred  557,619 units issued and outstanding    |  |   | 237,473    |  |   | 365,315   
|General partners                                        |  |   | 0          |  |   | 0         
|                                                        |  |   |            |  |   |           
|Total partners capital                                 |  |   | 17,731,119 |  |   | 17,740,940
|                                                        |  |   |            |  |   |           
|Total liabilities and partners capital                 |  | $ | 18,044,641 |  | $ | 18,071,840
|                                                        |  |   |            |  |   |           

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF OPERATIONS



|                                                             |  |                                          |           |   |      |   |           |  
|------------------------------------------------------------ |  | ---------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                             |  | (Unaudited) Three Months Ended March 31, |          
|                                                             |  | 2007                                     |           |   | 2006 |  
|                                                             |  |                                         
|EQUITY IN INCOME OF JOINT VENTURES                           |  | $                                        | 327,571   |   |      | $ | 258,824   |  
|                                                             |  |                                         
|EXPENSES:                                                    |  |                                          |           |   |      |   |           |  
|General and administrative                                   |  |                                          | 56,614    |   |      |   | 94,159    |  
|                                                             |  |                                         
|INTEREST AND OTHER INCOME                                    |  |                                          | 2,299     |   |      |   | 6,376     |  
|                                                             |  |                                          |           |   |      |   |           |  
|NET INCOME                                                   |  | $                                        | 273,256   |   |      | $ | 171,041   |  
|                                                             |  |                                          |           |   |      |   |           |  
|                                                             |  |                                         
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:             |  |                                          |           |   |      |   |           |  
|CASH PREFERRED                                               |  | $                                        | 401,098   |   |      | $ | 296,154   |  
|                                                             |  |                                          |           |   |      |   |           |  
|TAX PREFERRED                                                |  | $                                        | (127,842  | ) |      | $ | (125,113  | )
|                                                             |  |                                          |           |   |      |   |           |  
|                                                             |  |                                         
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                                          |           |   |      |   |           |  
|CASH PREFERRED                                               |  |                                          | $ 0.13    |   |      |   | $ 0.10    |  
|                                                             |  |                                          |           |   |      |   |           |  
|TAX PREFERRED                                                |  |                                          | $(0.23    | ) |      |   | $(0.22    | )
|                                                             |  |                                          |           |   |      |   |           |  
|                                                             |  |                                         
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |                                          |           |   |      |   |           |  
|CASH PREFERRED                                               |  |                                          | 3,003,500 |   |      |   | 3,003,500 |  
|                                                             |  |                                          |           |   |      |   |           |  
|TAX PREFERRED                                                |  |                                          | 557,619   |   |      |   | 557,619   |  
|                                                             |  |                                          |           |   |      |   |           |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2006 AND

FOR THE THREE MONTHS ENDED MARCH 31, 2007 (UNAUDITED)



|                                                                                     |  |                  |  |        |                  |   |                         |         |   |        |   |          |   |  |   |   |  |   |            |  
|------------------------------------------------------------------------------------ |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ------- | - | ------ | - | -------- | - |  | - | - |  | - | ---------- | -
|                                                                                     |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |        
|                                                                                     |  | Cash Preferred   |  |        | Tax Preferred    |   |                         |        
|                                                                                     |  | Units            |  | Amount |                  |   | Units                   |         |   | Amount |   |          |  
|BALANCE, December 31, 2005                                                           |  | 3,000,000        |  | $      | 17,301,510       |   |                         | 561,119 |   |        | $ | 870,955  |   |  | $ | 0 |  | $ | 18,172,465 |  
|                                                                                     |  |                  |  |        |                  |  
|Tax preferred conversion elections                                                   |  | 3,500            |  |        | 5,433            |   |                         | (3,500  | ) |        |   | (5,433   | ) |  |   | 0 |  |   | 0          |  
|Net income (loss)                                                                    |  | 0                |  |        | 1,303,927        |   |                         | 0       |   |        |   | (500,207 | ) |  |   | 0 |  |   | 803,720    |  
|Distributions of operating cash flow($0.41 per weighted-average Cash Preferred Unit) |  | 0                |  |        | (1,235,245       | ) |                         | 0       |   |        |   | 0        |   |  |   | 0 |  |   | (1,235,245 | )
|                                                                                     |  |                  |  |        |                  |   |                         |         |   |        |   |          |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2006                                                           |  | 3,003,500        |  |        | 17,375,625       |   |                         | 557,619 |   |        |   | 365,315  |   |  |   | 0 |  |   | 17,740,940 |  
|                                                                                     |  |                  |  |        |                  |  
|Net income (loss)                                                                    |  | 0                |  |        | 401,098          |   |                         | 0       |   |        |   | (127,842 | ) |  |   | 0 |  |   | 273,256    |  
|Distributions of operating cash flow($0.09 per weighted-average Cash Preferred Unit) |  | 0                |  |        | (283,077         | ) |                         | 0       |   |        |   | 0        |   |  |   | 0 |  |   | (283,077   | )
|                                                                                     |  |                  |  |        |                  |   |                         |         |   |        |   |          |   |  |   |   |  |   |            |  
|BALANCE, March 31, 2007                                                              |  | 3,003,500        |  | $      | 17,493,646       |   |                         | 557,619 |   |        | $ | 237,473  |   |  | $ | 0 |  | $ | 17,731,119 |  
|                                                                                     |  |                  |  |        |                  |   |                         |         |   |        |   |          |   |  |   |   |  |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF CASH FLOWS



|                                                                                  |  |                                |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                  |  | (Unaudited) Three Months Ended |         
|                                                                                  |  | March 31,                      |         
|                                                                                  |  | 2007                           |          |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                |          |   |      |   |          |  
|Net income                                                                        |  | $                              | 273,256  |   |      | $ | 171,041  |  
|Operating distributions received from joint ventures                              |  |                                | 418,013  |   |      |   | 392,215  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Equity in income of joint ventures                                                |  |                                | (327,571 | ) |      |   | (258,824 | )
|Changes in assets and liabilities:                                                |  |                                |          |   |      |   |          |  
|Decrease (increase) in other assets                                               |  |                                | 489      |   |      |   | (1,262   | )
|(Decrease) increase in accounts payable and accrued expenses                      |  |                                | (2,665   | ) |      |   | 49,550   |  
|Increase (decrease) in due to affiliates                                          |  |                                | 11,021   |   |      |   | (1,334   | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                                | 372,543  |   |      |   | 351,386  |  
|                                                                                  |  |                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                |          |   |      |   |          |  
|Investment in joint ventures                                                      |  |                                | (85,445  | ) |      |   | (17,089  | )
|                                                                                  |  |                               
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                |          |   |      |   |          |  
|Operating distributions paid to limited partners                                  |  |                                | (308,811 | ) |      |   | (413,761 | )
|                                                                                  |  |                                |          |   |      |   |          |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                         |  |                                | (21,713  | ) |      |   | (79,464  | )
|                                                                                  |  |                               
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                | 144,645  |   |      |   | 373,378  |  
|                                                                                  |  |                                |          |   |      |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                              | 122,932  |   |      | $ | 293,914  |  
|                                                                                  |  |                                |          |   |      |   |          |  
|                                                                                  |  |                               
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                                |          |   |      |   |          |  
|Partnership distributions payable                                                 |  | $                              | 283,077  |   |      | $ | 308,811  |  
|                                                                                  |  |                                |          |   |      |   |          |  

See accompanying notes.

.



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WELLS REAL ESTATE FUND XII, L.P.



CONDENSED NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2007 (unaudited)



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

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

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

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

The Partnership owns interests in all of its real estate assets
through joint ventures with other entities affiliated with the General Partners and Wells Operating Partnership, L.P. (Wells OP). Wells OP is a Delaware limited partnership with Wells Real Estate Investment Trust, Inc. (Wells
REIT) serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust. 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. 111 Southchase Boulevard A two-story manufacturing and office building located in Fountain Inn, South Carolina  2. 20/20 Building A three-story office building located in Leawood, Kansas  3. Gartner Building(1) 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. |  | 4. Siemens Building A three-story office building located in Troy, Michigan  5. AT&T Oklahoma Building(1) A one-story office building and a two-story
office building located in Oklahoma City, Oklahoma  6. Comdata Building A three-story office building located in Brentwood, Tennessee



| | (1) | 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 Annual Report on Form 10-K for the year ended December 31, 2006.



|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 (SEC), 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 Annual Report on Form 10-K for the year ended December 31, 2006.

Investment in Joint Ventures

The Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities under the provisions of Financial Accounting Standards Board
Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial
Statements. The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major
decision or any action that would materially affect the Joint Ventures, or their real property investments. Accordingly, upon applying the provisions of Statement of Financial Accounting Standard (SFAS) No. 94, Consolidation of
All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in the Joint Ventures using the equity method of
accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income (loss)
and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

Other Assets

Other
assets is comprised of interest income receivable as of March 31, 2007 and December 31, 2006.



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##### Table of Contents

Distributions of Net Cash from Operations

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



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



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



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

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

Distribution of Sale Proceeds

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



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



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



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



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



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



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



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



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



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.



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

Gains on the sale or exchange of the Partnerships properties will be
allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the
partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the
deductions for depreciation, amortization, and cost recovery previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale
of such property.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under GAAP, including amending SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 157
emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be effective for the Partnership beginning January 1, 2008. The Partnership is currently assessing provisions and
evaluating the financial impact of SFAS No. 157 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income
Taxes, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 was effective for the Partnership beginning January 1, 2007. The adoption of this
pronouncement has not had a material impact on the Partnerships financial statements.



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

Summary of Financial Information

Condensed financial information for the Joint Ventures for the three months ended March 31, 2007 and 2006, respectively, is presented below:



|                            |  |                    |           |                                        |   |           |                                    |      |                    |  |      |          |      |  |      |       |      |   |     |  |   |         |  |   |          |  
|--------------------------- |  | ------------------ | --------- | -------------------------------------- | - | --------- | ---------------------------------- | ---- | ------------------ |  | ---- | -------- | ---- |  | ---- | ----- | ---- | - | --- |  | - | ------- |  | - | -------- | -
|                            |  | Total Revenues     |           | Income (Loss) FromContinuingOperations |   |           | Income FromDiscontinued Operations |      | Net Income (Loss)  | 
|                            |  | Three Months Ended |           | Three Months Ended                     |   |           | Three Months Ended                 |      | Three Months Ended | 
|                            |  | March 31,          |           | March 31,                              |   |           | March 31,                          |      | March 31,          | 
|                            |  | 2007               |           | 2006                                   |   | 2007      |                                    | 2006 |                    |  | 2007 |          | 2006 |  | 2007 |       | 2006 |  
|Fund XI-XII-REIT Associates |  | $                  | 403,648   |                                        | $ | 0         |                                    | $    | 132,931            |  | $    | (267,162 | )    |  | $    | 388   |      | $ | 0   |  | $ | 133,319 |  | $ | (267,162 | )
|Fund XII-REIT Associates    |  |                    | 1,083,073 |                                        |   | 1,070,434 |                                    |      | 676,668            |  |      | 676,309  |      |  |      | 820   |      |   | 493 |  |   | 677,488 |  |   | 676,802  |  
|                            |  |                    |           |                                        |   |           |                                    |      |                    |  |      |          |      |  |      |       |      |   |     |  |   |         |  |   |          |  
|                            |  | $                  | 1,486,721 |                                        | $ | 1,070,434 |                                    | $    | 809,599            |  | $    | 409,147  |      |  | $    | 1,208 |      | $ | 493 |  | $ | 810,807 |  | $ | 409,640  |  
|                            |  |                    |           |                                        |   |           |                                    |      |                    |  |      |          |      |  |      |       |      |   |     |  |   |         |  |   |          |  



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##### Table of Contents

The Partnership allocates its share of earnings generated by the properties owned by the Joint Ventures to its Cash
Preferred and Tax Preferred limited partners pursuant to the partnership agreement provisions outlined in Note 2 for net income, net loss, and gain on sale, respectively. The components of income (loss) from discontinued operations recognized by the
Joint Ventures are provided below:



|                            |  |                                   |       |                                   |   |       |  |                 |       |              |   |       |  |   |   |  |   |    
|--------------------------- |  | --------------------------------- | ----- | --------------------------------- | - | ----- |  | --------------- | ----- | ------------ | - | ----- |  | - | - |  | - | ---
|                            |  | Three Months Ended March 31, 2007 |       | Three Months Ended March 31, 2006
|                            |  | OperatingIncome (Loss)            |       | Gain on Sale                      |   | Total |  | OperatingIncome |       | Gain on Sale |   | Total
|Fund XI-XII-REIT Associates |  | $                                 | 388   |                                   | $ | 0     |  | $               | 388   |              | $ | 0     |  | $ | 0 |  | $ | 0  
|Fund XII-REIT Associates    |  |                                   | 820   |                                   |   | 0     |  |                 | 820   |              |   | 493   |  |   | 0 |  |   | 493
|                            |  |                                   |       |                                   |   |       |  |                 |       |              |   |       |  |   |   |  |   |    
|                            |  | $                                 | 1,208 |                                   | $ | 0     |  | $               | 1,208 |              | $ | 493   |  | $ | 0 |  | $ | 493
|                            |  |                                   |       |                                   |   |       |  |                 |       |              |   |       |  |   |   |  |   |    

Due from Joint Ventures

As presented in the accompanying balance sheets, due from joint ventures as of March 31, 2007 and December 31, 2006 represents operating cash flow generated by the Joint Ventures for the three months ended
March 31, 2007 and December 31, 2006, respectively, which is attributable to the Partnership.



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

Management and Leasing Fees

In accordance with the property management and leasing agreement, 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) 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, which is assessed periodically based on market studies, or (b) in the case of commercial properties leased on a long-term net basis (ten or more years), the maximum property management fee from
such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term.
Management and leasing fees are paid by the Joint Ventures and, accordingly, included in equity in income of joint ventures in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease
acquisition costs incurred through the Joint Ventures is $25,652 and $20,479 for the three months ended March 31, 2007 and 2006, respectively.

Administrative 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 $20,775 and $16,804 for the three months ended March 31, 2007 and 2006, respectively. In addition, Wells Capital pays for certain operating expenses of the Partnership (bill-backs)
directly and invoices the Partnership for the reimbursement thereof. As of March 31, 2007 and December 31, 2006, the due to affiliates balances represent administrative reimbursements and bill-backs due to Wells Management and/or Wells
Capital.

Economic Dependency

We have engaged Wells
Capital and Wells Management to provide certain essential services for us, including supervision of the management and leasing of our properties, asset acquisition and disposition services, as well as other administrative responsibilities, including
accounting services and investor communications and relations.



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These agreements are terminable by either party upon 60 days written notice. As a result of these relationships, we are dependent upon Wells Capital
and Wells Management.

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

Future net income generated
by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the
volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs. As of March 31, 2007, the General Partners believe that WREF generates adequate cash flow from operations and has adequate liquidity available in
the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.

Assertion of Legal Action
Against Related-Parties

On March 12, 2007, a stockholder of Wells REIT filed a purported class action and derivative complaint, Washtenaw
County Employees Retirement System v. Wells Real Estate Investment Trust, Inc., et al., in the United States District Court for the District of Maryland against, among others, Wells REIT, Leo F. Wells, III, one of our General Partners,
Wells Capital, the corporate general partner of Wells Partners, our other general partner, Wells Management, our property manager, certain affiliates of WREF, the directors of Wells REIT, and certain individuals who formerly served as officers and
directors of Wells REIT prior to the closing of the internalization transaction on April 16, 2007. The complaint alleges violations of the federal proxy rules based on allegations that the proxy statement of Wells REIT filed with the SEC on
February 26, 2007 contains false and misleading statements and omits to state material facts and breaches of fiduciary duty arising from the Wells REIT internalization transaction and the related proxy statement. The complaint seeks, among
other things, unspecified monetary damages. On April 9, 2007, the District Court denied the plaintiffs motion for an order enjoining the internalization transaction. On April 17, 2007, the Court granted the defendants motion to
transfer venue to the United States District Court for the Northern District of Georgia, and the case was docketed in the Northern District of Georgia on April 24, 2007. Mr. Wells, Wells Capital, and Wells Management intend to vigorously
defend this action. Any financial loss incurred by Wells Capital, Wells Management, or its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.



|5. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

The Partnership and its General
Partners are from time to time a party to legal proceedings, which arise in the ordinary course of its business. The Partnership is not currently involved in any legal proceedings of which the outcome is reasonably possible to have a material
adverse effect on results of operations or financial condition. The Partnership is not aware of any legal proceedings contemplated by governmental authorities.



|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, 2006.

Overview

The Partnership typically operates in the following five
life cycle phases and, during which, typically focuses on the following key operating objectives. The duration of each phase is dependent upon various economic,



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industry, market, and other internal/external factors. Some overlap naturally exists in the transition from one phase to the next.



| |  |  | Fundraising phase
| | - |  | -----------------

The period
during which the Partnership is raising capital through the sale and issuance of limited partner units to the public;



| |  |  | Investing phase
| | - |  | ---------------

The period
during which the Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets;



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

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



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

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



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

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

Portfolio Overview

We are currently operating in the holding phase of our life cycle. We currently own interests in
four properties. During the fourth quarter 2006, Fund XI-XII-REIT Associates entered into a lease at 111 Southchase Boulevard with Caterpillar, Inc., which expires in December 2011, increasing the occupancy to 100%. On May 4, 2007, Fund
XI-XII-REIT Associates amended and reinstated an agreement to sell 111 Southchase Boulevard to an unrelated third party for a gross sales price of $7,625,000, excluding closing costs (the Agreement). Pursuant to the Agreement, the
inspection period has expired, and a buyer-funded deposit of $1,000,000 has become non-refundable. The Partnership expects this transaction to close in the second quarter of 2007; however, there are no assurances regarding when or if this sale will
be completed.

Also during the fourth quarter 2006, Fund XI-XII-REIT Associates entered into two leases at the 20/20 Building with Blue Cross and Blue
Shield of Kansas City, Missouri and The EPOCH Group, L.C. commencing February 2007 and June 2007, respectively, both of which expire in October 2012. This increases the 20/20 Buildings occupancy to 77%. Our focus at this time involves leasing
the remaining vacancy at the 20/20 Building and maximizing the operating performance of our assets in order to deliver what we believe will be the best overall performance for our limited partners.

Operating distributions payable to the Cash Preferred limited partners for the first quarter of 2007 declined slightly compared to the level paid in the prior quarter.
We anticipate that operating distributions will remain at a similar level in the near-term, given the remaining re-leasing costs and rental abatement periods associated with recent leases at the 20/20 Building and 111 Southchase Boulevard and the
anticipated capital improvements for the 20/20 Building.

Property Summary

As we continue to operate in the holding phase, we will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we will seek to maximize
returns to the limited partners by negotiating long-term leases at market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property-level costs and portfolio costs. Later, as we move into the



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##### Table of Contents

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 to minimize contingencies and our post-closing involvement with the buyer.

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



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



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



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



| |  |  | The 111 Southchase Boulevard property, located in Fountain Inn, South Carolina, is 100% leased through December 2011. This property is currently under contract to
sell.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The 20/20 Building, located in Leawood, Kansas, is now approximately 77% leased through October 2012.
| | - |  | -----------------------------------------------------------------------------------------------------



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



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

Liquidity and Capital Resources

Overview

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

Short-Term Liquidity

During the three months ended March 31,
2007, we generated net operating cash flows, including operating distributions received from the Joint Ventures, of approximately $373,000, which were used primarily to fund operating distributions to limited partners of approximately $309,000.
Operating distributions from the Joint Ventures are generally representative of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures. Future operating
distributions paid to limited partners will be largely dependent upon the amount of cash generated from the Joint Ventures, our expectations of future cash flows, and determination of near-term cash needs for tenant re-leasing costs and other
capital improvements for properties owned by the Joint Ventures. We anticipate future operating distributions from the Joint Ventures to remain at similar levels in the near-term.

During the three months ended March 31, 2007, we also invested residual operating cash flows and cash on hand of approximately $85,000 in Fund XI-XII-REIT Associates to fund re-leasing costs incurred in
connection with the new lease at 111 Southchase Boulevard. We anticipate funding our pro-rata share of the re-leasing costs for 111 Southchase Boulevard and the 20/20 Building resulting from recent leasing activities at both properties and the
anticipated capital improvements for the 20/20 Building in the near-term.

At this time, we expect to continue to generate cash flows from operations,
including distributions from the Joint Ventures, sufficient to cover our estimated future expenses. We also believe that the cash on hand and distributions due from the Joint Ventures are sufficient to cover our working capital needs, including
liabilities of



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##### Table of Contents

approximately $314,000 as of March 31, 2007. During 2007, our General Partners anticipate that we will fund our proportionate share of capital
expenditures noted above.

Long-Term Liquidity

We
expect that our future sources of capital will be primarily derived from operating cash flows generated from the Joint Ventures and net proceeds generated from the selective and strategic sale of properties. Our future long-term liquidity
requirements will include, but not be limited to, funding tenant improvements, renovations, expansions, and other significant capital improvements necessary for properties owned through the Joint Ventures. We expect to continue to use substantially
all future net cash flows from operations, including distributions received from the Joint Ventures, less expenses related to the recurring operations of the properties and the portfolio and reserves for known capital expenditures, to pay operating
distributions to the limited partners.

Capital Resources

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

The Joint Ventures fund capital expenditures primarily related to building improvements for the purpose of maintaining the
quality of our properties, and tenant improvements for the purpose of readying our properties for re-leasing. As leases expire, we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally,
tenant improvements funded in connection with lease renewals require less capital than those funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market,
drive capital costs as well as rental rates.

Operating cash flows, if available, are generally distributed from the Joint Ventures to the Partnership
approximately one month following quarter-ends. However, the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management policy typically includes
first utilizing current period operating cash flow until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event that current and prior period accumulated operating cash flows are
insufficient to fund such costs, net property sale proceeds reserves, if available, would then be utilized. Any capital or other expenditures not provided for by the operations of the Joint Ventures will be required to be funded by the Partnership
and the respective joint venture partners on a pro-rata basis.

As of March 31, 2007, we have received, used, distributed, and held net sale proceeds
allocated to the Partnership from the sale of properties as presented below:



|                                       |  |                   |  |                                       |        |                                                |            |                          |    |                                                               |   |                                                    |   |            |  |   |      
|-------------------------------------- |  | ----------------- |  | ------------------------------------- | ------ | ---------------------------------------------- | ---------- | ------------------------ | -- | ------------------------------------------------------------- | - | -------------------------------------------------- | - | ---------- |  | - | -----
|                                       |  | Net Sale Proceeds |  | Partnerships Approximate Ownership % |        | Net Sale Proceeds Allocated to the Partnership |            | Use of Net Sale Proceeds |    | Net Sale Proceeds Distributed toPartners as of March 31, 2007 |   | UndistributedNet SaleProceeds as
of March 31, 2007
|Property Sold                          |  |                   |  |                                       | Amount |                                                | Purpose    |                          |   
|                                       |  |                   |  |                                       |        |                                                |           
|Johnson Matthey Building(sold in 2004) |  | $9,675,000        |  | 17.10%                                |        | $                                              | 1,653,361  |                          | $0 |                                                               |  |                                                    | $ | 1,653,361  |  | $ | 0    
|                                       |  |                   |  |                                       |        |                                                |           
|Gartner Building(sold in 2005)         |  | $12,396,859       |  | 17.10%                                |        |                                                | 2,118,499  |                          | 0  |                                                               |  |                                                    |   | 2,117,051  |  |   | 1,448
|                                       |  |                   |  |                                       |        |                                                |           
|AT&T Oklahoma Building(sold in 2005)   |  | $21,307,577       |  | 44.99%                                |        |                                                | 9,585,853  |                          | 0  |                                                               |  |                                                    |   | 9,579,588  |  |   | 6,265
|                                       |  |                   |  |                                       |        |                                                |            |                          |    |                                                               |   |                                                    |   |            |  |   |      
|                                       |  |                   |  |                                       |        |                                                |           
|Total                                  |  |                   |  |                                       |        | $                                              | 13,357,713 |                          | $0 |                                                               |   |                                                    | $ | 13,350,000 |  | $ | 7,713
|                                       |  |                   |  |                                       |        |                                                |            |                          |    |                                                               |   |                                                    |   |            |  |   |      



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Results of Operations

Equity in Income of Joint Ventures

Equity in income of Joint Ventures increased from $258,824 for the three months ended March 31,
2006 to $327,571 for the three months ended March 31, 2007. The increase is primarily a result of the recent leasing activity at 111 Southchase Boulevard and the 20/20 Building. We anticipate equity in income of Joint Ventures to increase in
the near-term as a result of the gain anticipated to be recognized on the sale of 111 Southchase Boulevard in the second quarter of 2007.

Expenses

Our total expenses decreased from $94,159 for the three months ended March 31, 2006 to $56,614 for the three months ended March 31, 2007. The
decrease is attributable to (i) a decline in Tennessee partnership franchise and excise taxes, and (ii) printing costs and legal fees. We estimate Tennessee partnership franchise and excise taxes based on an estimate of the apportionment
of income allocable to the Partnership from properties in Tennessee relative to income allocable to the Partnership from all properties as if earned ratably during the calendar year. Thus, our future estimates of Tennessee partnership franchise and
excise tax expenses will fluctuate as the relationship of income earned by the Partnership from properties in Tennessee fluctuates relative to income earned by the Partnership from all properties in the future. We anticipate increases in
administrative expenses in future periods resulting from increased costs relating to compliance with additional reporting and regulatory requirements.

Interest and Other Income

Interest and other income decreased from $6,376 for the three months ended March 31, 2006 to $2,299 for the
three months ended March 31, 2007. The decrease is primarily a result of a decrease in the average amount of operating cash held during 2007. Future levels of interest income will be largely dependent upon the timing of future dispositions and
net sale proceeds distributions to the limited partners, and the amount of operating cash needed to invest in the Joint Ventures related to funding our pro-rata share of re-leasing costs and capital expenditures.

Inflation

We are exposed to inflation risk, as income from long-term
leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that would protect us from the impact of inflation. These provisions include rent steps, reimbursement billings for operating
expense pass-through charges, real estate tax, and insurance reimbursements on a per-square-foot basis or, in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. However, due to the long-term nature of
our leases, the leases may not readjust their reimbursement rates frequently enough to cover inflation.

Application of Critical Accounting Policies

Summary

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



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##### Table of Contents

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



|                      |  |                                       
|--------------------- |  | --------------------------------------
|Buildings             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant improvements   |  | Shorter of lease term or economic life

In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net
income would be misstated.

Valuation of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest 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 assets and their eventual disposition. In the event that such expected undiscounted future cash flows do
not exceed the carrying value, management adjusts the real estate assets to the fair value, as defined by SFAS No. 144, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon
availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. We have determined that
there has been no impairment in the carrying value of any of the real estate assets held by the Partnership as of March 31, 2007.

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

Related-Party Transactions and Agreements

We have entered into agreements with Wells Capital and Wells Management, affiliates of our
General Partners, and their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells Management and their affiliates for asset management; the management and leasing of our properties; administrative services
relating to accounting, property management, and other partnership administration, and incur the related expenses. See Note 4 to our financial statements included in this report for a description of these fees and expense reimbursements we have
incurred.



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

The American Jobs Creation Act of 2004 added Section 470 to the Internal Revenue Code, which provides for certain limitations on the utilization
of losses by investors that are attributable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. If Section 470 were deemed to apply to the Partnership, passive losses allocable to
limited partners holding Class B Units could only be utilized to offset passive income generated from the same property or potentially from properties owned by the same partnership. In March 2005, the IRS announced that it would not apply
Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS extended the period for transitional relief through the 2005 tax year, and in
December 2006, the IRS again extended the period for transitional relief through all tax years beginning prior to January 1, 2007. In addition, pursuant to Section 403(ff) of the Gulf Opportunity Zone Act of 2005, the effective date
provisions regarding the applicability of Section 470 were amended to provide that, in the case of leased property treated as tax-exempt use property by reason of its being owned by a partnership having both taxable and tax-exempt partners,
Section 470 will apply only to property acquired after March 12, 2004. Since the Partnership acquired all of its properties prior to March 12, 2004, and is not expected to acquire interests in any additional properties in the future,
we do not believe that the provisions of Section 470 should apply to limit the utilization of losses attributable to the properties owned by the Partnership; however, due to the uncertainties and lack of guidance relating to this provision, it
is unclear as to whether the acquisition of a limited partnership interest in the Partnership after the March 12, 2004 effective date may be deemed to be an acquisition of property within the meaning of the effective date provisions of
Section 470.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Since
we do not borrow any money, make any foreign investments, or invest in any market risk-sensitive instruments, we are not subject to risks relating to interest rates, foreign current exchange rate fluctuations, or the other market risks contemplated
by Item 305 of Regulation S-K.



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

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

There were no significant changes in our internal control over financial reporting during the
quarter ended March 31, 2007 that have materially affected, or are likely to materially affect, our internal control over financial reporting.



|PART II. | OTHER INFORMATION
|-------- | -----------------



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

We are from time to time a party to legal
proceedings, which arise in the ordinary course of our business. We are not currently involved in any litigation the outcome of which would, in managements judgment based on information currently available, have a material adverse effect on
our results of operations or financial condition,



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nor is management aware of any such litigation threatened against us during the quarter ended March 31, 2007, requiring disclosure under Item 103
of Regulation S-K.



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

There have been no material changes from the risk
factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006.



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



|(a) | We did not sell any equity securities that were not registered under the Securities Act of 1933 during the quarter ended March 31, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended March 31, 2007.
|--- | -------------------------------------------------------------------------



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



|(a) | We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended March 31, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



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



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

No matters were submitted to a vote of our limited partners during the quarter ended March 31, 2007.



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



|(a) | During the quarter ended March 31, 2007, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

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





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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|             |  |  |  |                                                                                                   |  |                            
|------------ |  |  |  | ------------------------------------------------------------------------------------------------- |  | ---------------------------
|             |  |  |  | WELLS REAL ESTATE FUND XII, L.P. (Registrant)                                                    
|             |  |  | 
|             |  |  |  | By:                                                                                               |  | WELLS PARTNERS, L.P.       
|             |  |  |  |                                                                                                   |  | (General Partner)          
|             |  |  | 
|             |  |  |  | By:                                                                                               |  | WELLS CAPITAL, INC.        
|             |  |  |  |                                                                                                   |  | (Corporate General Partner)
|             |  | 
|May 11, 2007 |  |  |  | /S/    LEO F. WELLS,
III                                                                         
|             |  |  |  | Leo F. Wells, III President, Principal
Executive Officer,and Sole Director of Wells Capital, Inc.
|             |  | 
|May 11, 2007 |  |  |  | /S/    DOUGLAS P.
WILLIAMS                                                                       
|             |  |  |  | Douglas P. Williams Principal Financial
Officer of Wells Capital, Inc.                           



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EXHIBIT INDEX

TO FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND XII, L.P.



|            |  |                                                                                                                                                                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                        
|            | 
|*10.1       |  | Purchase and Sale Agreement for the sale of the 111 Southchase Boulevard Building (Exhibit 10.2 to Form 10-Q of Wells Real Estate Fund XI for the period ended March 31, 2007, Commission
File No. 0-25731)                                        
|            | 
|*10.2       |  | Reinstatement of and Fifth Amendment to Purchase and Sale Agreement for the sale of the 111 Southchase Boulevard Building (Exhibit 10.3 to Form 10-Q of Wells Real Estate Fund XI for the
period ended March 31, 2007, Commission File No. 0-25731)
|            | 
|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                                                                                                                     



|* | previously filed and incorporated herein by reference
|- | -----------------------------------------------------