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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)



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

For the quarterly period ended September 30, 2008 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





WELLS REAL ESTATE FUND XII,
L.P.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈                 Accelerated filer   ̈

Non-accelerated filer  x (Do not check if a smaller reporting
company)                 Smaller reporting company   ̈

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, 2007 along with Item 1A. of Part II of
this report 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  September 30, 2008 (unaudited) and December 31, 2007                                                     |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Nine Months Ended September 30, 2008 (unaudited) and 2007 (unaudited)   |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2007 and Nine Months Ended September 30, 2008 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Nine Months Ended September 30, 2008 (unaudited) and 2007 (unaudited)                    |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                       |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 16      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                |  | 22      
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                                                                   |  | 22      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                          
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                         |  | 23      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                              |  | 23      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 23      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                           |  | 23      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 24      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                         |  | 24      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                  |  | 24      



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



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

The information furnished in the
Partnerships accompanying balance sheets and 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, 2007. The Partnerships results of operations for the three months and nine months ended September 30, 2008 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)September 30,2008 |            | December 31,2007
|Investment in joint ventures |  | $                            | 15,461,173 |                  | $ | 16,496,531
|Cash and cash equivalents    |  |                              | 261,198    |                  |   | 205,220   
|Due from joint ventures      |  |                              | 422,422    |                  |   | 431,062   
|Other assets                 |  |                              | 224        |                  |   | 1,396     
|                             |  |                              |            |                  |   |           
|Total assets                 |  | $                            | 16,145,017 |                  | $ | 17,134,209
|                             |  |                              |            |                  |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                                                                                                                         |  |   |            |  |   |           
|---------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- |  | - | ----------
|LIABILITIES:                                                                                                                             |  |   |            |  |   |           
|Accounts payable and accrued expenses                                                                                                    |  | $ | 24,126     |  | $ | 40,628    
|Due to affiliates                                                                                                                        |  |   | 8,813      |  |   | 6,714     
|Partnership distributions payable                                                                                                        |  |   | 350,622    |  |   | 353,999   
|                                                                                                                                         |  |   |            |  |   |           
|Total liabilities                                                                                                                        |  |   | 383,561    |  |   | 401,341   
|                                                                                                                                         |  |  
|PARTNERS CAPITAL:                                                                                                                       |  |   |            |  |   |           
|Limited partners:                                                                                                                        |  |   |            |  |   |           
|Cash Preferred  3,016,188 units and 3,013,500 units issued and outstanding as of September 30, 2008 and December 31, 2007,
respectively |  |   | 15,761,456 |  |   | 16,732,868
|Tax Preferred  544,931 units and 547,619 units issued and outstanding as of September 30, 2008 and December 31, 2007,
respectively      |  |   | 0          |  |   | 0         
|General partners                                                                                                                         |  |   | 0          |  |   | 0         
|                                                                                                                                         |  |   |            |  |   |           
|Total partners capital                                                                                                                  |  |   | 15,761,456 |  |   | 16,732,868
|                                                                                                                                         |  |   |            |  |   |           
|Total liabilities and partners capital                                                                                                  |  | $ | 16,145,017 |  | $ | 17,134,209
|                                                                                                                                         |  |   |            |  |   |           

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF OPERATIONS



|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|------------------------------------------------------------ |  | ------------------------------------------ | --------- | - | ----------------------------------------- | - | --------- | ---- |  | ---- | --------- |  | - | --------- | -
|                                                             |  | (Unaudited)Three Months EndedSeptember 30, |           |   | (Unaudited)Nine Months EndedSeptember 30, |  
|                                                             |  | 2008                                       |           |   | 2007                                      |   |           | 2008 |  | 2007 |          
|EQUITY IN INCOME (LOSS) OF JOINT VENTURES                    |  | $                                          | (342,779  | ) |                                           | $ | 294,605   |      |  | $    | 242,237   |  | $ | 1,280,534 |  
|                                                             |  |                                            |           |  
|EXPENSES:                                                    |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|General and administrative                                   |  |                                            | 52,021    |   |                                           |   | 54,919    |      |  |      | 163,947   |  |   | 147,724   |  
|                                                             |  |                                            |           |  
|INTEREST AND OTHER INCOME                                    |  |                                            | 651       |   |                                           |   | 18,932    |      |  |      | 2,164     |  |   | 28,834    |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|                                                             |  |                                            |           |  
|NET INCOME (LOSS)                                            |  | $                                          | (394,149  | ) |                                           | $ | 258,618   |      |  | $    | 80,454    |  | $ | 1,161,644 |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|                                                             |  |                                            |           |  
|NET INCOME (LOSS) ALLOCATED TO:                              |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|CASH PREFERRED LIMITED PARTNERS                              |  | $                                          | (394,149  | ) |                                           | $ | 380,173   |      |  | $    | 80,454    |  | $ | 1,197,818 |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|TAX PREFERRED LIMITED PARTNERS                               |  | $                                          | 0         |   |                                           | $ | (121,470  | )    |  | $    | 0         |  | $ | (36,174   | )
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|GENERAL PARTNERS                                             |  | $                                          | 0         |   |                                           | $ | (85       | )    |  | $    | 0         |  | $ | 0         |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|                                                             |  |                                            |           |  
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|CASH PREFERRED                                               |  |                                            | $(0.13    | ) |                                           |   | $ 0.13    |      |  |      | $0.03     |  |   | $ 0.40    |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|TAX PREFERRED                                                |  |                                            | $ 0.00    |   |                                           |   | $(0.22    | )    |  |      | $0.00     |  |   | $(0.07    | )
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|                                                             |  |                                            |           |  
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|CASH PREFERRED                                               |  |                                            | 3,016,188 |   |                                           |   | 3,013,500 |      |  |      | 3,016,188 |  |   | 3,008,167 |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  
|TAX PREFERRED                                                |  |                                            | 544,931   |   |                                           |   | 547,619   |      |  |      | 544,931   |  |   | 552,952   |  
|                                                             |  |                                            |           |   |                                           |   |           |      |  |      |           |  |   |           |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2007 AND

FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2008 (UNAUDITED)



|                                                                                                                                  |  |                  |  |        |                 |   |                       |         |   |        |   |          |   |  |    |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------ | --------------- | - | --------------------- | ------- | - | ------ | - | -------- | - |  | -- |  | - | ---------- | -
|                                                                                                                                  |  | Limited Partners |  |        | GeneralPartners |   | TotalPartnersCapital |        
|                                                                                                                                  |  | Cash Preferred   |  |        | Tax Preferred   |   |                       |        
|                                                                                                                                  |  | Units            |  | Amount |                 |   | Units                 |         |   | Amount |   |          |  
|BALANCE, December 31, 2006                                                                                                        |  | 3,003,500        |  | $      | 17,375,625      |   |                       | 557,619 |   |        | $ | 365,315  |   |  | $0 |  | $ | 17,740,940 |  
|                                                                                                                                  |  |                  |  |        |                 |  
|Tax preferred conversion elections                                                                                                |  | 10,000           |  |        | 6,569           |   |                       | (10,000 | ) |        |   | (6,569   | ) |  | 0  |  |   | 0          |  
|Net income                                                                                                                        |  | 0                |  |        | 1,140,618       |   |                       | 0       |   |        |   | 285,113  |   |  | 0  |  |   | 1,425,731  |  
|Distributions of operating cash flow($0.40 per weighted-average Cash Preferred Unit)                                              |  | 0                |  |        | (1,203,803      | ) |                       | 0       |   |        |   | 0        |   |  | 0  |  |   | (1,203,803 | )
|Distributions of net sale proceeds($0.19 and $1.17 per weighted-average Cash Preferred Unit and Tax Preferred Unit,
respectively) |  | 0                |  |        | (586,141        | ) |                       | 0       |   |        |   | (643,859 | ) |  | 0  |  |   | (1,230,000 | )
|                                                                                                                                  |  |                  |  |        |                 |   |                       |         |   |        |   |          |   |  |    |  |   |            |  
|BALANCE, December 31, 2007                                                                                                        |  | 3,013,500        |  |        | 16,732,868      |   |                       | 547,619 |   |        |   | 0        |   |  | 0  |  |   | 16,732,868 |  
|                                                                                                                                  |  |                  |  |        |                 |  
|Tax preferred conversion elections                                                                                                |  | 2,688            |  |        | 0               |   |                       | (2,688  | ) |        |   | 0        |   |  | 0  |  |   | 0          |  
|Net income                                                                                                                        |  | 0                |  |        | 80,454          |   |                       | 0       |   |        |   | 0        |   |  | 0  |  |   | 80,454     |  
|Distributions of operating cash flow($0.35 per weighted-average Cash Preferred Unit)                                              |  | 0                |  |        | (1,051,866      | ) |                       | 0       |   |        |   | 0        |   |  | 0  |  |   | (1,051,866 | )
|                                                                                                                                  |  |                  |  |        |                 |   |                       |         |   |        |   |          |   |  |    |  |   |            |  
|BALANCE, September 30, 2008                                                                                                       |  | 3,016,188        |  | $      | 15,761,456      |   |                       | 544,931 |   |        | $ | 0        |   |  | $0 |  | $ | 15,761,456 |  
|                                                                                                                                  |  |                  |  |        |                 |   |                       |         |   |        |   |          |   |  |    |  |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF CASH FLOWS



|                                                                                  |  |                                           |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ----------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | (Unaudited)Nine Months
EndedSeptember 30, |           
|                                                                                  |  | 2008                                      |            |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                           |            |   |      |   |            |  
|Net income                                                                        |  | $                                         | 80,454     |   |      | $ | 1,161,644  |  
|Operating distributions received from joint ventures                              |  |                                           | 1,286,235  |   |      |   | 1,261,225  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                           |            |   |      |   |            |  
|Equity in income of joint ventures                                                |  |                                           | (242,237   | ) |      |   | (1,280,534 | )
|Changes in assets and liabilities:                                                |  |                                           |            |   |      |   |            |  
|Decrease (increase) in other assets                                               |  |                                           | 1,172      |   |      |   | (5,155     | )
|(Decrease) increase in accounts payable and accrued expenses                      |  |                                           | (16,502    | ) |      |   | 17,560     |  
|Increase in due to affiliates                                                     |  |                                           | 2,099      |   |      |   | 5,594      |  
|                                                                                  |  |                                           |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                                           | 1,111,221  |   |      |   | 1,160,334  |  
|                                                                                  |  |                                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                           |            |   |      |   |            |  
|Net sale proceeds received from joint ventures                                    |  |                                           | 0          |   |      |   | 1,236,704  |  
|Investment in joint ventures                                                      |  |                                           | 0          |   |      |   | (184,561   | )
|                                                                                  |  |                                           |            |   |      |   |            |  
|Net cash provided by investing activities                                         |  |                                           | 0          |   |      |   | 1,052,143  |  
|                                                                                  |  |                                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                           |            |   |      |   |            |  
|Operating distributions paid to limited partners                                  |  |                                           | (1,055,243 | ) |      |   | (875,131   | )
|                                                                                  |  |                                           |            |   |      |   |            |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                                           | 55,978     |   |      |   | 1,337,346  |  
|                                                                                  |  |                                          
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                           | 205,220    |   |      |   | 144,645    |  
|                                                                                  |  |                                           |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                                         | 261,198    |   |      | $ | 1,481,991  |  
|                                                                                  |  |                                           |            |   |      |   |            |  
|                                                                                  |  |                                          
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                                           |            |   |      |   |            |  
|Partnership distributions payable                                                 |  | $                                         | 350,622    |   |      | $ | 283,485    |  
|                                                                                  |  |                                           |            |   |      |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 (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. (WREF). Leo F. Wells, III is the
president and sole director of Wells Capital and the president, sole director, and sole owner of WREF. 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 elected to have their units treated 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. 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.

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 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 Piedmont Operating Partnership, LP (Piedmont OP),
formerly known as Wells Operating Partnership, L.P. Piedmont OP is a Delaware limited partnership with Piedmont Office Realty Trust, Inc. (Piedmont REIT), formerly known as Wells Real Estate Investment
Trust, Inc., serving as its general partner. Piedmont 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.   Piedmont Operating Partnership, LP |  | 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
|Wells Fund XII-REIT Joint Venture Partnership (Fund XII-REIT Associates)        |  |   Wells Real Estate Fund XII, L.P.   Piedmont Operating Partnership, LP                                    |  | 3. 4685 Investment Drive
(formerlyknown as the Siemens Building) A three-story office building located in Troy, Michigan                                                                    
|                                                                                  |  |                                                                                                             
|                                                                                  |  |                                                                                                              |  | 4. Comdata Building A three-story office building located in Brentwood, Tennessee                                                                                                             



| | * | This property was sold in May 2007.
| | - | -----------------------------------



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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, 2007.

On May 23, 2007, Fund XI-XII-REIT Associates sold 111 Southchase Boulevard to an unrelated third party for a gross sale price
of $7,625,000. As a result of the sale, the Partnership received net sale proceeds of approximately $1,237,000 and was allocated a gain of approximately $338,000.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Basis of
Presentation

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission (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, 2007.

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 (SOP) 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.

Impairment of Real Estate Assets

The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned through the Partnerships investment in the Joint Ventures
may not be recoverable. When indicators of potential impairment are present which suggest 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 respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition for assets held for use, or with the estimated fair values, less costs
to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use, or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value,
management adjusts the real estate assets to the



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##### Table of Contents

respective estimated fair values, pursuant to the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and
recognizes an impairment loss. Estimated fair values are calculated based on the following information, in order of preference, dependent upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties,
or (iii) the present value of future cash flows, including estimated salvage value.

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 on a per-unit basis 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 on a per-unit basis 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.
| | - |  | --------------------------------------------------------------------------------------------



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##### Table of Contents

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

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

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

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

Recent Accounting Pronouncement

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 on Long-Lived Assets. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an
entity-specific measurement. In February 2008, the FASB issued Staff Position No. SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13 (FSP 157-1). FSP 157-1, which is effective upon the initial adoption of SFAS No. 157, excludes SFAS No. 13, Accounting for Leases, as well as other
accounting pronouncements that address fair value measurements on lease classification or measurement under SFAS No. 13, from the scope of SFAS No. 157. In February 2008, the FASB issued Staff Position No. SFAS 157-2, Effective Date of
FASB Statement No. 157(FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157 for all nonrecurring nonfinancial assets and liabilities until fiscal years beginning after November 15, 2008. On October 10,
2008, the FASB issued Staff Position No. SFAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (FSP 157-3). FSP 157-3 includes guidance for how companies should value
illiquid assets under the fair value accounting method prescribed in SFAS No. 157, Fair Value Measurements, however, does not change any of the provisions of SFAS No. 157. FSP 157-3 is effective upon issuance on October 10,
2008, and retrospective application is prohibited. FSP 157-2 will be effective for the Partnership beginning January 1, 2009, and the remaining aspects of SFAS No. 157 were effective for the Partnership beginning January 1, 2008. SFAS
No. 157 has not had a material impact on the Partnerships financial statements to date; however, the Partnership is currently assessing the provisions and evaluating the potential impact of FSP 157-2 on its financial statements.



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

Impairment of Real Estate Assets

Fund XI-XII-REIT Associates has evaluated the recoverability of the carrying value of the 20/20 Building pursuant to the accounting policy outlined in
Note 2 and determined that the carrying value of the real estate



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##### Table of Contents

assets of the 20/20 Building are not recoverable, as compared to the estimated fair value, primarily as a result of shortening the estimated holding period
of such assets in third quarter 2008. Accordingly, Fund XI-XII-REIT Associates reduced the carrying value of the 20/20 Building to its estimated fair value based on the present value of future cash flows and recognized a corresponding
impairment loss of approximately $3,678,000 in the third quarter of 2008, of which approximately $629,000 is allocable to the Partnership. This impairment loss is included in income (loss) from continuing operations for the three months and nine
months ended September 30, 2008 in the table below.

Summary of Financial Information

Condensed financial information for the Joint Ventures for the three months and nine months ended September 30, 2008 and 2007, respectively, is presented below:



|                            |  |                                 |           |                                         |   |           |                                    |   |            |                                 |  |      |           |      |  |   |      |  |   |           |   |  |   |            |   |  |   |           |  
|--------------------------- |  | ------------------------------- | --------- | --------------------------------------- | - | --------- | ---------------------------------- | - | ---------- | ------------------------------- |  | ---- | --------- | ---- |  | - | ---- |  | - | --------- | - |  | - | ---------- | - |  | - | --------- | -
|                            |  | Total Revenues                  |           | Income (Loss) FromContinuing Operations |   |           | Loss FromDiscontinued Operations   |   |            | Net Income (Loss)               | 
|                            |  | Three Months EndedSeptember 30, |           | Three Months EndedSeptember 30,         |   |           | Three Months EndedSeptember 30,    |   |            | Three Months EndedSeptember 30, | 
|                            |  | 2008                            |           | 2007                                    |   | 2008      |                                    |   | 2007       |                                 |  | 2008 |           | 2007 |  |   | 2008 |  |   | 2007      |  
|Fund XI-XII-REIT Associates |  | $                               | 311,047   |                                         | $ | 217,773   |                                    | $ | (3,729,538 | )                               |  | $    | (75,130   | )    |  |   | $0   |  | $ | (1,081    | ) |  | $ | (3,729,538 | ) |  | $ | (76,211   | )
|Fund XII-REIT Associates    |  |                                 | 1,071,191 |                                         |   | 1,084,065 |                                    |   | 654,757    |                                 |  |      | 683,801   |      |  |   | 0    |  |   | 0         |   |  |   | 654,757    |   |  |   | 683,801   |  
|                            |  |                                 |           |                                         |   |           |                                    |   |            |                                 |  |      |           |      |  |   |      |  |   |           |   |  |   |            |   |  |   |           |  
|                            |  | $                               | 1,382,238 |                                         | $ | 1,301,838 |                                    | $ | (3,074,781 | )                               |  | $    | 608,671   |      |  |   | $0   |  | $ | (1,081    | ) |  | $ | (3,074,781 | ) |  | $ | 607,590   |  
|                            |  |                                 |           |                                         |   |           |                                    |   |            |                                 |  |      |           |      |  |   |      |  |   |           |   |  |   |            |   |  |   |           |  
|                            |  |                                 |           |                                        
|                            |  | Total Revenues                  |           | Income (Loss) FromContinuing Operations |   |           | Income FromDiscontinued Operations |   |            | Net Income (Loss)               | 
|                            |  | Nine Months EndedSeptember 30,  |           | Nine Months EndedSeptember 30,          |   |           | Nine Months EndedSeptember 30,     |   |            | Nine Months EndedSeptember 30,  | 
|                            |  | 2008                            |           | 2007                                    |   | 2008      |                                    |   | 2007       |                                 |  | 2008 |           | 2007 |  |   | 2008 |  |   | 2007      |  
|Fund XI-XII-REIT Associates |  | $                               | 838,011   |                                         | $ | 673,005   |                                    | $ | (3,791,485 | )                               |  | $    | (20,876   | )    |  | $ | 317  |  | $ | 2,145,291 |   |  | $ | (3,791,168 | ) |  | $ | 2,124,415 |  
|Fund XII-REIT Associates    |  |                                 | 3,220,864 |                                         |   | 3,245,243 |                                    |   | 1,978,549  |                                 |  |      | 2,038,598 |      |  |   | 0    |  |   | 820       |   |  |   | 1,978,549  |   |  |   | 2,039,418 |  
|                            |  |                                 |           |                                         |   |           |                                    |   |            |                                 |  |      |           |      |  |   |      |  |   |           |   |  |   |            |   |  |   |           |  
|                            |  | $                               | 4,058,875 |                                         | $ | 3,918,248 |                                    | $ | (1,812,936 | )                               |  | $    | 2,017,722 |      |  | $ | 317  |  | $ | 2,146,111 |   |  | $ | (1,812,619 | ) |  | $ | 4,163,833 |  
|                            |  |                                 |           |                                         |   |           |                                    |   |            |                                 |  |      |           |      |  |   |      |  |   |           |   |  |   |            |   |  |   |           |  

The Partnership allocates its share of net income, net loss, and gain on sale 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. The components of income (loss) from discontinued operations recognized by the Joint Ventures are
provided below:



|                            |  |                                     |     |                                     |    |       |   |                 |  |             |         |       |   |           |  |   |          
|--------------------------- |  | ----------------------------------- | --- | ----------------------------------- | -- | ----- | - | --------------- |  | ----------- | ------- | ----- | - | --------- |  | - | ---------
|                            |  | Nine Months EndedSeptember 30, 2008 |     | Nine Months EndedSeptember 30, 2007
|                            |  | OperatingIncome                     |     | Gainon Sale                         |    | Total |   | OperatingIncome |  | Gainon Sale |         | Total
|Fund XI-XII-REIT Associates |  | $                                   | 317 |                                     | $0 |       | $ | 317             |  | $           | 167,560 |       | $ | 1,977,731 |  | $ | 2,145,291
|Fund XII-REIT Associates    |  |                                     | 0   |                                     | 0  |       |   | 0               |  |             | 820     |       |   | 0         |  |   | 820      
|                            |  |                                     |     |                                     |    |       |   |                 |  |             |         |       |   |           |  |   |          
|                            |  | $                                   | 317 |                                     | $0 |       | $ | 317             |  | $           | 168,380 |       | $ | 1,977,731 |  | $ | 2,146,111
|                            |  |                                     |     |                                     |    |       |   |                 |  |             |         |       |   |           |  |   |          



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##### Table of Contents

Due from Joint Ventures

As presented in the accompanying balance sheets, due from joint ventures as of September 30, 2008 and December 31, 2007 represents operating cash flow generated by the Joint Ventures for the three months ended September 30,
2008 and December 31, 2007, 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) 2.5% for management services and 2% for leasing services of the gross
revenues collected monthly, 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, are included in equity in income (loss) of joint ventures in the accompanying statements of operations. The Partnerships share of management and leasing
fees and lease acquisition costs incurred through the Joint Ventures is $9,620 and $907 for the three months ended September 30, 2008 and 2007, respectively, and $29,537 and $42,942 for the nine months ended September 30, 2008 and 2007,
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 incurred administrative expenses of $23,277 and $18,009 payable to Wells Capital and Wells Management for the three months ended September 30, 2008 and 2007,
respectively, and $71,730 and $60,202 for the nine months ended September 30, 2008 and 2007, respectively. In addition, Wells Capital and Wells Management pay for certain operating expenses of the Partnership (bill-backs) directly
and invoice the Partnership for the reimbursement thereof on a quarterly basis. As presented in the accompanying balance sheets, due to affiliates as of September 30, 2008 and December 31, 2007 represents administrative reimbursements and
bill-backs due to Wells Capital and/or Wells Management.

Economic Dependency

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

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



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##### Table of Contents

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 well as anticipated dividend income earned from its holdings of common stock of Piedmont REIT, which was acquired in connection with the Piedmont REIT internalization transaction (see Assertion of Legal Actions Against Related-Parties
below). In addition, WREF guarantees debt of another WREF-sponsored product in the amount of approximately $76.1 million as of October 31, 2008. 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.

The Partnership is also dependent upon the ability of its current tenants to pay their contractual rent amounts as they become due. The inability of a tenant to pay future rental amounts would be likely to have a negative impact on the
Partnerships results of operations. The Partnership is not currently aware of any reason why its existing tenants will not be able to pay their contractual rental amounts as they become due in all material respects. Situations preventing the
tenants from paying contractual rents could result in a material adverse impact on the Partnerships results of operations.

Assertion of Legal
Actions Against Related-Parties

On March 12, 2007, a stockholder of Piedmont REIT, filed a putative class action and derivative complaint,
presently styled In re Wells Real Estate Investment Trust, Inc. Securities Litigation, in the United States District Court for the District of Maryland against, among others, Piedmont REIT; Leo F. Wells, III and Wells Capital, our
General Partners; Wells Management, our property manager; certain affiliates of WREF; the directors of Piedmont REIT; and certain individuals who formerly served as officers or directors of Piedmont REIT prior to the closing of the internalization
transaction on April 16, 2007. The complaint alleges, among other things, violations of the federal proxy rules and breaches of fiduciary duty arising from the Piedmont REIT internalization transaction and the related proxy statement filed with
the SEC on February 26, 2007, as amended. The complaint seeks, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization transaction. 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. On June 7, 2007, the Court granted a motion to designate the class lead plaintiff and class co-lead counsel. On June 27, 2007, the plaintiff filed an amended
complaint, which attempts to assert class action claims on behalf of those persons who received and were entitled to vote on the Piedmont REIT proxy statement filed with the SEC on February 26, 2007 and derivative claims on behalf of Piedmont
REIT. On July 9, 2007, the Court denied the plaintiffs motion for expedited discovery related to an anticipated motion for a preliminary injunction. On August 13, 2007, the defendants filed a motion to dismiss the amended complaint.
On March 31, 2008, the Court granted in part the defendants motion to dismiss the amended complaint. The Court dismissed five of the seven counts of the amended complaint in their entirety. The Court dismissed the remaining two counts
with the exception of allegations regarding the failure to disclose in the Piedmont REIT proxy statement details of certain expressions of interest in acquiring Piedmont REIT. On April 21, 2008, the plaintiff filed a second amended complaint,
which alleges violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for the Piedmont REIT internalization transaction omitted details of certain expressions of interest in acquiring Piedmont REIT.
The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and rescind the internalization transaction, and to cancel and rescind any stock issued to the defendants as consideration for the internalization
transaction. On May 12, 2008, the defendants answered and raised certain defenses to the second amended complaint. On June 23, 2008, the plaintiff filed a motion for class certification. As of the date of this filing, the time for the
defendants to respond to the plaintiffs motion for class certification has not yet passed. The parties are presently engaged in discovery. Mr. Wells, Wells Capital, and Wells Management intend to vigorously defend this action. Any
financial loss incurred by Wells Capital, Wells Management, or their affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.



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##### Table of Contents

On August 24, 2007, two stockholders of Piedmont REIT filed a derivative complaint, styledDonald and
Donna Goldstein, Derivatively on behalf of Defendant Wells Real Estate Investment Trust, Inc. v. Leo F. Wells, III, et al.,in the Superior Court of Fulton County, Georgia, on behalf of Piedmont REIT against, among others,
Leo F. Wells, III and Wells Capital, our General Partners, and a number of individuals who currently or formerly served as officers or directors of Piedmont REIT. The complaint alleges, among other things, that the consideration paid by
Piedmont REIT as part of the internalization transaction was excessive; that the defendants breached their fiduciary duties to Piedmont REIT; and that the internalization transaction unjustly enriched the defendants. The complaint seeks, among other
things, a judgment declaring that the defendants committed breaches of their fiduciary duties and were unjustly enriched at the expense of Piedmont REIT; monetary damages equal to the amount by which Piedmont REIT was damaged by the defendants; an
order awarding Piedmont REIT restitution from the defendants and ordering disgorgement of all profits and benefits obtained by the defendants from their wrongful conduct and fiduciary breaches; an order rescinding the internalization transaction;
and the establishment of a constructive trust upon any benefits improperly received by the defendants as a result of their wrongful conduct. On October 19, 2007, the Court verbally granted the defendants motion for a protective order
(and entered a written order on October 24, 2007) staying discovery until the Court rules on the defendants motion to dismiss the complaint. On October 31, 2007, the defendants filed their motion to dismiss the plaintiffs
derivative complaint. On December 19, 2007, the Court entered an order allowing the plaintiffs to take limited written discovery on the issue of derivative demand, but the order staying discovery entered in October 2007 otherwise remains in
effect. The defendants responded to the limited discovery requested by the plaintiffs. On January 10, 2008, the plaintiffs filed an amended complaint, which contains substantially the same counts against the same defendants as the
original complaint with certain additional factual allegations based primarily on events occurring after the original complaint was filed. In addition, the plaintiffs responded to the defendants motion to dismiss this lawsuit. A
hearing on the motion to dismiss was held on February 22, 2008. On March 13, 2008, the Court granted the defendants motion to dismiss. On April 11, 2008, the plaintiffs filed a notice to appeal the Courts judgment granting
the defendants motion to dismiss. The appeal is currently pending in the Georgia Court of Appeals.



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

From time to time, the Partnership
and its General Partners are party to legal proceedings which arise in the ordinary course of our business. The Partnership is not currently involved in any litigation for which the outcome would, in the judgment of the General Partners based on
information currently available, have a materially adverse impact on the results of operations or financial condition of the Partnership, nor is management aware of any such litigation threatened against us.



|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, 2007.

Overview

The Partnership typically operates in the following five
life cycle phases and, during which, typically focuses on the following key operating objectives. The duration of each phase is dependent upon various economic, industry, market, and other internal/external factors. Some overlap naturally exists in
the transition from one phase to the next.



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

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



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##### Table of Contents

| |  |  | 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 now own interests in three
properties. On October 17, 2008, Fund XI-XII-REIT Associates entered into a 62-month lease agreement with Nolan Real Estate Services, Inc. (Nolan) to occupy approximately 11% of the 20/20 Building. The lease commencement date is the
earlier of the date on which (i) Nolan accepts possession and occupies the space, or (ii) tenant improvements are substantially complete.

On
October 29, 2008, Fund XII-REIT Associates completed a lease amendment with the sole tenant at 4685 Investment Drive, Continental Automotive Systems US, Inc. (Continental), which extends the lease term from August 31, 2010
to October 31, 2015. As a result of the lease amendment, the monthly base rent will decrease beginning November 1, 2008 from approximately $131,000 to approximately $82,000. The execution of the lease amendment allowed us to avoid funding
any tenant improvement allowances while extending the lease term by 62 months.

Our focus at this time involves leasing and marketing efforts 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 limited partners holding Cash Preferred Units for the third quarter of 2008 remained consistent with the level paid in the prior quarter. We anticipate that operating distributions my decline in the
near-term due to the reduction in rental rate at 4685 Investment Drive as a result of the recent lease amendment with Continental.

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

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.
| | - |  | ------------------------------------------------------



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| |  |  | The 111 Southchase Boulevard property was sold on May 23, 2007.
| | - |  | ---------------------------------------------------------------



| |  |  | The 20/20 Building, located in Leawood, Kansas, will be approximately 91% leased following the commencement of the 62-month lease with Nolan. The major leases
for approximately 80% of the building extend through October 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 4685 Investment Drive, located in Troy, Michigan, is currently 100% leased through October 2015 following the lease amendment with Continental.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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

The Impact of Current Economic Conditions on our Portfolio

The
fundamentals of the U.S. office real estate market continue to weaken due to dislocation in the financial services industry and have been recently exacerbated by the global financial crisis. During the nine months ended September 30, 2008,
national vacancy rates rose steadily by approximately 90 basis points to 14.1%. During October 2008, vacancy rates have continued to increase as have sublease inventory levels. Rising sublease inventories will create additional competition for
landlords with direct space and, thus, will result in downward pressure on the rents that landlords are able to achieve with new leases.

While some of the
market conditions noted above may indicate expected changes in rental rates, the extent to which our portfolio may be affected is dependent upon the contractual rental rates currently provided in existing leases at the properties we own. As the
majority of our in-place leases are at properties that were acquired at times during which the market demanded higher rental rates, as compared with today, new leasing activities in certain markets may result in a decrease in future rental
rates. Additionally, the turbulence in the credit markets may adversely affect the ability of potential purchasers of our properties to obtain financing.

Less diversified real estate funds, such as the Partnership, that own fewer properties, and those with current vacancies or near-term tenant rollover, may face a challenging leasing environment. The properties within these funds may be
required to offer lower rental rates and higher concession packages to potential tenants, the degree to which will depend heavily upon the specific property and market.

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

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 one or more 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
nine months ended September 30, 2008, we generated net operating cash flows, including operating distributions received from the Joint Ventures, of approximately $1,111,000. Operating distributions from the



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Joint Ventures are generally representative of rental revenues and tenant reimbursements, less property operating expenses, management fees, general
administrative expenses, and capital expenditures. We used net operating cash flows primarily to fund operating distributions of approximately $1,055,000 to Cash Preferred limited partners during the nine months ended September 30, 2008. The
extent of any 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 to fund our
share of tenant re-leasing costs and other capital improvements for properties owned by the Joint Ventures. We anticipate that operating distributions from the Joint Ventures may decline in the near term due to the reduction in rental rates
resulting from the Continental lease amendment.

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 approximately
$384,000, as of September 30, 2008.

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 our share of 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. Future cash flows from operating activities will be primarily affected by distributions received from the Joint Ventures, which are dependent upon the net operating income
generated by the Joint Ventures properties, less reserves for known capital expenditures.

Capital Resources

The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties or investing in joint ventures formed
for the same purpose, and has invested all of the partners original 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 incur 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 sale proceeds reserves, if available, would then be utilized. Any
capital or other expenditures not funded from the operations of the Joint Ventures will be required to be funded by the Partnership and the other respective joint venture partners on a pro rata basis.



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As of September 30, 2008, we have received, used, distributed, and held net sale proceeds allocated to the
Partnership from the sale of properties as presented below:



|                                        |  |                  |  |                                     |        |                                              |            |                         |    |                                                                 |   |                                                        |   |            |  |   |       
|--------------------------------------- |  | ---------------- |  | ----------------------------------- | ------ | -------------------------------------------- | ---------- | ----------------------- | -- | --------------------------------------------------------------- | - | ------------------------------------------------------ | - | ---------- |  | - | ------
|                                        |  | Net SaleProceeds |  | PartnershipsApproximateOwnership % |        | Net Sale ProceedsAllocated to
thePartnership |            | Use ofNet Sale Proceeds |    | Net Sale ProceedsDistributed toPartners
as ofSeptember 30, 2008 |   | Undistributed NetSale Proceeds as ofSeptember 30, 2008
|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  |                                                                 |  |                                                        |   | 2,118,499  |  |   | 0     
|                                        |  |                  |  |                                     |        |                                              |           
|AT&T Oklahoma Building (sold in 2005)   |  | $21,307,577      |  | 44.99%                              |        |                                              | 9,585,853  |                         | 0  |                                                                 |  |                                                        |   | 9,585,853  |  |   | 0     
|                                        |  |                  |  |                                     |        |                                              |           
|111 Southchase Boulevard (sold in 2007) |  | $7,236,841       |  | 17.10%                              |        |                                              | 1,236,704  |                         | 0  |                                                                 |  |                                                        |   | 1,222,287  |  |   | 14,417
|                                        |  |                  |  |                                     |        |                                              |            |                         |    |                                                                 |   |                                                        |   |            |  |   |       
|                                        |  |                  |  |                                     |        |                                              |           
|Total                                   |  |                  |  |                                     |        | $                                            | 14,594,417 |                         | $0 |                                                                 |   |                                                        | $ | 14,580,000 |  | $ | 14,417
|                                        |  |                  |  |                                     |        |                                              |            |                         |    |                                                                 |   |                                                        |   |            |  |   |       

Upon evaluating the capital needs of the properties in which we currently own an interest, our General Partners
have determined to reserve the remaining net sale proceeds.

Results of Operations

Equity in Income (Loss) of Joint Ventures

Equity in income (loss) of Joint Ventures was $(342,779) and $294,605 for
the three months ended September 30, 2008 and 2007, respectively. The decrease is attributable to an impairment loss recognized by Fund XI-XII-REIT Associates related to the 20/20 Building in the third quarter of 2008, of which, approximately
$629,000 was allocated to the Partnership.

Equity in income of Joint Ventures was $242,237 and $1,280,534 for the nine months ended September 30,
2008 and 2007, respectively. The decrease is primarily attributable to (i) an impairment loss recognized by Fund XI-XII-REIT Associates related to the 20/20 Building in the third quarter of 2008, of which, approximately $629,000 was
allocated to the Partnership, (ii) recognizing a gain on the sale of 111 Southchase Boulevard in May 2007 and a corresponding decrease in operating income following this sale.

We expect equity in income of Joint Ventures to increase in the future as a result of recognizing a non-recurring impairment loss at the 20/20 Building in the third quarter of 2008.

Expenses

General and administrative expenses were relatively stable
at $52,021 and $54,919 for the three months ended September 30, 2008 and 2007, respectively.

General and administrative expenses were $163,947 and
$147,724 for the nine months ended September 30, 2008 and 2007, respectively. The increase is primarily attributable to an increase in administrative costs relating to compliance with additional reporting and regulatory requirements and we
anticipate additional increases in future periods as well.

Interest and Other Income

Interest and other income were $651 and $18,932 for the three months ended September 30, 2008 and 2007, respectively, and $2,164 and $28,834 for the nine months ended September 30, 2008 and 2007,
respectively. The decreases are primarily a result of a decrease in the average amount of net sale proceeds held during the



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respective periods due to the distribution of net sale proceeds to limited partners in November 2007, as well as a decrease in the average daily yield.
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 are intended to help 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.

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 are required to make subjective assessments as to the useful lives of our
depreciable assets. We 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 are depreciated
using the straight-line method over the following useful lives:



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



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recoverable. When indicators of potential impairment are present which suggest that the carrying amounts of real estate assets may not be recoverable, we
assess the recoverability of the real estate assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual
disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that such expected undiscounted future cash flows for assets held for use, or the estimated fair values, less costs to
sell, for assets held for sale, do not exceed the respective assets carrying values, we adjust the real estate assets to the estimated fair values and recognize an impairment loss. Estimated fair values are calculated based on the following
information, in order of preference, dependent upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage value. In
the third quarter of 2008, Fund XI-XII-REIT Associates recorded an impairment loss at the 20/20 Building of approximately $3,678,000, of which approximately $629,000 was allocated to the Partnership, in order to reduce the carrying value of the
property to its fair value estimated based on present value of future cash flows, as a result of management refining its strategy for disposing of this building.

Projections of expected future cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the
property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the
propertys future cash flows and fair value, and could result in the misstatement of the carrying value of 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.



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



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

We carried out an evaluation, under the
supervision and with the participation of management of Wells Capital, the corporate general partner of Wells Partners, 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 (the Exchange Act) as of the end of the quarterly 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 the reports we file or submit under the Exchange Act 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 the reports we file under the Exchange Act 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.



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There were no changes in our internal control over financial reporting during the quarter ended September 30, 2008
that have materially affected, or are reasonably 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, nor is management aware of any such litigation threatened against us during the quarter ended September 30, 2008, requiring disclosure under Item 103 of Regulation S-K.



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

Item 1A. in our Annual Report on Form 10-K for
the year ended December 31, 2007 includes various risk factors applicable to the Partnership. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on
Form 10-K for the year ended December 31, 2007. Except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2007.

Current economic conditions and turmoil in the credit markets may cause market rental rates and property values to decline and may impede disposition of a property at
commercially reasonable terms.

Current economic conditions, the availability and cost of credit, the mortgage market, and declining real estate
markets have contributed to increased volatility and diminished expectations for real estate markets and the economy as a whole on a going-forward basis. Many economists are predicting continued deterioration in economic conditions in the United
States, along with significant increases in unemployment and vacancy rates at commercial properties. As a result, current economic conditions and the credit crisis may cause commercial real estate values and market rental rates to decline
significantly. Deteriorating economic conditions could adversely impact the ability of one or more of our tenants to honor their lease payments and our ability to re-lease space on favorable terms as leases expire or as space otherwise becomes
vacant at our properties. While we do not anticipate the need to access the credit markets, the impact of the current crisis in the credit markets may adversely affect the ability of potential purchasers of our properties to obtain
financing. Therefore, this may affect our timing and/or ability to sell a property at commercially reasonable terms. No assurances can be given that current economic conditions and the effects of the credit crisis will not have a material
adverse effect on our business, financial condition, and results of operations.



|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 September 30, 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended September 30, 2008.
|--- | -----------------------------------------------------------------------------



|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 September 30, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



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



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|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 September 30, 2008.



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



|(a) | During the quarter ended September 30, 2008, 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 Third 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)
|                 |  | 
|November 7, 2008 |  |  |  | /s/ LEO F. WELLS, III                                                                             
|                 |  |  |  | Leo F. Wells, III President, Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|                 |  | 
|November 7, 2008 |  |  |  | /s/ DOUGLAS P. WILLIAMS                                                                           
|                 |  |  |  | Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.                            



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EXHIBIT INDEX

TO THIRD QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND XII, L.P.



|           |  |                                                                                                                               
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                   
|           | 
|10.1       |  | Second Amendment to Lease Agreement relating to 4685 Investment Drive                                                         
|           | 
|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