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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, 2010

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [Not yet applicable to
registrant.]    Yes   ̈    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, 2009 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, 2010 (unaudited) and December 31, 2009                                                         |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Nine Months Ended September 30, 2010 (unaudited) and 2009 (unaudited)       |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2009 and the Nine Months Ended September 30, 2010 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Nine Months Ended September 30, 2010 (unaudited) and 2009 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                           |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 15      
|         |  |                       | 
|         |  | Item 3                |  | Quantitative and Qualitative Disclosures about Market Risk                                                                    |  | 20      
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                                                                       |  | 20      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                              
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                             |  | 21      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                                  |  | 21      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                   |  | 21      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                               |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | RESERVED                                                                                                                      |  | 21      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                             |  | 21      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                      |  | 22      



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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, 2009. The Partnerships results of operations for the three months and nine months ended September 30, 2010 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 30,2010 |            |  | December 31,2009 |  
|Investment in joint ventures                            |  | $                            | 14,628,426 |  |                  | $ | 14,986,012 | 
|Cash and cash equivalents                               |  |                              | 399,903    |  |                  |   | 377,835    | 
|Due from joint ventures                                 |  |                              | 386,448    |  |                  |   | 300,200    | 
|                                                        |  |                              |            |  |                  |   |            | 
|Total assets                                            |  | $                            | 15,414,777 |  |                  | $ | 15,664,047 | 
|                                                        |  |                              |            |  |                  |   |            | 
|                                                       
|LIABILITIES AND PARTNERS CAPITAL                       | 
|                                                        |  |                             
|LIABILITIES:                                            |  |                              |            |  |                  |   |            | 
|Accounts payable and accrued expenses                   |  | $                            | 27,383     |  |                  | $ | 24,379     | 
|Due to affiliates                                       |  |                              | 8,852      |  |                  |   | 10,673     | 
|Partnership distributions payable                       |  |                              | 276,127    |  |                  |   | 276,127    | 
|                                                        |  |                              |            |  |                  |   |            | 
|Total liabilities                                       |  |                              | 312,362    |  |                  |   | 311,179    | 
|                                                        |  |                             
|Commitments and contingencies                           |  |                              |            |  |                  |   |            | 
|                                                        |  |                             
|PARTNERS CAPITAL:                                      |  |                              |            |  |                  |   |            | 
|Limited partners:                                       |  |                              |            |  |                  |   |            | 
|Cash Preferred  3,044,188 units issued and outstanding |  |                              | 15,102,415 |  |                  |   | 15,352,868 | 
|Tax Preferred  516,931 units issued and outstanding    |  |                              | 0          |  |                  |   | 0          | 
|General partners                                        |  |                              | 0          |  |                  |   | 0          | 
|                                                        |  |                              |            |  |                  |   |            | 
|Total partners capital                                 |  |                              | 15,102,415 |  |                  |   | 15,352,868 | 
|                                                        |  |                              |            |  |                  |   |            | 
|Total liabilities and partners capital                 |  | $                            | 15,414,777 |  |                  | $ | 15,664,047 | 
|                                                        |  |                              |            |  |                  |   |            | 

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, |  
|                                                      |  | 2010                                       |           |  | 2009                                      |   |           | 2010 |  |   | 2009      | 
|                                                      |  |                                            |           | 
|EQUITY IN INCOME OF JOINT VENTURES                    |  | $                                          | 258,066   |  |                                           | $ | 230,662   |      |  | $ | 750,513   |  |  | $ | 741,299   | 
|                                                      |  |                                            |           | 
|GENERAL AND ADMINISTRATIVE EXPENSES                   |  |                                            | 51,045    |  |                                           |   | 45,619    |      |  |   | 172,585   |  |  |   | 162,685   | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|NET INCOME                                            |  | $                                          | 207,021   |  |                                           | $ | 185,043   |      |  | $ | 577,928   |  |  |   | 578,614   | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|                                                      |  |                                            |           | 
|NET INCOME ALLOCATED TO LIMITED PARTNERS:             |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|CASH PREFERRED                                        |  | $                                          | 207,021   |  |                                           | $ | 185,043   |      |  | $ | 577,928   |  |  | $ | 578,614   | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|TAX PREFERRED                                         |  | $                                          | 0         |  |                                           | $ | 0         |      |  | $ | 0         |  |  | $ | 0         | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|                                                      |  |                                            |           | 
|NET INCOME PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|CASH PREFERRED                                        |  |                                            | $0.07     |  |                                           |   | $0.06     |      |  |   | $0.19     |  |  |   | $0.19     | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|TAX PREFERRED                                         |  |                                            | $0.00     |  |                                           |   | $0.00     |      |  |   | $0.00     |  |  |   | $0.00     | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|                                                      |  |                                            |           | 
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:   |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|CASH PREFERRED                                        |  |                                            | 3,044,188 |  |                                           |   | 3,044,188 |      |  |   | 3,044,188 |  |  |   | 3,025,522 | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 
|TAX PREFERRED                                         |  |                                            | 516,931   |  |                                           |   | 516,931   |      |  |   | 516,931   |  |  |   | 535,597   | 
|                                                      |  |                                            |           |  |                                           |   |           |      |  |   |           |  |  |   |           | 

See accompanying notes.



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WELLS REAL
ESTATE FUND XII, L.P.



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2009 AND

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (UNAUDITED)



|                                                                                    |  |                  |           |  |                 |   |            |                        |  |  |         |   |  |  |    |  |  |  |    |  |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---------------- | --------- |  | --------------- | - | ---------- | ---------------------- |  |  | ------- | - |  |  | -- |  |  |  | -- |  |  | - | ---------- | -
|                                                                                    |  | Limited Partners |           |  | GeneralPartners |   |            | TotalPartners
Capital | 
|                                                                                    |  | Cash Preferred   |           |  | Tax Preferred   |   |            |                       
|                                                                                    |  | Units            |           |  | Amount          |   |            | Units                  |  |  | Amount  |   |  | 
|BALANCE, December 31, 2008                                                          |  |                  | 3,016,188 |  |                 | $ | 15,692,918 |                        |  |  | 544,931 |   |  |  | $0 |  |  |  | $0 |  |  | $ | 15,692,918 |  
|                                                                                    |  |                  |           |  |                 |  
|Tax preferred conversion elections                                                  |  |                  | 28,000    |  |                 |   | 0          |                        |  |  | (28,000 | ) |  |  | 0  |  |  |  | 0  |  |  |   | 0          |  
|Net income                                                                          |  |                  | 0         |  |                 |   | 763,182    |                        |  |  | 0       |   |  |  | 0  |  |  |  | 0  |  |  |   | 763,182    |  
|Distributions of operating cash flow($0.36 per weighted-averageCash Preferred Unit) |  |                  | 0         |  |                 |   | (1,103,232 | )                      |  |  | 0       |   |  |  | 0  |  |  |  | 0  |  |  |   | (1,103,232 | )
|                                                                                    |  |                  |           |  |                 |   |            |                        |  |  |         |   |  |  |    |  |  |  |    |  |  |   |            |  
|BALANCE, December 31, 2009                                                          |  |                  | 3,044,188 |  |                 |   | 15,352,868 |                        |  |  | 516,931 |   |  |  | 0  |  |  |  | 0  |  |  |   | 15,352,868 |  
|                                                                                    |  |                  |           |  |                 |  
|Net income                                                                          |  |                  | 0         |  |                 |   | 577,928    |                        |  |  | 0       |   |  |  | 0  |  |  |  | 0  |  |  |   | 577,928    |  
|Distributions of operating cash flow($0.27 per weighted-averageCash Preferred Unit) |  |                  | 0         |  |                 |   | (828,381   | )                      |  |  | 0       |   |  |  | 0  |  |  |  | 0  |  |  |   | (828,381   | )
|                                                                                    |  |                  |           |  |                 |   |            |                        |  |  |         |   |  |  |    |  |  |  |    |  |  |   |            |  
|BALANCE, September 30, 2010                                                         |  |                  | 3,044,188 |  |                 | $ | 15,102,415 |                        |  |  | 516,931 |   |  |  | $0 |  |  |  | $0 |  |  | $ | 15,102,415 |  
|                                                                                    |  |                  |           |  |                 |   |            |                        |  |  |         |   |  |  |    |  |  |  |    |  |  |   |            |  

See accompanying notes.



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WELLS REAL
ESTATE FUND XII, L.P.



STATEMENTS OF CASH FLOWS



|                                                                                 |  |                               |           |   |      |   |           |  
|-------------------------------------------------------------------------------- |  | ----------------------------- | --------- | - | ---- | - | --------- | -
|                                                                                 |  | (Unaudited) Nine Months Ended |          
|                                                                                 |  | September 30,                 |          
|                                                                                 |  | 2010                          |           |   | 2009 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            |  |                               |           |   |      |   |           |  
|Net income                                                                       |  | $                             | 577,928   |   |      | $ | 578,614   |  
|Operating distributions received from joint ventures                             |  |                               | 1,021,851 |   |      |   | 1,102,323 |  
|Adjustments to reconcile net income to net cash provided by operatingactivities: |  |                               |           |   |      |   |           |  
|Equity in income of joint ventures                                               |  |                               | (750,513  | ) |      |   | (741,299  | )
|Changes in assets and liabilities:                                               |  |                               |           |   |      |   |           |  
|Decrease in other assets                                                         |  |                               | 0         |   |      |   | 125       |  
|Increase (decrease) in accounts payable and accrued expenses                     |  |                               | 3,004     |   |      |   | (9,558    | )
|Decrease in due to affiliates                                                    |  |                               | (1,821    | ) |      |   | (2,050    | )
|                                                                                 |  |                               |           |   |      |   |           |  
|Net cash provided by operating activities                                        |  |                               | 850,449   |   |      |   | 928,155   |  
|                                                                                 |  |                              
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |                               |           |   |      |   |           |  
|Investment in joint ventures                                                     |  |                               | 0         |   |      |   | (17,089   | )
|                                                                                 |  |                              
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            |  |                               |           |   |      |   |           |  
|Operating distributions paid to limited partners                                 |  |                               | (828,381  | ) |      |   | (826,467  | )
|                                                                                 |  |                               |           |   |      |   |           |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                        |  |                               | 22,068    |   |      |   | 84,599    |  
|                                                                                 |  |                              
|CASH AND CASH EQUIVALENTS, beginning of period                                   |  |                               | 377,835   |   |      |   | 265,257   |  
|                                                                                 |  |                               |           |   |      |   |           |  
|                                                                                 |  |                              
|CASH AND CASH EQUIVALENTS, end of period                                         |  | $                             | 399,903   |   |      | $ | 349,856   |  
|                                                                                 |  |                               |           |   |      |   |           |  
|                                                                                 |  |                              
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:          |  |                               |           |   |      |   |           |  
|Partnership distributions payable                                                |  | $                             | 276,127   |   |      | $ | 276,127   |  
|                                                                                 |  |                               |           |   |      |   |           |  

See accompanying notes.



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WELLS REAL
ESTATE FUND XII, L.P.



CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2010 (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 nonpublic 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. A 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 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REITJoint
Venture (Fund XI-XII-REIT Associates) |  | Wells Real Estate Fund XI, L.P.
Wells Real Estate Fund XII, L.P.
Piedmont Operating Partnership, LP |  | 1.20/20 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                                  |  | 2.4685 Investment Drive
A three-story office building located in Troy, Michigan
 3.Comdata Building
A three-story office building located in Brentwood, Tennessee



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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, 2009.



|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, 2009.

Investment in Joint Ventures

The
Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities. The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by the
Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments. Accordingly, the Partnership 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.

Evaluating the Recoverability 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 their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting standard for the
impairment or disposal of long-lived assets, and recognizes an impairment loss. Estimated fair values are determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for the subject
property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value.

While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard
for fair value measurements and disclosures describes three levels of inputs



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that may be used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as
well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for
the asset or liability, which are typically based on an entitys own assumptions, as little, if any, related market activity or information is available. Examples of Level 3 inputs include estimated holding periods, discount rates, market
capitalization rates, expected lease rental rates, timing of new leases, and sales prices; additionally, the Partnership may assign an estimated probability-weighting to more than one fair value estimate based on the Partnerships
assessment of the likelihood of the respective underlying assumptions occurring as of the evaluation date. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Partnerships assessment of the significance of
a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The accounting standard for fair value measurements and disclosures was applied to the Partnerships
outstanding nonfinancial assets and nonfinancial liabilities effective January 1, 2009.

Distributions of Net Cash from Operations

Net cash from operations, if available and unless reserved, 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 Net 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;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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

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

For the purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, and cost
recovery and the gain on the sale of assets. Net income, as defined, of the Partnership will be 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, such excess net income 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.

Gain 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 January 2010, the Financial Accounting Standards Board (the FASB) clarified previously issued GAAP and issued new requirements related to Accounting Standards Codification Topic Fair
Value Measurements and Disclosures (ASU 2010-6). The clarification component includes disclosures about inputs and valuation techniques used in determining fair value, and providing fair value measurement information for each class
of assets and liabilities. The new requirements relate to disclosures of transfers between the levels in the fair value hierarchy, as well as the individual components in the rollforward of the lowest level (Level 3) in the fair value hierarchy.
This change in GAAP became effective for the Partnership beginning January 1, 2010, except for the provision concerning the rollforward of activity of the Level 3 fair value measurement, which will become effective for the Partnership on
January 1, 2011. The adoption of ASU 2010-6 did not have a material impact on the Partnerships financial statements or disclosures.



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

Summary
of Financial Information

Condensed financial information for the Joint Ventures for the three months and nine months ended
September 30, 2010 and 2009, respectively, is presented below:



|                            |  |                                 |           |  |                                 |   |           |                                |  |   |                                |   |  |      |         |   |      |   |           |      |  |   |           |  |  |   |           |   |  |   |           |  
|--------------------------- |  | ------------------------------- | --------- |  | ------------------------------- | - | --------- | ------------------------------ |  | - | ------------------------------ | - |  | ---- | ------- | - | ---- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | - |  | - | --------- | -
|                            |  | Total Revenues                  |           |  | Net Income (Loss)               |   |           | Total Revenues                 |  |   | Net Income (Loss)              |  
|                            |  | Three Months EndedSeptember 30, |           |  | Three Months EndedSeptember 30, |   |           | Nine Months EndedSeptember 30, |  |   | Nine Months EndedSeptember 30, |  
|                            |  | 2010                            |           |  | 2009                            |   |           | 2010                           |  |   | 2009                           |   |  | 2010 |         |   | 2009 |   |           | 2010 |  |   | 2009      | 
|Fund XI-XII-REIT Associates |  | $                               | 337,406   |  |                                 | $ | 323,005   |                                |  | $ | (1,576                         | ) |  | $    | (36,890 | ) |      | $ | 885,383   |      |  | $ | 915,315   |  |  | $ | (33,048   | ) |  | $ | (15,931   | )
|Fund XII-REIT Associates    |  |                                 | 937,002   |  |                                 |   | 951,138   |                                |  |   | 574,231                        |   |  |      | 526,731 |   |      |   | 2,840,347 |      |  |   | 2,859,033 |  |  |   | 1,680,804 |   |  |   | 1,653,823 |  
|                            |  |                                 |           |  |                                 |   |           |                                |  |   |                                |   |  |      |         |   |      |   |           |      |  |   |           |  |  |   |           |   |  |   |           |  
|                            |  | $                               | 1,274,408 |  |                                 | $ | 1,274,143 |                                |  | $ | 572,655                        |   |  | $    | 489,841 |   |      | $ | 3,725,730 |      |  | $ | 3,774,348 |  |  | $ | 1,647,756 |   |  | $ | 1,637,892 |  
|                            |  |                                 |           |  |                                 |   |           |                                |  |   |                                |   |  |      |         |   |      |   |           |      |  |   |           |  |  |   |           |   |  |   |           |  

Due from Joint Ventures

As presented in the accompanying balance sheets, due from joint ventures as of September 30, 2010 and December 31, 2009 represents operating cash flow generated by the Joint Ventures for the
three months ended September 30, 2010 and December 31, 2009, 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 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 and payable to Wells Management is $8,116 and $11,084
for the three months ended September 30, 2010 and 2009, respectively, and $26,661 and $28,490 for the nine months ended September 30, 2010 and 2009, 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 $24,927 and $22,659 payable to Wells Capital and Wells Management for the three months ended September 30, 2010 and 2009, respectively, and $76,852 and $71,561 for the nine months ended
September 30, 2010 and 2009, 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



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sheets, due to affiliates as of September 30, 2010 and December 31, 2009 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 both 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.

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 distribution 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 Action Against Related-Parties below). As of September 30, 2010, the Partnership has no reason to believe that WREF does not have access to adequate liquidity and
capital resources, including cash flow from operations, cash on hand and other investments, 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 Action 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, one of the Partnerships General Partners; Wells Capital, the corporate general partner of Wells Partners, the Partnerships other General Partner; Wells Management, the Partnerships
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 alleged, 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 sought, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization
transaction.

On June 27, 2007, the plaintiff filed an amended complaint, which attempted 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.



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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. On September 16, 2009, the Court granted the plaintiffs motion for class certification. On September 20, 2009, the defendants filed a petition for permission to appeal immediately the Courts
order granting the motion for class certification with the Eleventh Circuit Court of Appeals. The petition for permission to appeal was denied on October 30, 2009. On April 13, 2009, the plaintiff moved for leave to amend the second
amended complaint to add additional defendants. The court denied the plaintiffs motion for leave to amend on June 23, 2009.

On
December 4, 2009, the parties filed motions for summary judgment. On August 2, 2010, the Court entered an order denying the defendants motion for summary judgment and granting, in part, the plaintiffs motion for partial summary
judgment. The Court ruled that the question of whether certain expressions of interest in acquiring Piedmont REIT constituted material information required to be disclosed in the proxy statement to obtain approval for the Piedmont REIT
internalization transaction raises questions of fact that must be determined at trial. A trial date has not been set.

Mr. Wells, Wells
Capital, and Wells Management believe that the allegations contained in the complaint are without merit and 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 the Partnerships operations and portfolio of investments.



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

From time
to time, the Partnership and its General Partners are parties 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, 2009.

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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| |  |  | 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 in
the positioning-for-sale phase of our life cycle. We have sold four of the seven properties in which we have held interests. Our focus at this time involves leasing and marketing efforts that we believe will ultimately result in the best disposition
pricing of our assets for our investors.

Operating distributions payable to the limited partners holding Cash Preferred Units for the third
quarter of 2010 remained consistent with the level paid in the prior quarter. We anticipate that operating distributions will remain at a similar level or decline in the near-term due to (i) the continued volatility in the automotive industry
and its potential impact on 4685 Investment Drive and (ii) funding our pro rata share of anticipated re-leasing costs and capital improvements for the 20/20 Building.

Property Summary

As we move further into the positioning-for-sale 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 negotiating long-term leases at market rental rates while
attempting to minimize down time, re-leasing expenditures, ongoing property level costs, and portfolio costs. As properties are positioned for sale, our attention will shift to locating suitable buyers, negotiating purchase-sale contracts that will
attempt to maximize the total return to our limited partners and minimize contingencies and potential post-closing obligations to buyers. As of October 31, 2010, the Partnership owned interests in three properties.

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



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



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



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



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



| |  |  | The 20/20 Building, located in Leawood, Kansas, is 91% leased. The major leases for approximately 80% of the building extend through October 2012. We
are actively working on re-leasing the remaining vacant space in this building.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The 4685 Investment Drive building, located in Troy, Michigan, is 100% leased through October 2015.
| | - |  | ---------------------------------------------------------------------------------------------------



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

Liquidity and Capital Resources

Overview

Our operating strategy entails
funding expenditures related to the recurring operations of the Joint Ventures properties and the portfolio with operating cash flows, including current and prior period operating distributions received from the Joint Ventures, and assessing
the amount of remaining cash flows that will be required to fund known future re-leasing costs and other capital improvements. Any residual operating cash flows are generally considered available for distribution to the Cash Preferred limited
partners and, unless reserved, are generally paid quarterly. As a result, the ongoing monitoring of our cash position is critical to ensuring that adequate liquidity and capital resources are available. Economic downturns in one or more of our core
markets could adversely impact the ability of 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, 2010, we generated net operating cash flows, including operating distributions received from the Joint
Ventures, of approximately $850,000. Operating distributions from the Joint Ventures generally consist of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital
expenditures. We used net operating cash flows to fund operating distributions of approximately $828,000 to Cash Preferred limited partners. The extent to which any future operating distributions are 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 fluctuate due to (i) the continued volatility in the automotive industry and its potential impact on 4685 Investment Drive and (ii) funding our pro
rata share of anticipated re-leasing costs and capital improvements for the 20/20 Building.

We believe that the cash on hand and
distributions due from the Joint Ventures are sufficient to cover our working capital needs, including those provided for within our total liabilities of approximately $312,000, as of September 30, 2010.

Long-Term Liquidity

We expect that our
future sources of capital will be primarily derived from operating cash flows generated from properties owned by the Joint Ventures and net proceeds generated from the sale of those 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 or anticipated capital expenditures, to pay
operating distributions to the limited partners.

Capital Resources

The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties 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.



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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 calendar
quarter-ends. However, the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known or anticipated 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, are then 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.

As of September 30, 2010, we have received, used, distributed, and held net sale proceeds allocated to the
Partnership from the sale of properties as presented below:



|                                       |  |                  |             |        |                                      |         |                                             |   |            |                         |  |                                                                 |  |   |                                                        |   |            |  |  |   |        | 
|-------------------------------------- |  | ---------------- | ----------- | ------ | ------------------------------------ | ------- | ------------------------------------------- | - | ---------- | ----------------------- |  | --------------------------------------------------------------- |  | - | ------------------------------------------------------ | - | ---------- |  |  | - | ------ | 
|Property Sold                          |  | Net
SaleProceeds |             |        | PartnershipsApproximate
Ownership % |         | Net 
SaleProceedsAllocatedto thePartnership |   |            | Use ofNet Sale Proceeds |  | Net Sale
ProceedsDistributed toPartners as ofSeptember 30, 2010 |  |   | Undistributed NetSale Proceeds as ofSeptember 30, 2010 |  
|                                       |  |                  |             | 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 of Joint Ventures

Equity in income of Joint Ventures increased from
$230,662 for the three months ended September 30, 2009 to $258,066 for the three months ended September 30, 2010. The increase is primarily attributable to (i) incurring parking lot repair expenses at the 20/20 Building in the
third quarter of 2009 and (ii) a decrease in depreciation of tenant improvements due to the August 2010 expiration of the original term of the Continental lease at 4685 Investment Drive.

Equity in income of Joint Ventures remained relatively stable at $741,299 for the nine months ended September 30, 2009 and $750,513 for the nine
months ended September 30, 2010.

Absent leasing activity at the 20/20 Building, we anticipate equity in income of Joint Ventures to
remain at similar levels in the near term.



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General and Administrative Expenses

General and administrative expenses increased from $45,619 for the three months ended September 30, 2009 to $51,045 for the
three months ended September 30, 2010. The increase is primarily attributable to an increase in legal services incurred in connection with regulatory reporting requirements in the third quarter of 2010.

General and administrative expenses increased from $162,685 for the nine months ended September 30, 2009 to $172,585 for the nine months ended
September 30, 2010. The increase is primarily attributable to a temporary difference in accounting fees related to the timing of work performed by our external accountants in the current year.

We anticipate that future general and administrative expenses will vary primarily based on future changes in our reporting and regulatory requirements.

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



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

Evaluating the Recoverability of Real
Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate
assets in which we have an ownership interest through investments in the Joint Ventures may not be recoverable. When indicators of potential impairment are present which 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 their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting
standard for the impairment or disposal of long-lived assets, and recognize an impairment loss. Estimated fair values are determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for
the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual 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
(approximately $629,000 of which was allocated to the Partnership) to reduce the carrying value of the property to its estimated fair value based on the present value of future cash flows, primarily as a result of management refining its strategy
for the disposition 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

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



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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.

Changes in Internal
Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended
September 30, 2010 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, 2010, requiring disclosure under Item 103 of
Regulation S-K. For a description of pending litigation involving certain related parties, see Assertion of Legal Action Against Related-Parties in Note 4 to our financial statements included in this report.



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

There have been no material
changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.



|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, 2010.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended September 30, 2010.
|--- | -----------------------------------------------------------------------------



|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, 2010.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



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



|ITEM 4. | RESERVED
|------- | --------



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



|(a) | During the quarter ended September 30, 2010, 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(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 11, 2010 |  |  |  | /s/ LEO F. WELLS, III                                                                             
|                  |  |  |  | Leo F. Wells, III
President, Principal Executive Officer,
and Sole Director of Wells Capital, Inc.
|                  |  | 
|November 11, 2010 |  |  |  | /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.



|              |      |  |             |                                                                                                                               
|------------- | ---- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |      |  | Description
|              |     
|              | 31.1 |  |             | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|              |     
|              | 31.2 |  |             | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|              |     
|              | 32.1 |  |             | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002