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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark one)



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

For the fiscal year ended December 31, 2006 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 0-25731



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WELLS REAL ESTATE FUND XI, L.P.

(Exact name of registrant as specified in its
charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2250094                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6200 The Corners Parkway, Norcross, Georgia                    |  | 30092-3365                          
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               | 
|Registrants telephone number including area code              |  | (770) 449-7800                      

Securities registered pursuant to Section 12(b) of the Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  | None                                     

Securities registered pursuant to section 12(g) of the Act:



|                 |  |                 
|---------------- |  | ----------------
|CLASS A UNITS    |  | CLASS B UNITS   
|(Title of class) |  | (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.   Yes ̈NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
  Yes ̈No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

Large accelerated filer ̈Accelerated
filer ̈Non-accelerated filer  x

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



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-K of Wells Real Estate Fund XI, L.P. (the Partnership) other than historical facts may be considered
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans, strategies, and
prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a
guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will, expect, intend,
anticipate, estimate, believe, continue, or other similar words. Specifically, 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-K, 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 dividends to
stockholders, and maintain the value of our real estate properties, may be significantly hindered. Contained in Item 1A. are some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to
differ materially from those presented in our forward-looking statements.



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WELLS REAL ESTATE FUND XI, L.P.



PART I



|ITEM 1. | BUSINESS.
|------- | ---------

General

Wells Real Estate Fund XI, 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 June 20, 1996 for the purpose of acquiring, developing, owning, operating, improving, leasing, and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elected to
have their units treated as Class A Units or Class B Units. The limited partners have the right to change their prior elections to have some or all of their units treated as Class A Units or Class B Units one time during each quarterly
accounting period (conversion elections). 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; and (c) add or remove a general partner. A majority vote on any of the above-described matters will bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights,
regardless of class.

On December 31, 1997, the Partnership commenced an offering of up to $35,000,000 of Class A or Class B limited partnership
units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations upon receiving and accepting subscriptions for 125,000 units on March 3, 1998. The
offering was terminated on December 30, 1998, at which time the Partnership had sold approximately 1,302,942 Class A Units and 350,338 Class B Units representing capital contributions of $16,532,802.

Operating Phases and Objectives

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;



| |  |  | 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



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| |  |  | 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.

The Partnership is currently in the holding phase of its life cycle. Accordingly, management will focus resources on managing the Partnerships existing portfolio,
including identifying strategic sales of certain properties, and locating suitable replacement tenants for vacant space as necessary.

Employees

The Partnership has no direct employees. The employees of Wells Capital and Wells Management Company, Inc. (Wells Management), an affiliate
of the General Partners, perform a full range of real estate services for the Partnership including leasing and property management, accounting, asset management, and investor relations. See Item 13, Certain Relationships and Related
Transactions, for a summary of the fees paid to the General Partners and their affiliates during the years ended December 31, 2006, 2005, and 2004.

Insurance

Wells Management carries comprehensive liability and extended coverage with respect to the properties we own through our interest
in joint ventures. In the opinion of management, our properties are adequately insured.

Competition

We will experience competition for tenants from owners and managers of competing projects which may include the General Partners and their affiliates. As a result, in
connection with negotiating leases, we may offer rental concessions, reduced charges for tenant improvements, and other inducements, all of which may have an adverse impact on results of operations. We are also in competition with sellers of similar
properties to locate suitable purchasers for its properties.

Economic Dependency

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

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

Future net income generated by WREF
will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the volume of
future acquisitions and dispositions of real estate assets by WREF-sponsored programs. As of December 31, 2006, we believe that WREF generates adequate cash flow from operations and has adequate liquidity available in the form of cash on hand
and current receivables necessary to meet its current and future obligations as they become due.

Additionally, we are dependent upon the ability of our
current tenants to pay their contractual rent amounts as the rents become due. The inability of a tenant to pay future rental amounts would have a negative impact on our results of operations. If certain situations prevent our tenants from paying
contractual rents, this could result in a material adverse impact on our results of operations.



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Proxy to Liquidate

Under Section 20.2 of the partnership agreement, limited partners holding 10% or more of the outstanding units have the right, at any time commencing eight years after the termination of the Partnerships offering of units
(December 30, 2006), to provide a written request to the General Partners directing the General Partners to formally proxy the limited partners to determine whether the assets of the Partnership should be liquidated.

Assertion of Legal Action Against Related-Parties

On March 12,
2007, a stockholder of Wells Real Estate Investment Trust, Inc. (Wells REIT), a Wells-sponsored program, filed a purported class action and derivative complaint against, among others, Wells REIT, the officers and directors of Wells REIT,
Leo. F. Wells, III and Wells Capital, our General Partners, and certain affiliates of WREF.

The complaint attempts to assert class action claims on behalf
of those persons who receive and are entitled to vote on a proxy statement for Wells REIT that was filed with the Securities and Exchange Commission (SEC) on February 26, 2007, as amended (the proxy statement). The
complaint alleges, among other things, that (i) the consideration to be paid as part of a proposed merger agreement to acquire certain affiliates of WREF is excessive; and (ii) the proxy statement contains false and misleading statements
or omits to state material facts. Additionally, the complaint seeks to, among other things, obtain (i) certification of the class action; (ii) a judgment declaring the proxy statement false and misleading; (iii) unspecified monetary
damages; (iv) nullification of any stockholder approvals obtained during the proxy process; (v) nullification of the merger proposal and the merger agreement; (vi) restitution for disgorgement of profits, benefits, and other
compensation for wrongful conduct and fiduciary breaches; (vii) the nomination and election of new independent directors, and the retention of a new financial advisor to assess the advisability of Wells REITs strategic alternatives; and
(viii) the payment of reasonable attorneys fees and experts fees.

Wells REIT, our General Partners, and certain affiliates of WREF
believe that the allegations contained in the complaint are without merit and intends to vigorously defend this action. Due to the uncertainties inherent in the litigation process, it is not possible to predict the ultimate outcome of this matter at
this time; however, as with any litigation, the risk of financial loss does exist. Any financial loss incurred by WREF, which adversely affects the financial health of Wells Capital or its affiliates, could hinder their ability to successfully
manage our operations and our portfolio of investments.

Web Site Address

Access to copies of each of our filings with the SEC is available, free of charge, at the http://www.wellsref.com Web site, through a link to the http://www.sec.gov Web site.



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

Real Estate Risks

Economic and regulatory changes that impact the real estate market generally may cause our operating results to suffer and decrease the value of our
real estate properties.

Our operating results will be subject to risks generally incident to the ownership of real estate, including:



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



| |  |  | changes in supply of or demand for similar or competing properties in an area;
| | - |  | ------------------------------------------------------------------------------



| |  |  | changes in interest rates and availability of permanent mortgage funds, which may render the sale of a property difficult or unattractive;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | changes in tax, real estate, environmental and zoning laws; and
| | - |  | ---------------------------------------------------------------



| |  |  | periods of high interest rates and tight money supply.
| | - |  | ------------------------------------------------------

These and other reasons may prevent us from being profitable or from realizing growth or maintaining the value of our real estate properties.

General economic conditions may affect the timing of sale of our properties and the sale price we receive.

We may be unable to sell a
property if or when we decide to do so. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates, and other factors, including supply and demand for real estate
investments, all of which are beyond our control. We cannot predict whether we will be able to sell any property for the price or on terms which are acceptable to us. Further, we cannot predict the length of time which will be needed to find a
willing purchaser and to close the sale of a property.

Adverse economic conditions in the geographic regions in which we own properties may negatively
impact your overall returns.

Adverse economic conditions in the geographic regions in which we own our properties could affect the real estate values
in this area or the business of our tenants if any of our tenants rely upon the local economy for their revenues. Therefore, changes in local economic conditions could reduce our income and distributions to limited partners or the amounts we could
otherwise receive upon the sale of a property in a negatively affected region.

Adverse economic conditions affecting the particular industries of the
tenants of our properties may negatively impact your overall returns.

Adverse economic conditions affecting a particular industry of one or more of our
tenants, such as the technology industry, could affect the financial ability of one or more of our tenants to make payments under their leases, which could cause delays in our receipt of rental revenues or a vacancy in one or more of our properties
for a period of time. Therefore, changes in economic conditions of the particular industry of one or more of our tenants could reduce our income and distributions to limited partners and the value of one or more of our properties at the time of sale
of such properties.

We are dependent on our tenants for substantially all of our revenue, so our success is materially dependent on the financial
stability of our tenants.

Most of our properties are occupied by only a few tenants and, therefore, the success of our investments are materially
dependent on the financial stability of our tenants. Lease payment defaults by tenants could cause us to reduce the amount of distributions to holders of Class A Units. A default of a tenant on its lease payments to us would cause us to lose
the revenue from the property. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting our property. If a lease is terminated, we cannot
assure you that we will be able to lease the property for the rent previously received or sell the property without incurring a loss.

We currently have
a vacancy issue with one of our properties, which could reduce or eliminate cash distributions to limited partners.

Because of the vacancy issue, we
have expended, or anticipate that we will be required to expend in the future, substantial funds for tenant improvements and tenant refurbishments to the vacated space and other lease-up costs. If the vacancy continues for a long period of time, we
may suffer reduced revenues resulting in less cash to be distributed to investors holding Class A Units, if any. In addition, the resale value of this property is currently diminished because the market value depends principally upon the value
of the leases in place at such property.



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Your investment in units are subject to greater risk because we lack a diversified property portfolio.

Because we own interests in a limited number of properties, your investment in units are subject to a greater risk of loss. There is a greater risk that you will lose
money in your investment because our portfolio of properties is not diverse by geographic location, property type or industry group of tenants.

Our
future financial success depends on only a few tenants.

The revenues generated by these tenants are substantially reliant upon the financial condition
of these tenants and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants may result in the failure or delay of such tenants rental payments, which may have a substantial adverse
effect on our financial performance.

We depend on tenants for our revenue. Accordingly, lease terminations and/or tenant default could reduce our net
income and limit our ability to make distributions to our stockholders.

The success of our investments materially depends on the financial stability of
our tenants. A default or termination by a significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a
foreclosure if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting our
property. If significant leases are terminated or defaulted upon, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce the amount of
distributions to limited partners.

If one or more of our tenants file bankruptcy, we may be precluded from collecting all sums due.

If one or more of our tenants, or the guarantor of a tenants lease, commences, or has commenced against it, any proceeding under any provision of the federal
Bankruptcy Code, as amended, or any other legal or equitable proceeding under any bankruptcy, insolvency, rehabilitation, receivership, or debtors relief statute or law (bankruptcy proceeding), we may be unable to collect sums due under
relevant leases. Any or all of the tenants, or a guarantor of a tenants lease obligations, could be subject to a bankruptcy proceeding. Such a bankruptcy proceeding may bar our efforts to collect pre-bankruptcy debts from these entities or
their properties, unless we are able to obtain an enabling order from the bankruptcy court. If a lease is rejected by a tenant in bankruptcy, we would only have a general unsecured claim against the tenant, and may not be entitled to any further
payments under the lease. A tenants or lease guarantors bankruptcy proceeding could hinder or delay efforts to collect past due balances under relevant leases, and could ultimately preclude collection of these sums. Such an event could
cause a decrease or cessation of rental payments which would mean a reduction in our cash flow and the amount available for distribution to limited partners holding Class A Units. In the event of a bankruptcy proceeding, we cannot assure you
that the tenant or its trustee will assume our lease. If a given lease, or guaranty of a lease, is not assumed, our cash flow and the amounts available for distribution to limited partners holding Class A Units may be adversely affected.

We may not have funding for future tenant improvements which may reduce your returns and make it difficult to attract one or more new tenants.

When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings, it is likely that in order to
attract one or more new tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space and other lease-up costs. Substantially all of our net offering proceeds available for investment
have been used for investment in Partnership properties, and we do not anticipate that we will maintain permanent working capital reserves. We also have not identified a funding source to provide funds which may be required in the future for tenant



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improvements, tenant refurbishments, and other lease-up costs in order to attract new tenants. We cannot assure you that any such source of funding will be
available to us for such purposes in the future. In the event that we are required to use net cash from operations to fund such tenant improvements, tenant refurbishments, and other lease-up costs, cash distributions to limited partners holding
Class A Units will be reduced or eliminated for potentially extended periods of time.

A property that incurs a vacancy could be difficult to sell
or lease.

A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. Our
properties may be leased to a single tenant and/or may be specifically suited to the particular needs of certain tenants based on the type of business the tenant operates. If a vacancy on any of our properties continues for a long period of time, we
may suffer reduced revenues resulting in less cash to be distributed to investors holding Class A Units. In addition, the resale value of the property could be diminished because the market value of a particular property will depend principally
upon the value of the leases of such property.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage
could reduce our net income.

Our General Partners will attempt to obtain adequate insurance on all of our properties to cover casualty losses. However,
there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution, or environmental matters that are uninsurable or not economically insurable, or may be insured
subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims. We may not have adequate
coverage for such losses. If any of our properties incur a casualty loss that is not fully insured, the value of our assets will be reduced by such uninsured loss. In addition, other than reserves of net cash from operations we may establish, we
have no source of funding to repair or reconstruct any uninsured damaged property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to limited
partners.

Uncertain market conditions and the broad discretion of our General Partners relating to the future disposition of properties could adversely
affect the return on your investment.

We generally will hold the various real properties in which we invest until such time as the General Partners
determine that the sale or other disposition thereof appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. Our General Partners intend to sell properties acquired for development
after holding such properties for a minimum period of 10 years from the date the development is completed, and intend to sell existing income-producing properties within 10 to 12 years after their acquisition, or as soon thereafter as market
conditions permit. This is the period of time it typically takes to realize significant appreciation of the type of property in which we traditionally invest. However, our General Partners may exercise their discretion as to whether and when to sell
a property, and we will have no obligation to sell properties at any particular time, except upon the termination of the Partnership as specified in the partnership agreement, or earlier if a majority of you vote to liquidate the Partnership
pursuant to a formal proxy to liquidate. We cannot predict with any certainty the various market conditions affecting real estate investments which will exist at any particular time in the future. Due to the uncertainty of market conditions which
may affect the future disposition of our properties, we cannot assure you that we will be able to sell our properties at a profit in the future. Accordingly, the timing of liquidation of the Partnership and the extent to which you will receive cash
distributions and realize potential appreciation on our real estate investments will be dependent upon fluctuating market conditions.



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If any environmentally hazardous material is determined to exist on a property owned by the Partnership, our operating
results could be adversely affected.

Under various federal, state, and local environmental laws, ordinances, and regulations, a current or previous
owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under, or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require expenditures.
Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. In connection with the acquisition and ownership of our properties, we may be
potentially liable for such costs. The cost of defending against claims of liability, complying with environmental regulatory requirements, or remediating any contaminated property could materially adversely affect the business, assets, or results
of operations of the Partnership and, consequently, amounts available for distribution to limited partners holding Class A Units.

The Partnership
and/or certain other prior Wells public limited partnerships sponsored by our General Partners have sold real estate properties for a sale price less than the original purchase price.

Certain of the real estate properties previously purchased by the Partnership and other Wells public limited partnerships sponsored by the General Partners have not appreciated to the levels anticipated at the time of
purchase. Recently some of these properties have been sold by such programs at purchase prices below the prices paid for such properties. We cannot guarantee that any of our properties will appreciate in value.

General Investment Risks

The Georgia Revised Uniform Limited
Partnership Act (GRULPA) does not grant you any specific voting rights and your rights are limited under our partnership agreement.

A vote
of a majority in interest of the limited partners is sufficient to take the following significant Partnership actions:



| |  |  | to amend our partnership agreement;
| | - |  | -----------------------------------



| |  |  | to change our business purpose or our investment objectives;
| | - |  | ------------------------------------------------------------



| |  |  | to remove our General Partners; or
| | - |  | ----------------------------------



| |  |  | to authorize a merger or a consolidation of the Partnership.
| | - |  | ------------------------------------------------------------

These are your only significant voting rights granted under our partnership agreement. In addition, GRULPA does not grant you any specific voting rights. Therefore, your voting rights are severely limited.

You are bound by the majority vote on matters on which you are entitled to vote.

You may approve any of the above actions by majority vote of the limited partners. Therefore, you are bound by such majority vote even if you do not vote with the majority on any of these actions.

Under our partnership agreement, we are required to indemnify our General Partners under certain circumstances which may reduce returns to our limited partners.

Under our partnership agreement and subject to certain limitations, the Partnership is required to indemnify our General Partners from and against
losses, liabilities, and damages relating to or arising out of any action or inaction on behalf of the Partnership done in good faith and in the best interest of the Partnership. If substantial and expensive litigation should ensue and the
Partnership is obligated to indemnify one or both General Partners, we may be forced to use substantial funds to do so, which may reduce the return on your investment.



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Payment of fees to our General Partners and their affiliates will reduce cash available for distributions to our
limited partners.

Our General Partners and their affiliates perform services for us in connection with the management and leasing of our properties in
which we own interests. Our affiliates may receive property management and leasing fees of 4.5% of gross revenues in connection with the commercial properties we own. In addition, we will reimburse our General Partners and their affiliates for the
administrative services necessary to our prudent operation, which includes actual costs of goods, services, and materials used for or by the Partnership. These fees and reimbursements will reduce the amount of cash available for capital expenditures
to our properties or distributions to our limited partners.

The availability and the timing of cash distributions are uncertain.

We cannot assure you that sufficient cash will be available to make distributions to you from either net cash from operations or proceeds from the sale of properties. We
bear all expenses incurred in connection with our operations, which are deducted from cash funds generated by operations prior to computing the amount of net cash from operations to be distributed to our general and limited partners. In addition,
our General Partners, in their discretion, may retain all or any portion of net cash generated from our operations and/or proceeds from the sale of our properties for tenant improvements, tenant refurbishments, and other lease-up costs or for
working capital reserves.

Gains and distributions upon sale of our properties are uncertain.

Although gains from the sale of properties typically represent a substantial portion of any profits attributable to real estate investments, we cannot assure you that we
will realize any gains on the sale of our properties. In any event, you should not expect distribution of such proceeds to occur during the early years of our operations. We generally will not sell properties until at least 10 to 12 years after the
acquisition of the properties and our General Partners may exercise their discretion as to whether and when to sell a property; therefore, we have no obligation to sell properties at any particular time. Further, receipt of the full proceeds of such
sales may be extended over a substantial period of time following the sales. In addition, the amount of taxable gain allocated to you with respect to the sale of a Partnership property could exceed the cash proceeds received from such sale. While
the net proceeds from the sale of a property will generally be distributed to investors, the General Partners, in their sole discretion, may not make such distribution if such proceeds are used to:



| |  |  | purchase land underlying any of our properties;
| | - |  | -----------------------------------------------



| |  |  | buy out the interest of any co-venturer or joint venture partner in a property which is jointly owned;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | establish working capital reserves; or
| | - |  | --------------------------------------



| |  |  | make repairs, maintenance, tenant improvements, capital improvements, or other expenditures to any of our existing properties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

We are uncertain of our sources for funding of future capital needs.

Substantially all of the gross proceeds of the offering were used to invest in properties and to pay various fees and expenses. In addition, we do not anticipate that we will maintain any permanent working capital reserves. Accordingly, in
the event that we develop a need for additional capital in the future, such as the funding of tenant improvements, tenant refurbishments, or other lease-up costs, we have not identified any sources for such funding, and we cannot assure you that any
sources of funding will be available to us for potential capital needs in the future.

We may need to reserve net cash from operations for future tenant
improvements which may reduce your returns.

We may be required to expend substantial funds for tenant improvements and tenant refurbishments to vacated
space and other lease-up costs. Substantially all of our net offering proceeds available for investment will be used



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for investment in Partnership properties, and we do not anticipate that we will maintain permanent working capital reserves. We also have no identified
funding source to provide funds which may be required in the future for tenant improvements, tenant refurbishments, and other lease-up costs in order to attract new tenants. We cannot assure you that any such source of funding will be available to
us for such purposes in the future. In the event that we are required to use net cash from operations to fund such tenant improvements, tenant refurbishments, and other lease-up costs, cash distributions to limited partners holding Class A
Units will be reduced or eliminated for potentially extended periods of time.

Marketability and Transferability Risks

There is no public trading market for your units.

There is no public
market for your units, and we do not anticipate that any public trading market for your units will ever develop. If you attempt to sell your units, you would likely do so at substantially discounted prices on the secondary market. Further, our
partnership agreement restricts our ability to participate in a public trading market or anything substantially equivalent to one by providing that any transfer which may cause us to be classified as a publicly traded partnership as
defined in Section 7704 of the Internal Revenue Code shall be deemed void and shall not be recognized. Because classification of the Partnership as a publicly traded partnership may significantly decrease the value of your units,
our General Partners intend to use their authority to the maximum extent possible to prohibit transfers of units which could cause us to be classified as a publicly traded partnership.

Your units have limited transferability and lack liquidity due to restrictions under state regulatory laws and our partnership agreement.

You are limited in your ability to transfer your units. Our partnership agreement and certain state regulatory agencies have imposed restrictions relating to the number
of units you may transfer. In addition, the suitability standards applied to you upon the purchase of your units may also be applied to persons to whom you wish to transfer your units. Accordingly, you may find it difficult to sell your units for
cash or if you are able to sell your units, you may have to sell your units at a substantial discount. You may not be able to sell your units in the event of an emergency, and your units are not likely to be accepted as collateral for a loan.

Our estimated unit valuations should not be viewed as an accurate reflection of the value of the limited partners units.

The estimated unit valuations contained in this annual report on Form 10-K should not be viewed as an accurate reflection of the value of the limited partners
units, what limited partners might be able to sell their units for, or the fair market value of the Partnerships properties, nor do they necessarily represent the amount of net proceeds limited partners would receive if the Partnerships
properties were sold and the proceeds distributed in a liquidation of the Partnership. There is no established public trading market for the Partnerships limited partnership units, and it is not anticipated that a public trading market for the
units will ever develop. We did not obtain any third-party appraisals of our properties in connection with these estimated unit valuations. In addition, property values are subject to change and could decline in the future. The valuations performed
by the General Partners are estimates only, and are based on a number of assumptions which may not be accurate or complete and may or may not be applicable to any specific limited partnership units. Further, these estimated valuations assume, and
are applicable only to, limited partners who have made no conversion elections under the partnership agreement and who purchased their units directly from the Partnership in the Partnerships original public offering of units. It should also be
noted that, as properties are sold and the net proceeds from property sales are distributed to limited partners, the remaining value of the Partnerships portfolio of properties, and resulting value of Partnerships limited partnership
units, will naturally decline.



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Special Risks Regarding Status of Units

If you hold Class A Units, we expect that you will be allocated more income than cash flow.

Since limited
partners holding Class A Units are allocated substantially all of the Partnerships net income, while substantially all deductions for depreciation and other tax losses are allocated to limited partners holding Class B Units, we expect
that those of you who hold Class A Units will be allocated taxable income in excess of your cash distributions. We cannot assure you that cash flow will be available for distribution in any year.

If you hold Class B Units, you may not be able to use your passive losses.

Those of you holding Class B Units will be allocated a disproportionately larger share of our deductions for depreciation and other tax losses. Such losses will be treated as passive losses, which may only be used to offset
passive income and may not be used to offset active or portfolio income. Accordingly, you may receive no current benefit from your share of tax losses unless you are currently being allocated passive income from other sources.

In addition, the American Jobs Creation Act of 2004 (the Act) added Section 470 to the Internal Revenue Code, which provides for certain
limitations on the utilization of losses allocable to leased property owned by a partnership having both taxable and tax-exempt partners, such as the Partnership. In March 2005, the Internal Revenue Service (IRS) issued IRS Notice
2005-29 announcing that the IRS would not be applying Section 470 to disallow losses for tax year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS issued IRS Notice 2006-2
extending the period for transitional relief through the 2005 tax year and in December 2006, the IRS again extended the period for transitional relief through all tax years beginning prior to January 1, 2007. The IRS has indicated that it is
continuing to study the application of Section 470 to partnerships, such as the Partnership, but unless further legislation is enacted which addresses this issue or some other form of relief from the provisions of Section 470 of the Act is
granted, beginning in tax year 2007 and thereafter, passive losses allocable to limited partners holding Class B Units may be used only to offset passive income generated from the same property or within the same fund.

The desired effect of holding Class A Units or Class B Units may be reduced depending on how many investors hold each type of unit.

You will be entitled to different rights and priorities as to distributions of cash flow from operations and net sale proceeds and as to the allocation of depreciation
and other tax losses depending upon whether you are holding Class A Units or Class B Units. However, the effect of any advantage associated with holding Class A Units or Class B Units may be significantly reduced or eliminated,
depending upon the ratio of Class A Units to Class B Units during any given period. We will not attempt to restrict the ratio of Class A Units to Class B Units, and we will not attempt to establish or maintain any particular ratio.

Management Risks

You must rely on our General
Partners for management of our business.

Our General Partners make all decisions with respect to the management of the Partnership. Limited partners
have no right or power to take part in the management of the Partnership, except through the exercise of limited voting rights. Therefore, you must rely almost entirely on our General Partners for management of the Partnership and the operation of
its business. Our General Partners may be removed only under certain conditions set forth in our partnership agreement. If our General Partners are removed, they will receive payment equal to the fair market value of their interests in the
Partnership as agreed upon by our General Partners and the Partnership or by arbitration if they are unable to agree.



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Leo F. Wells, III has a primary role in determining what is in the best interests of the Partnership and its limited
partners.

Leo F. Wells, III is one of our General Partners and is the president, treasurer, and sole director of Wells Capital, the general partner of
our corporate general partner. Therefore, one person has a primary role in determining what is in the best interests of the Partnership and its limited partners. Although Mr. Wells relies on the input of the officers and other employees of
Wells Capital, he ultimately has the authority to make decisions affecting our Partnership operations. Therefore, Mr. Wells alone will determine the propriety of his own actions, which could result in a conflict of interest when he is faced
with any significant decision relating to our Partnership affairs.

Our loss of or inability to obtain key personnel could delay or hinder
implementation of our investment strategies, which could limit our ability to make distributions.

Our success depends to a significant degree upon the
contributions of Leo F. Wells, III, Douglas P. Williams, and Randall D. Fretz, each of whom would be difficult to replace. We do not have employment agreements with Messrs. Wells, Williams, or Fretz, and we cannot guarantee that such persons will
remain affiliated with us. If any of Wells Capitals key personnel were to cease their affiliation with the Partnership, we may be unable to find suitable replacement personnel, and our operating results could suffer. We do not maintain key
person life insurance on any person. We believe that our future success depends, in large part, upon the ability of our General Partners to hire and retain highly skilled managerial and operational personnel. If we lose or are unable to obtain the
services of highly skilled personnel or do not establish or maintain appropriate strategic relationships, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.

Our operating performance could suffer if Wells Capital incurs significant losses, including those losses that may result from being the general partner of other
entities.

We are dependent on Wells Capital to conduct our operations; thus, adverse changes in the financial condition of Wells Capital or our
relationship with Wells Capital could hinder its ability to successfully manage our operations and our portfolio of investments. As a general partner in many Wells-sponsored programs, Wells Capital may have contingent liabilities for the obligations
of such programs. Enforcement of such obligations against Wells Capital could result in a substantial reduction of its net worth. If such liabilities affected the level of services that Wells Capital could provide, our operations and financial
performance could suffer.

Our General Partners have a limited net worth consisting of illiquid assets which may affect their ability to fulfill their
financial obligations to the Partnership.

The net worth of our General Partners consists primarily of interests in real estate, retirement plans,
partnerships, and closely-held businesses and, in the case of Wells Capital, receivables from affiliated corporations and partnerships. Accordingly, the net worth of our General Partners is illiquid and not readily marketable. This illiquidity may
be relevant to you in evaluating the ability of our General Partners to fulfill their financial obligations to the Partnership. In addition, our General Partners have significant commitments to the other Wells-sponsored programs.

Our operating performance could suffer if Wells Capital incurs significant losses, including those losses that may result from being the general partner of other
entities.

We are dependent on Wells Capital and its affiliates to select investments and conduct our operations. Thus, adverse changes to our
relationship with or the financial health of Wells Capital and its affiliates, including changes arising from litigation, could hinder their ability to successfully manage our operations and our portfolio of investments. As a general partner to many
WREF-sponsored programs, Wells Capital may have contingent liability for the obligations of such partnerships. Enforcement of such obligations against Wells Capital could result in a substantial reduction of its net worth. If such liabilities
affected the level of services that Wells Capital could provide, our operations and financial performance could suffer.



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Conflicts of Interest Risks

Our General Partners will face conflicts of interest relating to time management which could result in lower returns on our investments.

Because our General Partners and their affiliates have interests in other real estate programs and also engage in other business activities, they could have conflicts of interest in allocating their time between our business and these other
activities, which could affect operations of the Partnership. You should note that our partnership agreement does not specify any minimum amount of time or level of attention that our General Partners are required to devote to the Partnership.

Our General Partners will face conflicts of interest relating to the sale and leasing of properties.

We may be selling properties at the same time as other Wells programs are buying and selling properties. We may have acquired or be selling properties in geographic areas
where other Wells programs own properties or are trying to sell properties, which could lower your return on your investment.

Investments in joint
ventures with affiliates will result in additional risks involving our relationship with the co-venturer.

We have entered into joint ventures with
affiliates. Such investments may involve risks not otherwise present with an investment in real estate, including, for example:



| |  |  | the possibility that our co-venturer, co-tenant, or partner in an investment might become bankrupt;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | that such co-venturer, co-tenant, or partner may at any time have economic or business interests or goals which are or which become inconsistent with our business
interests or goals; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that such co-venturer, co-tenant, or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Actions by such a co-venturer, co-tenant, or partner might result in subjecting the property to liabilities in excess of those
contemplated and may have the effect of reducing your returns.

Our General Partners will face various conflicts of interest relating to joint ventures
with affiliates.

Since our General Partners and their affiliates control both the Partnership and other affiliates, transactions between the parties
with respect to joint ventures between such parties do not have the benefit of arms length negotiation of the type normally conducted between unrelated co-venturers. Under these joint venture arrangements, neither co-venturer has the power to
control the venture, and an impasse could be reached regarding matters pertaining to the joint venture, which might have a negative influence on the joint venture and decrease potential returns to you. In the event that a co-venturer has a right of
first refusal to buy out the other co-venturer, it may be unable to finance such buy-out at that time. It may also be difficult for us to sell our interest in any such joint venture or partnership or as a co-tenant in property. In addition, to the
extent that our co-venturer, partner, or co-tenant is an affiliate of our General Partners, certain conflicts of interest will exist.

Federal Income
Tax Risks

The IRS may challenge our characterization of material tax aspects of your investment in the Partnership.

An investment in units involves certain material income tax risks, the character and extent of which are, to some extent, a function of whether you hold Class A
Units or Class B Units. We will not seek any rulings from the IRS regarding any of the tax issues related to your units.



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Investors may realize taxable income without cash distributions.

As a limited partner in the Partnership, you are required to report your allocable share of the Partnerships taxable income on your personal income tax return
regardless of whether or not you have received any cash distributions from the Partnership. For example, if you hold Class A Units, you will be allocated substantially all of our net income, defined in the partnership agreement to mean
generally net income for federal income tax purposes, including any income exempt from tax, but excluding all deductions for depreciation and amortization and gain or loss from the sale of Partnership properties, even if such income is in excess of
any distributions of cash from our operations. If you hold Class A Units, you will likely be allocated taxable income in excess of any distributions to you, and the amount of cash received by you could be less than the income tax attributable
to the net income allocated to you.

We could potentially be characterized as a publicly traded partnership resulting in unfavorable tax results.

If the IRS were to classify the Partnership as a publicly traded partnership, we could be taxable as a corporation, and distributions made
to you could be treated as portfolio income to you rather than passive income. We cannot assure you that we will not, at some time in the future, be treated as a publicly traded partnership due to the following factors:



| |  |  | the complex nature of the IRS rules governing our potential exemption from classification as a publicly traded partnership;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the lack of interpretive guidance with respect to such rules; and
| | - |  | -----------------------------------------------------------------



| |  |  | the fact that any determination in this regard will necessarily be based upon events which have not yet occurred.
| | - |  | -----------------------------------------------------------------------------------------------------------------

The IRS may challenge our allocations of profit and loss.

While it
is more likely than not Partnership items of income, gain, loss, deduction, and credit will be allocated among our General Partners and our limited partners substantially in accordance with the allocation provisions of the partnership agreement, we
cannot assure you that the IRS will not successfully challenge the allocations in the partnership agreement and reallocate items of income, gain, loss, deduction, and credit in a manner which reduces the anticipated tax benefits to investors holding
Class B Units or increases the income allocated to investors holding Class A Units.

We may be audited and additional tax, interest and penalties
may be imposed upon you.

Our federal income tax returns may be audited by the IRS. Any audit of the Partnership could result in an audit of your tax
return causing adjustments of items unrelated to your investment in the Partnership, in addition to adjustments to various Partnership items. In the event of any such adjustments, you might incur accountants or attorneys fees, court
costs, and other expenses contesting deficiencies asserted by the IRS. You also may be liable for interest on any underpayment and certain penalties from the date your tax was originally due. The tax treatment of all Partnership items will generally
be determined at the partnership level in a single proceeding rather than in separate proceedings with each partner, and our General Partners are primarily responsible for contesting federal income tax adjustments proposed by the IRS. In this
connection, our General Partners may extend the statute of limitations as to all partners and, in certain circumstances, may bind the partners to a settlement with the IRS. Further, our General Partners may cause us to elect to be treated as
an electing large partnership. If they do, we could take advantage of simplified flow-through reporting of Partnership items. Adjustments to Partnership items would continue to be determined at the partnership level, however, and
any such adjustments would be accounted for in the year they take effect, rather than in the year to which such adjustments relate. Accordingly, if you make an election to change the status of your units between the years in which a tax benefit is
claimed and an adjustment is made, you may suffer a disproportionate adverse impact with respect to any such adjustment. Further, our General Partners will have the discretion in such circumstances



Page 14



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either to pass along any such adjustments to the partners or to bear such adjustments at the partnership level, thereby potentially adversely impacting the
holders of a particular class of units disproportionately to holders of the other class of units.

State and local taxes and a requirement to withhold
state taxes may apply.

The state in which you reside may impose an income tax upon your share of our taxable income. Further, states in which we own
properties may impose income taxes upon your share of our taxable income allocable to any Partnership property located in that state or other taxes on limited partnerships owning properties in their states. Many states have implemented or are
implementing programs to require partnerships to withhold and pay state income taxes owed by nonresident partners relating to income-producing properties located in their states, and we may be required to withhold state taxes from cash distributions
otherwise payable to you. In the event we are required to withhold state taxes from your cash distributions, or pay other state taxes, the amount of the net cash from operations otherwise payable to you would be reduced. In addition, such collection
and filing requirements at the state level may result in increases in our administrative expenses which would have the effect of reducing cash available for distribution to you. You are urged to consult with your own tax advisors with respect to the
impact of applicable state and local taxes and state tax withholding requirements or other potential state taxes relating to an investment in our units.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial, and administrative
changes have been made in the provisions of the federal income tax laws applicable to investments similar to an investment in our units. Additional changes to the tax laws are likely to continue to occur in the future, and we cannot assure you that
any such changes will not adversely affect the taxation of a limited partner. Any such changes could have an adverse effect on an investment in our units or on the market value or the resale potential of our properties. You are urged to consult with
your own tax advisor with respect to the impact of recent legislation on your investment in units and the status of legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our units.

Retirement Plan and Qualified Plan Risks

There are
special considerations that apply to a pension or profit-sharing trust or an Individual Retirement Account (IRA) investing in units.

If you
are investing the assets of a pension, profit-sharing, Section 401(k), Keogh, or other qualified retirement plan or the assets of an IRA in units, you should satisfy yourself that:



| |  |  | your investment is consistent with your fiduciary obligations under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plans investment policy;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment will not impair the liquidity of the plan or IRA;
| | - |  | -----------------------------------------------------------------



| |  |  | your investment will not produce unrelated business taxable income for the plan or IRA;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | you will be able to value the assets of the plan annually in accordance with ERISA requirements; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



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We may dissolve the Partnership if our assets are deemed to be plan assets or if we engage in prohibited transactions.

If our assets were deemed to be assets of qualified plans investing as limited partners, i.e., plan assets, our General Partners would be considered to
be fiduciaries of such plans and certain contemplated transactions between our General Partners or their affiliates, and the Partnership may then be deemed to be prohibited transactions subject to excise taxation under Section 4975
of the Internal Revenue Code. Additionally, if our assets were deemed to be plan assets, the standards of prudence and other provisions of ERISA applicable to plan fiduciaries would apply to the General Partners with respect to our investments. We
have not sought a ruling from the U.S. Department of Labor regarding the potential classification of our assets as plan assets.

In this regard, U.S.
Department of Labor Regulations defining plan assets for purposes of ERISA contain exemptions which, if satisfied, would preclude assets of a limited partnership such as ours from being treated as plan assets. We cannot assure you that our
partnership agreement has been structured so that the exemptions in such Regulations would apply to us, although our General Partners intend that an investment by a qualified plan in units will not be deemed an investment in the assets of the
Partnership. We can make no representations or warranties of any kind regarding the consequences of an investment in our units by qualified plans in this regard. Plan fiduciaries are urged to consult with and rely upon their own advisors with
respect to this and other ERISA issues which, if decided adversely to the Partnership, could result in qualified plan investors being deemed to have engaged in prohibited transactions, which would cause the imposition of excise taxes and
co-fiduciary liability under Section 405 of ERISA in the event actions taken by us are deemed to be nonprudent investments or prohibited transactions.

In the event our assets are deemed to constitute plan assets or certain transactions undertaken by us are deemed to constitute prohibited transactions under ERISA or the Internal Revenue Code, and no
exemption for such transactions is obtainable by us, the General Partners have the right, but not the obligation, upon notice to all limited partners, but without the consent of any limited partner, to:



| |  |  | compel a termination and dissolution of the Partnership; or
| | - |  | -----------------------------------------------------------



| |  |  | restructure our activities to the extent necessary to comply with any exemption in the U.S. Department of Labor Regulations or any prohibited transaction exemption
granted by the Department of Labor or any condition which the Department of Labor might impose as a condition to granting a prohibited transaction exemption.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Adverse tax consequences may result because of minimum distribution requirements.

If you intend to purchase units
through your IRA, or if you are a custodian of an IRA or a trustee or other fiduciary of a retirement plan considering an investment in units, you must consider the limited liquidity of an investment in our units as it relates to applicable minimum
distribution requirements under the Internal Revenue Code. If units are held and our properties have not yet been sold at such time as mandatory distributions are required to begin to an IRA beneficiary or qualified plan participant, Sections
408(a)(6) and 401(a)(9) of the Internal Revenue Code will likely require that a distribution-in-kind of the units be made to the IRA beneficiary or qualified plan participant. Any such distribution-in-kind of units must be included in the taxable
income of the IRA beneficiary or qualified plan participant for the year in which the units are received at the fair market value of the units and taxes attributable thereto must be paid without any corresponding cash distributions from us with
which to pay such income tax liability.

Unrelated business taxable income (UBTI) may be generated with respect to tax-exempt investors.

We do not intend or anticipate that the tax-exempt investors in the Partnership will be allocated income deemed to be derived from an unrelated trade
or business. Notwithstanding this, the General Partners do have limited authority to borrow funds deemed necessary:



| |  |  | to finance improvements necessary to protect capital previously invested in a property;
| | - |  | ---------------------------------------------------------------------------------------



Page 16



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| |  |  | to protect the value of our investment in a property; or
| | - |  | --------------------------------------------------------



| |  |  | to make one of our properties more attractive for sale or lease.
| | - |  | ----------------------------------------------------------------

Our General Partners have represented that they will not cause the Partnership to incur indebtedness unless they obtain an opinion from legal counsel or an opinion from our tax accountants that the proposed
indebtedness more likely than not will not cause the income allocable to tax-exempt investors to be characterized as UBTI. Any such opinion will have no binding effect on the IRS or any court, however, and some risk remains that we may generate UBTI
for our tax-exempt investors in the event that it becomes necessary for us to borrow funds.

Further, in the event we were deemed to be a
dealer in real property, defined as one who holds real estate primarily for sale to customers in the ordinary course of business, the gain realized on the sale of our properties which is allocable to tax-exempt investors would be
characterized as UBTI.



|ITEM 1B.    UNRESOLVED | STAFF COMMENTS.
|---------------------- | ---------------

There were no unresolved SEC staff comments as of
December 31, 2006.



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|ITEM 2. | PROPERTIES.
|------- | -----------

Overview

The Partnership owns interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners. During the periods
presented, the Partnership owned interests in the following joint ventures (the Joint Ventures) and properties:



|                                                             |  |                                                                                                         |  |                                                                                                         |  |                                                                                                       |  |                             |   |  |      |   |  |      |   |  |      |   |  |      |  
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | --------------------------- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                                             |  |                                                                                                         |  |                                                                                                         |  |                                                                                                       |  | Leased % as of December 31, |  
|Joint Venture                                                |  | Joint Venture Partners                                                                                  |  | Ownership %                                                                                             |  | Properties                                                                                            |  | 2006                        |   |  | 2005 |   |  | 2004 |   |  | 2003 |   |  | 2002 |  
|The Fund IX, Fund X,    Fund XI and REIT    Joint Venture    |  |   Wells Real Estate Fund IX, L.P.   Wells Real Estate Fund X, L.P.   Wells Real Estate Fund XI, L.P. |  | 39.0%48.5%8.8%                                                                                          |  | 1. Alstom Power  Knoxville Building(2) A three-story office building located in Knoxville, Tennessee |  |                            |   |  |     |   |  | 100  | % |  | 100  | % |  | 100  | %
|(Fund IX-X-XI-    REIT Associates)                         |  |   Wells Operating Partnership, L.P.(1)                                                                 |  | 3.7%                                                                                                    |  | 2. 360 Interlocken
Building A three-story office building located in Broomfield, Colorado             |  | 100                         | % |  | 97   | % |  | 93   | % |  | 78   | % |  | 75   | %
|                                                             |  |                                                                                                         |  |                                                                                                         |  | 3. Avaya Building A one-story office building located in Oklahoma City, Oklahoma                      |  | 100                         | % |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %
|                                                             |  |                                                                                                         |  |                                                                                                         |  | 4. Iomega Building(3) A single-story warehouse and office building located in Ogden, Utah             |  | 100                         | % |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %
|                                                             |  |                                                                                                         |  |                                                                                                         |  | 5. 1315 West Century Drive(4) A two-story office building located in Louisville, Colorado             |  |                            |   |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %
|Fund X and Fund XI    Associates (Fund X-XI    Associates) |  |   Wells Real Estate Fund X, L.P.   Wells Real Estate Fund XI, L.P.                                    |  | This joint venture only owns interests in other joint ventures and does not own anyproperties directly. | 
|Wells/Orange County    Associates                            |  |  Fund X-XI Associates  Wells Operating Partnership, L.P.(1)                                           |  | 56.3%43.7%                                                                                              |  | 6. Cort Building(5) A one-story office and warehouse building located in Fountain Valley, California  |  |                            |   |  |     |   |  |     |   |  |     |   |  | 100  | %
|Wells/Fremont    Associates                                  |  |  Fund X-XI Associates  Wells Operating Partnership, L.P.(1)                                           |  | 22.5%77.5%                                                                                              |  | 7. 47320 Kato Road A two-story warehouse and office building located in Fremont, California           |  | 100                         | % |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %



Page 18



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|                                                                        |  |                                                                                                             |  |                 |  |                                                                                                                   |  |                             |   |  |      |   |  |      |   |  |      |   |  |      |  
|----------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | --------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | --------------------------- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                                                        |  |                                                                                                             |  |                 |  |                                                                                                                   |  | Leased % as of December 31, |  
|Joint Venture                                                           |  | Joint Venture Partners                                                                                      |  | Ownership %     |  | Properties                                                                                                        |  | 2006                        |   |  | 2005 |   |  | 2004 |   |  | 2003 |   |  | 2002 |  
|The Wells Fund XI-    Fund XII-REIT    Joint Venture (Fund XI-XII-REIT |  |  Wells Real Estate Fund XI, L.P.  Wells Real Estate Fund XII, L.P.  Wells Operating Partnership, L.P.(1) |  | 26.1%17.1%56.8% |  | 8. 111 Southchase Boulevard A two-story manufacturing and office building located in Fountain Inn, South Carolina |  | 100                         | % |  | 0    | % |  | 0    | % |  | 0    | % |  | 0    | %
|Associates)                                                            |  |                                                                                                             |  |                 |  | 9. 20/20 Building A three-story office building located in Leawood, Kansas                                        |  | 77                          | % |  | 0    | % |  | 0    | % |  | 100  | % |  | 100  | %
|                                                                        |  |                                                                                                             |  |                 |  | 10.Johnson Matthey Building(6) A one-story office building and warehouse located in Wayne, Pennsylvania           |  |                            |   |  |     |   |  | 100  | % |  | 100  | % |  | 100  | %
|                                                                        |  |                                                                                                             |  |                 |  | 11.Gartner Building(7) A two-story office building located in Ft. Myers, Florida                                  |  |                            |   |  |     |   |  | 100  | % |  | 100  | % |  | 100  | %

| | (1) | Wells Operating Partnership, L.P. (Wells OP) is a Delaware limited partnership with Wells
REIT serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The property was sold in March 2005.
| | --- | ------------------------------------



| | (3) | The property was sold in January 2007.
| | --- | --------------------------------------



| | (4) | The property was sold in December 2006.
| | --- | ---------------------------------------



| | (5) | The property was sold in September 2003. Wells/Orange County Associates was liquidated in
2005.
| | --- | -----------------------------------------------------------------------------------------------



| | (6) | The property was sold in October 2004.
| | --- | --------------------------------------



| | (7) | The property was sold in April 2005.
| | --- | ------------------------------------

Wells Real Estate Fund IX, L.P., Wells Real Estate Fund X, L.P., and Wells Real Estate Fund XII, L.P. are affiliated with the Partnership through common general
partners. Each of the properties described above was acquired on an all-cash basis.



Page 19



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Lease Expirations

As
of December 31, 2006, the lease expirations scheduled during the following ten years for all properties in which the Partnership held an interest through the Joint Ventures, assuming no exercise of renewal options or termination rights, are
summarized below:



|                         |  |                           |  |                      |  |                                                |           |                                                                       |   |                                          |  |       |                                                              |  |       |  
|------------------------ |  | ------------------------- |  | -------------------- |  | ---------------------------------------------- | --------- | --------------------------------------------------------------------- | - | ---------------------------------------- |  | ----- | ------------------------------------------------------------ |  | ----- | -
|Year of Lease Expiration |  | Number of Leases Expiring |  | Square Feet Expiring |  | AnnualizedGross BaseRent in Year of Expiration |           | PartnershipShare ofAnnualizedGross
BaseRent in Year of  Expiration(1) |   | Percentage of Total SquareFeet  Expiring |  |       | Percentage of Total Annualized Base Rent inYear ofExpiration | 
|2008(2)                  |  | 2                         |  | 93,345               |  | $                                              | 1,273,617 |                                                                       | $ | 111,951                                  |  | 18.7  | %                                                            |  | 28.4  | %
|2009(3)                  |  | 3                         |  | 167,767              |  |                                                | 1,150,152 |                                                                       |   | 104,245                                  |  | 33.7  |                                                              |  | 25.7  |  
|2010(4)                  |  | 2                         |  | 5,211                |  |                                                | 107,976   |                                                                       |   | 9,491                                    |  | 1.1   |                                                              |  | 2.4   |  
|2011(5)                  |  | 2                         |  | 172,919              |  |                                                | 820,620   |                                                                       |   | 196,138                                  |  | 34.7  |                                                              |  | 18.3  |  
|2012(6)                  |  | 3                         |  | 58,665               |  |                                                | 1,127,727 |                                                                       |   | 278,234                                  |  | 11.8  |                                                              |  | 25.1  |  
|2013(7)                  |  | 1                         |  | 0                    |  |                                                | 2,400     |                                                                       |   | 211                                      |  | 0.0   |                                                              |  | 0.1   |  
|                         |  |                           |  |                      |  |                                                |           |                                                                       |   |                                          |  |       |                                                              |  |       |  
|                         |  | 13                        |  | 497,907              |  | $                                              | 4,482,492 |                                                                       | $ | 700,270                                  |  | 100.0 | %                                                            |  | 100.0 | %
|                         |  |                           |  |                      |  |                                                |           |                                                                       |   |                                          |  |       |                                                              |  |       |  



| | (1) | The Partnerships share of annualized gross base rent in year of expiration is calculated based
on the Partnerships ownership percentage in the joint venture that owns the leased property.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Expiration of Avaya, Inc. lease (approximately 57,200 square feet) and the GAIAM, Inc. lease at the
360 Interlocken Building lease (approximately 36,200 square feet).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Expiration of Iomega Corporation lease (approximately 108,300 square feet); TCI International, Inc.
lease at 47320 Kato Road (approximately 58,400 square feet); and Hotel Okura (USA), Inc. lease at the 360 Interlocken Building (approximately 1,100 square feet).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Expiration of Casey Family Programs lease at the 360 Interlocken Building (approximately 2,900 square
feet) and Ayres Associates, Inc. lease at the 360 Interlocken Building (approximately 2,300 square feet).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Expiration of Caterpillar, Inc. lease at 111 Southchase Boulevard (approximately 168,100 square feet)
and the Culver Financial lease at the 360 Interlocken Building (approximately 4,800 square feet).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Expiration of 20/20 Building: Blue Cross and Blue Shield lease at the 20/20 Building (approximately
15,000 square feet); the EPOCH Group, L.C. lease at the 20/20 Building (approximately 39,300 square feet); and the Lighthouse Financial, LLC lease at the 360 Interlocken Building (approximately 4,400 square feet).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Expiration of TCG Colorado ground lease at the 360 Interlocken Building.
| | --- | ------------------------------------------------------------------------

Property Descriptions

The
properties in which the Partnership owns an interest through the Joint Ventures during the periods presented are further described below:

Alstom Power  Knoxville Building

The Alstom Power  Knoxville Building is a three-story office building
comprised of approximately 84,000 rentable square feet located on a 5.62-acre tract of real property in Knoxville, Tennessee. The entire rentable area of the Alstom Power  Knoxville Building was leased to Alstom Power, Inc. through
October 31, 2014. On March 15, 2005, Fund IX-X-XI-REIT Associates sold the Alstom Power  Knoxville Building to an unrelated third party for a gross sale price of $12,000,000. As a result of the sale of the Alstom Power 
Knoxville Building, the Partnership received net sale proceeds of approximately $1,024,000 and was allocated a gain of approximately $442,000.

360 Interlocken Building

The 360 Interlocken Building is a three-story, multi-tenant office building containing
approximately 52,000 rentable square feet located on a 5.1-acre tract of land in Broomfield, Colorado. One major tenant, GAIAM, Inc.



Page 20



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(GAIAM), currently occupies approximately 36,000 square feet (or approximately 70% of the building). In 2004, GAIAM signed a three-year lease
extension through May 31, 2008. As of December 31, 2006, the annualized base rent payable for the GAIAM lease was approximately $615,000. Beginning on June 1, 2007, annualized base rent payable increases to approximately $651,000
through the term of the lease. The remainder of the building is leased to five tenants: Culver Financial (approximately 4,800 square feet, expiring February 2011); Lighthouse Financial, LLC (approximately 4,400 square feet, expiring July 2012);
Casey Family Programs (approximately 2,900 square feet, expiring May 2010); Ayres Associates, Inc. (approximately 2,300 square feet, expiring August 2010); and Hotel Okura (U.S.A.), Inc. (approximately 1,100 square feet, expiring April 2009). All
tenants in the 360 Interlocken Building are responsible for paying a pro-rata share of the increases in taxes, utilities, insurance, and other operating costs over a base year as defined in their respective leases.

Avaya Building

The Avaya Building is a
one-story office building containing approximately 57,000 net rentable square feet on 5.3 acres of land. Avaya, Inc. (Avaya) occupies the entire Avaya Building under the initial lease term of ten years, which commenced January 5,
1998 and expires January 31, 2008. The annual base rent payable is approximately $623,000 for the remainder of the lease term. In addition to base rent, Avaya is required to reimburse the landlord for certain insurance expenses. Avaya has the
option to extend the initial term for two additional five-year periods. The annual base rent payable for each extended term will be assessed at the respective currently prevailing market rental rates.

Iomega Building

The Iomega Building is a
single-story warehouse and office building including approximately 108,000 rentable square feet located in Ogden, Utah. The building was 100% leased by Iomega Corporation with a lease term extending through April 2009. As of December 31, 2006,
the annualized base rent payable was approximately $650,000. In addition, annual income of approximately $114,000 is payable related to the parking lot area. The lease is an economic triple-net lease, whereby the terms require the tenant to pay or
to reimburse the landlord for all operating expenses. On January 31, 2007, Fund IX-X-XI-REIT Associates sold the Iomega Building to an unrelated third party for a gross sale price of $4,867,000. As a result of the sale, the Partnership received
net sale proceeds of approximately $412,000 and was allocated a gain of approximately $16,000.

1315 West Century Drive

The 1315 West Century Drive property is a two-story office building with approximately 107,000 rentable square feet located on a 15-acre tract of land
located in Louisville, Colorado. The entire rentable area of 1315 West Century Drive was under a lease with Ohmeda, Inc. (Ohmeda) through April 30, 2005. After fulfilling the terms of the lease, Ohmeda vacated the building, and it
remained unoccupied.

On December 22, 2006, Fund IX-X-XI-REIT Associates sold 1315 West Century Drive to an unrelated third party for a gross sale
price of $8,325,000. As a result of the sale, Fund IX-X-XI-REIT Associates received net sale proceeds of approximately $8,060,000, of which approximately $708,000 was distributed to the Partnership. In the third quarter of 2006, Fund IX-X-XI-REIT
Associates recognized an impairment loss of approximately $354,000 to reduce the carrying value of 1315 West Century Drive to its estimated fair value, less costs to sell, and recognized an additional loss on sale of approximately $142,000.
Approximately $31,000 and $12,000 of the impairment loss and loss on sale was allocated to the Partnership, respectively.

Cort Building

The Cort Building is a 52,000-square-foot warehouse and office building located in Fountain Valley, California. On
September 11, 2003, Wells/Orange County Associates sold the Cort Building to an unrelated third party for a gross sales price of $5,770,000. As a result of the sale, the Partnership received net sale proceeds of approximately $1,316,000 and was
allocated a loss of approximately $90,000.



Page 21



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47320 Kato Road

The 47320 Kato Road building is a two-story warehouse and office building located in Fremont, California and is 100% leased to one tenant, TCI International, Inc. (TCI), under a five-year lease term, which
commenced on December 1, 2004 and expires on November 30, 2009. As of December 31, 2006, the annualized base rent payable was approximately $449,000 and will increase by approximately $14,000 each December through the end of the lease
term.

111 Southchase Boulevard

The 111 Southchase Boulevard property is a two-story manufacturing and office building containing approximately 168,000 rentable square feet located in Fountain Inn, South Carolina. The building is comprised of approximately 135,000 square
feet of warehouse space and approximately 33,000 square feet of office space. The 111 Southchase Boulevard property is currently under a lease agreement with Caterpillar, Inc., which commences in January 2007 and expires in December 2011. Under the
terms of the lease, annual base rent is approximately $647,000 and is scheduled to increase by 2.5% annually each January through the expiration of the lease. The annualized base rent in 2011 is approximately $714,000.

20/20 Building

The 20/20 Building is a
three-story office building including approximately 70,000 rentable square feet on a 7.12-acre tract of land located in Leawood, Kansas. The entire rentable area of the 20/20 Building was under a lease with Sprint Communications, Inc.
(Sprint) for an initial term of ten years, which commenced on May 19, 1997 and was to expire on May 18, 2007. Sprint, the sole tenant of the 20/20 Building, exercised an early lease termination and vacated the building in May
2004. Under the terms of the lease, Sprint paid Fund XI-XII-REIT Associates approximately $450,000 in early lease termination fees.

In December 2006, Fund
XI-XII-REIT Associates and Blue Cross and Blue Shield of Kansas City, Missouri (Blue Cross and Blue Shield) entered into a lease agreement for approximately 21% of the 20/20 Building that commences in February 2007 and will expire in
October 2012. Blue Cross and Blue Shield has the right to extend the lease for up to two additional five-year periods at a rate equal to the then-current fair market rental rate. Under the terms of the lease, following a five-month rental abatement
period, annualized base rent will be approximately $270,000 and is scheduled to increase by 1.39% annually beginning in the twenty-second month of the lease. The annualized base rent in 2012 will be approximately $285,000.

In December 2006, Fund XI-XII-REIT Associates and The EPOCH Group, L.C. (EPOCH) entered into a lease agreement for approximately 56% of the 20/20 Building
that commences in June 2007 and will expire in October 2012. EPOCH has the right to extend the lease for up to two additional five-year periods at a rate equal to the then-current fair market rental rate. Under the terms of the lease, following a
five-month rental abatement period, annualized base rent will be approximately $707,000 and is scheduled to increase by 1.39% annually beginning in the eighteenth month of the lease. Annualized base rent in 2012 will be approximately $747,000.

Johnson Matthey Building

The Johnson Matthey Building is an office and warehouse building including approximately 130,000 square feet located in Wayne, Pennsylvania. The entire rentable area of the Johnson Matthey Building was leased to Johnson Matthey, Inc., which
commenced on July 1, 1998 and was to expire on June 30, 2007.

On October 5, 2004, the Fund XI-XII-REIT Associates sold the Johnson Matthey
Building to the sole tenant, Johnson Matthey, Inc., for a gross sale price of $10,000,000. As a result of the sale of the Johnson Matthey Building, the Partnership received net sale proceeds of approximately $2,530,000 and was allocated a gain of
approximately $632,000.



Page 22



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Gartner Building

The Gartner Building is a two-story office building with approximately 62,000 rentable square feet on a 4.9-acre tract of land located in Fort Myers, Florida. The entire rentable area of the Gartner Building was
leased to Gartner, Inc., which commenced on February 1, 1998 and was set to expire on January 31, 2013. On April 13, 2005, the Fund XI-XII-REIT Associates sold the Gartner Building to an unrelated third party for a gross sale price of
approximately $12,520,000. As a result of the sale of the Gartner Building, the Partnership received net sale proceeds of approximately $3,242,000 and was allocated a gain of approximately $1,172,000.



|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------

From time to time, we are party to legal
proceedings which arise in the ordinary course of our business. We are 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 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

No matters
were submitted to a vote of the limited partners during the fourth quarter of 2006.



Page 23



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PART II



|ITEM 5. | MARKET FOR PARTNERSHIPS UNITS AND RELATED SECURITY HOLDER MATTERS.
|------- | -------------------------------------------------------------------

Summary

As of February 28, 2007, 1,426,674 Class A Units and 226,606 Class B Units held by a total of 1,240 and 80 limited
partners, respectively, were outstanding. Capital contributions are equal to $10.00 per each limited partnership unit. A public trading market has not been established for the Partnerships limited partnership units, nor is such a market
anticipated to develop in the future. The partnership agreement provides the General Partners with the right to prohibit transfers of units under certain circumstances.

Unit Valuation

Because fiduciaries of retirement plans subject to the ERISA and the IRA custodians are required to
determine and report the value of the assets held in their respective plans or accounts on an annual basis, the General Partners are required under the partnership agreement to report estimated unit values to the limited partners each year in the
Partnerships annual report on Form 10-K. The methodology to be utilized for determining such estimated unit values under the partnership agreement requires the General Partners to estimate the amount a unit holder would receive assuming that
the Partnerships properties were sold at their estimated fair market values as of the end of the Partnerships fiscal year and the proceeds therefrom (without any reduction for selling expenses) plus the amount of net sale proceeds held
by the Partnership at year-end from previous property sales, if any, were distributed to the limited partners in liquidation. The estimated unit valuations are intended to be an estimate of the distributions that would be made to limited partners
who purchased their units directly from the Partnership in the Partnerships original public offering of units, and who have made no conversion elections under the partnership agreement.

Utilizing the foregoing methodology and based upon market conditions existing in early December 2006, the General Partners have estimated the Partnerships unit
valuations, based upon their estimates of property values as of December 31, 2006, to be approximately $4.29 per Class A Unit and $3.70 per Class B Unit, based upon market conditions existing in early December 2006. These estimates should
not be viewed as an accurate reflection of the value of the limited partners units, what limited partners might be able to sell their units for, or the fair market value of the Partnerships properties, nor do they necessarily represent
the amount of net proceeds limited partners would receive if the Partnerships properties were sold and the proceeds distributed in a liquidation of the Partnership. There is no established public trading market for the Partnerships
limited partnership units, and it is not anticipated that a public trading market for the units will ever develop. In addition, property values are subject to change and could decline in the future. While, as required by the partnership agreement,
the General Partners have obtained an opinion from The David L. Beal Company, an independent appraiser certified by the Member Appraisal Institute, to the effect that such estimates of value were deemed reasonable and were prepared in accordance
with appropriate methods for valuing real estate, no actual appraisals were obtained due to the inordinate expense that would be involved in obtaining appraisals for all of the Partnerships properties.

The valuations performed by the General Partners are estimates only, and are based on a number of assumptions which may not be accurate or complete and may or may not be
applicable to any specific limited partnership units. For example, as a result of the availability of conversion elections under the partnership agreement and the resulting complexities involved relating to the distribution methodology under the
partnership agreement, each limited partnership unit of the Partnership potentially has its own unique characteristics as to distributions and value. These estimated valuations assume, and are applicable only to, limited partners who have made no
conversion elections under the partnership agreement and who purchased their units directly from the Partnership in the Partnerships original public offering of units. Further, as set forth above, no third-party appraisals have or will be
obtained. For these reasons, the estimated unit valuations set forth above should not be used by or relied



Page 24



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upon by investors, other than fiduciaries of retirement plans and IRA custodians for limited ERISA and IRA reporting purposes, as any indication of the fair
market value of their units. In addition, it should be noted that ERISA plan fiduciaries and IRA custodians may use estimated unit valuations obtained from other sources, such as prices paid for the Partnerships units in secondary market
trades, and that such estimated unit valuations may well be lower than those estimated by the General Partners using the methodology required by the partnership agreement.

It should also be noted that once the Partnership begins the process of selling certain of its properties and that as properties are sold and the net proceeds from property sales are distributed to limited partners,
the remaining value of the Partnerships portfolio of properties, and resulting value of Partnerships limited partnership units, will naturally decline. In considering the foregoing estimated unit valuations, it should be noted that the
Partnership has previously distributed net sale proceeds in the amount of $3.26 per Class A Unit and $8.11 per Class B Unit to its limited partners. These amounts are intended to represent the per-unit distributions received by limited partners
who purchased their units directly from the Partnership in the Partnerships original public offering of units, and who have made no conversion elections under the partnership agreement. Limited partners who have made one or more conversion
elections would have received a different level of per-unit distribution.

Operating Distributions

Operating cash available for distribution to the limited partners is generally distributed on a quarterly basis. Under the partnership agreement, distributions from net
cash from operations are allocated first to the limited partners holding Class A Units (and limited partners holding Class B Units that have elected a conversion right that allows them to share in the distribution rights of limited partners
holding Class A Units) until they have received an amount equal to 10% of their adjusted capital contributions. Cash available for distribution is then distributed to the General Partners until they have received an amount equal to 10% of cash
distributions previously distributed to the limited partners. Any remaining cash available for distribution is split between the limited partners holding Class A Units and the General Partners on a basis of 90% and 10%, respectively.

Operating cash distributions made to limited partners holding Class A Units during 2005 and 2006 are summarized below:



|                                          |  |                                  |        |                   |   |                   |  |                  |      |  |   |     
|----------------------------------------- |  | -------------------------------- | ------ | ----------------- | - | ----------------- |  | ---------------- | ---- |  | - | ----
|                                          |  |                                  |        | Per Class A Unit  |   |                  
|Operating Distributions for Quarter Ended |  | Total Operating Cash Distributed |        | Investment Income |   | Return of Capital |  | General Partners
|March 31, 2005                            |  | $                                | 69,332 |                   | $ | 0.05              |  | $                | 0.00 |  | $ | 0.00
|June 30, 2005                             |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|September 30, 2005                        |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|December 31, 2005                         |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|March 31, 2006                            |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|June 30, 2006                             |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|September 30, 2006                        |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00
|December 31, 2006                         |  | $                                | 0      |                   | $ | 0.00              |  | $                | 0.00 |  | $ | 0.00

Operating distributions to limited partners are accrued for accounting purposes in the quarter earned and paid to
Class A limited partners in the following quarter. No operating cash distributions were paid to holders of Class B Units or the General Partners during the years ended December 31, 2006 and 2005.



Page 25



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|ITEM 6. | SELECTED FINANCIAL DATA.
|------- | ------------------------

A summary of the selected financial data
as of and for the fiscal years ended December 31, 2006, 2005, 2004, 2003, and 2002 for the Partnership is provided below. The comparability of net income for the periods presented below is impacted by the sale of properties described in
Item 2.



|                                                                                            |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | ---- | ---------- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                            |  | 2006 |           |   | 2005 |   |           | 2004 |  | 2003 |            |  | 2002 |           
|Total assets                                                                                |  | $    | 7,227,747 |   |      | $ | 7,555,728 |      |  | $    | 12,882,509 |  | $    | 12,441,848 |   |  | $ | 13,081,560 |  
|Equity in income (loss) of Joint Ventures                                                   |  | $    | (222,194  | ) |      | $ | 1,553,813 |      |  | $    | 1,073,182  |  | $    | 557,937    |   |  | $ | 837,509    |  
|Net income (loss)                                                                           |  | $    | (279,569  | ) |      | $ | 1,495,344 |      |  | $    | 938,143    |  | $    | 445,529    |   |  | $ | 746,815    |  
|Net income (loss) allocated to General Partners                                             |  | $    | 0         |   |      | $ | 0         |      |  | $    | 0          |  | $    | 0          |   |  | $ | 0          |  
|Net income (loss) allocated to Limited Partners:                                            |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|Class A                                                                                     |  | $    | (279,569  | ) |      | $ | (172,777  | )    |  | $    | 759,499    |  | $    | 999,612    |   |  | $ | 1,239,219  |  
|Class B                                                                                     |  | $    | 0         |   |      | $ | 1,668,121 |      |  | $    | 178,644    |  | $    | (554,083   | ) |  | $ | (492,404   | )
|Net income (loss) per weighted-average Limited Partner Unit                                 |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|Class A                                                                                     |  |      | $(0.20    | ) |      |   | $(0.12    | )    |  |      | $0.55      |  |      | $ 0.72     |   |  |   | $ 0.91     |  
|Class B                                                                                     |  |      | $ 0.00    |   |      |   | $ 6.90    |      |  |      | $0.67      |  |      | $(2.05     | ) |  |   | $(1.68     | )
|Operating cash distribution to investors per weighted-average Class A Limited Partner Unit: |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|Investment income                                                                           |  |      | $ 0.00    |   |      |   | $ 0.05    |      |  |      | $0.21      |  |      | $ 0.72     |   |  |   | $ 0.94     |  
|Return of capital                                                                           |  |      | $ 0.00    |   |      |   | $ 0.00    |      |  |      | $0.00      |  |      | $ 0.00     |   |  |   | $ 0.00     |  
|Operating cash distribution to investors per weighted-average Class B Limited Partner Unit: |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|Investment income                                                                           |  |      | $ 0.00    |   |      |   | $ 0.00    |      |  |      | $0.00      |  |      | $ 0.00     |   |  |   | $ 0.00     |  
|Return of capital                                                                           |  |      | $ 0.00    |   |      |   | $ 0.00    |      |  |      | $0.00      |  |      | $ 0.00     |   |  |   | $ 0.00     |  
|Distribution of net sale proceeds per weighted-average Limited Partner Unit:                |  |      |           |   |      |   |           |      |  |      |            |  |      |            |   |  |   |            |  
|Class A                                                                                     |  |      | $ 0.00    |   |      |   | $ 3.45    |      |  |      | $0.00      |  |      | $ 0.00     |   |  |   | $ 0.00     |  
|Class B                                                                                     |  |      | $ 0.00    |   |      |   | $ 8.01    |      |  |      | $0.00      |  |      | $ 0.00     |   |  |   | $ 0.00     |  





|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITION RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the Selected Financial Data presented in Item 6 and our accompanying financial statements and notes thereto. See also Cautionary Note
Regarding Forward-Looking Statements preceding Part I of this report and Risk Factors in Item 1A. of this report.

Overview

Portfolio Overview

We are currently in the holding
phase of our life cycle. We currently own interests in five properties following the sale of 1315 West Century Drive in the fourth quarter of 2006 and the Iomega Building in the first quarter of 2007. During the fourth quarter 2006, Fund XI-XII-REIT
Associates entered into a 60-month lease agreement with Caterpillar, Inc. to occupy the entire building at 111 Southchase Boulevard, which commenced January



Page 26



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

The fourth quarter 2006
operating distributions to limited partners were reserved due to the number of vacancies in the portfolio and the reduced cash flow resulting from property sales. We anticipate that operating distributions will be reserved or remain low in the
near-term due to various issues, including re-leasing costs and rental abatement periods associated with recent leases at the 20/20 Building and 111 Southchase Boulevard and the anticipated capital improvements for the 20/20 Building. Our General
Partners anticipate distributing net sale proceeds of approximately $1.1 million to the limited partners in August 2007 from the sales of the Gartner Building and 1315 West Century Drive.

Property Summary

As we continue to operate in the holding phase, we
will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we will seek to maximize returns to the limited partners by negotiating long-term leases at market rental
rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs, and portfolio costs. As we move into the positioning-for-sale and disposition and liquidation phases, our attention will shift to locating suitable
buyers, negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners and minimize contingencies and our post-closing involvement with the buyer.

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



| |  |  | The Cort Building was sold on September 11, 2003.
| | - |  | -------------------------------------------------



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



| |  |  | The Alstom Power  Knoxville Building was sold on March 15, 2005.
| | - |  | -----------------------------------------------------------------



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



| |  |  | The 1315 West Century Drive property was sold on December 22, 2006.
| | - |  | -------------------------------------------------------------------



| |  |  | The Iomega Building was sold on January 31, 2007.
| | - |  | -------------------------------------------------



| |  |  | The 360 Interlocken Building is located in the Broomfield submarket of Denver, Colorado. The majority of this building is leased to GAIAM through May 2008. We
signed a new lease in the second quarter 2006 that increased the building occupancy to 100%.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Avaya Building in Oklahoma City, Oklahoma, is 100% leased through January 2008.
| | - |  | -----------------------------------------------------------------------------------



| |  |  | The 47320 Kato Road building, located in Fremont, California, in the Silicon Valley area, is 100% leased through November 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | The 111 Southchase Boulevard property, located in Fountain Inn, South Carolina, is now 100% leased through December 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



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



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Industry Factors

Our
results continue to be impacted by a number of factors influencing the real estate industry.

General Economic Conditions and Real
Estate Market Commentary

The General Partners review a number of economic forecasts and market commentaries in order to evaluate
general economic conditions and formulate a view of the current environments effect on the real estate markets in which we operate.

The U.S. economy has grown at a rate of 3.4% in 2006, which is up slightly from 3.2% growth in 2005. The economy grew at a 3.5% annual pace in the fourth quarter, up from 2.2% in the previous quarter. This slowdown of growth in the third
quarter is primarily attributable to housing, with residential investment falling 19.0%, the worst decrease in over a decade. This weakness in the housing sector was offset by fourth quarter growth in personal consumption expenditures, which rose
4.4% in the quarter and contributed 3.1% to gross domestic product (GDP). GDP growth for 2007 is expected to be 2.5% with estimated inflation at 2.0%.

The U.S. office real estate market is continuing to display strong growth through the first quarter of 2007, with steady declines in vacancy, positive absorption rates, and moderate construction. These conditions are
creating an acceleration in rent growth across most markets. National vacancy rates continue to trend downward with fourth quarter vacancy at 12.5%, down 35 basis points from the third quarter and 105 basis points from one year ago. Many markets are
performing well due to job growth in the service sector and a restraint on new supply. Improved job growth is not seen across the board, however, with coastal and energy markets doing well and the Midwest slightly lagging. A four-quarter average
puts job growth at 2.5% since midyear 2005, which is reflected in steady positive absorption. Looking forward to the near-term, many economists anticipate that there may be a slowing in the economy due to a further housing correction, causing weaker
employment growth and a downturn in demand for consumer-related finance. Such a slowing would also slow the growth in rental rates.

The
real estate capital transactions market experienced a strong finish to the year with $45 billion of office properties changing hands in the fourth quarter. Office property sales in 2006 totaled $134 billion, an increase of 32% over prior year sales.
Real estate investment trust privatizations, the process of publicly traded real estate investment trusts becoming privately held through merger or acquisition, accounted for $18 billion of volume in 2006. Capitalization rates (cap
rates) for central business district properties are at an all-time low due to strong investor demand. Demand for office properties continues to be well distributed across the capital sector with equity funds, institutions, real estate
investment trusts, and foreign investors being the most competitive bidders for portfolios. A different capital sector has led acquisitions for each of the past four years, a further indication of the diversity of demand. Equity funds have replaced
institutions as the largest purchaser of office properties in 2006. The spread between average cap rates and 10-year U.S. Treasuries continues to tighten, as cap rates compress and the U.S. Treasury inches up from 2002 lows. In the medium-term, the
combination of higher interest rates and slower rent growth could spell the end of the cap rate compression with cap rates expected to slightly increase over the next three years.

Impact of Economic Conditions on our Portfolio

While some of the market conditions noted above may indicate an expected increase in rental rates, the extent to which our portfolio may benefit from this growth is dependent upon the contractual rental rates
currently provided in existing leases at the properties we own. As the majority of our in-place leases are at properties that were acquired at times during which the market demanded higher rental rates, as compared with today, new leasing activities
in certain markets could actually result in a decrease in future rental rates.

Real Estate Funds with Current Vacancy or Near-term
Rollover Exposure

Real estate funds, such as the Partnership, that contain properties with current vacancies or near-term tenant
rollover may still face a challenging leasing environment. The properties within these funds will generally face lower rents and higher concession packages to the tenants in order to re-lease vacant space.



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

Liquidity and Capital Resources

Overview

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

Short-Term
Liquidity

During the year ended December 31, 2006, we generated net operating cash flows, including distributions received from the Joint
Ventures, of approximately $33,000. Operating distributions from the Joint Ventures are generally representative of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and
capital expenditures. Future operating distributions paid to limited partners will be largely dependent upon the amount of cash generated from the Joint Ventures, our expectations of future cash flows, and determination of near-term cash needs for
tenant re-leasing costs and other capital improvements for properties owned by the Joint Ventures. We anticipate future operating distributions from the Joint Ventures may decline in the near-term as a result of funding our pro-rata share of the
re-leasing costs for 111 Southchase Boulevard and the 20/20 Building resulting from recent leasing activities at both properties and the anticipated capital improvements for the 20/20 Building and reduced cash flows resulting from the sale of the
Iomega Building in the first quarter of 2007.

The 2006 operating cash flows and net proceeds from the sale of properties in previous periods were used to
fund re-leasing costs of approximately $366,000 incurred in connection with new leases at 111 Southchase Boulevard and the 20/20 Building during 2006. We also received net proceeds of approximately $708,000 from the sale of 1315 West Century Drive
during 2006.

We believe that the cash on hand and distributions due from the Joint Ventures are sufficient to cover our working capital needs, including
liabilities of approximately $22,000 as of December 31, 2006. During 2007, our General Partners anticipate that the Partnership will be able to fund its proportionate share of capital expenditures noted above.

Long-Term Liquidity

We expect that our future sources of capital
will be primarily derived from operating cash flows generated from the Joint Ventures, and net proceeds generated from the selective and strategic sale of properties. Our future long-term liquidity requirements will include, but not be limited to,
funding tenant improvements, renovations, expansions, and other significant capital improvements necessary for properties owned through the Joint Ventures. We expect to continue to use substantially all future net cash flows from operations to
provide funding for such requirements. Future cash flows from operating activities will be primarily affected by distributions received from the Joint Ventures, which are dependent upon the net operating income generated by the Joint Ventures
properties, less reserves for known capital expenditures.



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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 capital contributions. Thus, it is unlikely that we will acquire interests in any additional properties or joint ventures. Historically, our investment strategy has generally involved acquiring properties that are pre-leased to creditworthy
tenants on an all-cash basis through joint ventures with affiliated partnerships.

The Joint Ventures fund capital expenditures primarily related to
building improvements for the purpose of maintaining the quality of their properties, and tenant improvements for the purpose of readying their properties for re-leasing. As leases expire, we will work with the Joint Ventures to 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. Any capital or other expenditures not provided for by the operations of the Joint Ventures will be funded by the
Partnership and the respective joint venture partners on a pro-rata basis.

Operating cash flows, if available, are generally distributed from the Joint
Ventures to the Partnership during the first month following each calendar quarter-end. Our cash management policy typically includes first utilizing current period operating cash flow until depleted, at which point operating reserves are utilized
to fund capital and other required expenditures. In the event that current and prior period accumulated operating cash flows are insufficient to fund such costs, net property sale proceeds reserves would then be utilized.

As of December 31, 2006, we had received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



|                                                      |  |              |            |                                       |        |                                                |         |                          |  |                                                                  |         |                                                      |                                                                                                                             |  |   |           |  |   |          
|----------------------------------------------------- |  | ------------ | ---------- | ------------------------------------- | ------ | ---------------------------------------------- | ------- | ------------------------ |  | ---------------------------------------------------------------- | ------- | ---------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ---------
|                                                      |  | Net Proceeds |            | Partnerships Approximate Ownership % |        | Net Sale Proceeds Allocated to the Partnership |         | Use of Net Sale Proceeds |  | Net Sale Proceeds Distributed toPartners as of December 31, 2006 |         | UndistributedNet
SaleProceeds as of December 31,2006
|Property Sold                                         |  |              |            |                                       | Amount |                                                | Purpose |                          | 
|                                                      |  |              |            |                                       |        |                                                |        
|Cort Building(sold in 2003)                           |  | $            | 5,563,403  |                                       | 24%    |                                                | $       | 1,315,906                |  | $                                                                | 0       |                                                      |                                                                                                                            |  | $ | 1,315,906 |  | $ | 0        
|                                                      |  |              |            |                                       |        |                                                |        
|Johnson Matthey Building(sold in 2004)                |  | $            | 9,675,000  |                                       | 26%    |                                                |         | 2,529,819                |  |                                                                  | 0       |                                                      |                                                                                                                            |  |   | 2,529,819 |  |   | 0        
|                                                      |  |              |            |                                       |        |                                                |        
|Alstom Power  Knoxville Building(sold in March 2005) |  | $            | 11,646,089 |                                       | 9%     |                                                |         | 1,023,528                |  |                                                                  | 0       |                                                      |                                                                                                                            |  |   | 1,023,528 |  |   | 0        
|                                                      |  |              |            |                                       |        |                                                |        
|Gartner Building(sold in April 2005)                  |  | $            | 12,396,859 |                                       | 26%    |                                                |         | 3,241,531                |  |                                                                  | 250,000 |                                                      |   Partnership operating expenses (2006)   Joint venture operating expenses (2006)   Re-leasing the 20/20 Building (2006) |  |   | 1,930,747 |  |   | 1,060,784
|                                                      |  |              |            |                                       |        |                                                |        
|1315 West Century Drive(sold in December 2006)        |  | $            | 8,059,625  |                                       | 9%     |                                                |         | 708,328                  |  |                                                                  | 0       |                                                      |                                                                                                                            |  |   | 0         |  |   | 708,328  
|                                                      |  |              |            |                                       |        |                                                |         |                          |  |                                                                  |         |                                                      |                                                                                                                             |  |   |           |  |   |          
|                                                      |  |              |            |                                       |        |                                                |        
|Total                                                 |  |              |            |                                       |        |                                                | $       | 8,819,112                |  | $                                                                | 250,000 |                                                      |                                                                                                                             |  | $ | 6,800,000 |  | $ | 1,769,112
|                                                      |  |              |            |                                       |        |                                                |         |                          |  |                                                                  |         |                                                      |                                                                                                                             |  |   |           |  |   |          



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After year-end we received approximately $0.4 million of net sale proceeds from the January 2007 sale of the Iomega
Building. Our General Partners anticipate distributing net sale proceeds of approximately $1.1 million in August 2007 from the sales of the Gartner Building and 1315 West Century Drive, as further discussed below.

Contractual Obligations and Commitments

In March 2007, our General
Partners announced their intention to distribute net sale proceeds from the sales of the Gartner Building and 1315 West Century Drive of approximately $1.1 million in August 2007 to the limited partners of record as of June 30, 2007, which,
under the terms of the partnership agreement, does not include limited partners acquiring units after March 31, 2007. Following such distribution, we intend to hold residual net sale proceeds of approximately $1.0 million in reserve to fund
re-leasing costs for 111 Southchase Boulevard and the 20/20 Building and the anticipated capital improvements for the 20/20 Building.

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

Results of Operations

Comparison of the year ended December 31, 2006 vs. the year ended December 31, 2005

Equity in Income (loss) of Joint Ventures

Equity in income (loss) of Joint Ventures was $(222,194) and $1,553,813 for the
years ended December 31, 2006 and 2005, respectively. The 2006 decrease in equity in income (loss) of Joint Ventures, as compared to 2005, is primarily attributable to (i) the gains recognized on the sales of the Alstom Power 
Knoxville Building and the Gartner Building in 2005, (ii) a reduction in operating income due to the aforementioned sales, (iii) recognizing an impairment loss at 1315 West Century Drive in the third quarter of 2006, (iv) recognizing
an additional loss on the sale of 1315 West Century Drive in the fourth quarter of 2006, and (v) the expiration of the lease of the sole tenant of 1315 West Century Drive in April 2005, partially offset by (vi) increasing the building
occupancy at the 360 Interlocken Building to 100% in the second quarter of 2006, and (vii) property tax refunds in the third quarter of 2006 at the 360 Interlocken Building and 1315 West Century Drive as a result of successful prior year tax
appeals.

As a result of the recent leasing activity at 111 Southchase Boulevard and the 20/20 Building and recognizing a non-recurring impairment loss and
loss on sale at 1315 West Century Drive in 2006, we expect equity in income of Joint Ventures to increase in future periods.

Expenses

Total expenses were $130,883 and $200,956 for the years ended December 31, 2006 and 2005, respectively. The 2006 decrease, as
compared to 2005, is primarily attributable a decline in administrative costs and legal fees relative to the decrease in the size of the portfolio as a result of the sales of properties and a decline in Tennessee partnership franchise and excise
taxes due to the 2005 sale of the Alstom Power  Knoxville Building. We anticipate increases in administrative expenses in future periods related to compliance with reporting and regulatory requirements, partially offset by the aforementioned
decrease in Tennessee partnership franchise and excise taxes.

Interest and Other Income

Interest and other income was $73,508 and $142,487 for the years ended December 31, 2006 and 2005, respectively. The 2006 decrease, as compared to 2005, is a result
of a decrease in the average amount of net sale



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proceeds held during the respective periods, partially offset by an increase in the daily interest yield. Future levels of interest income will be largely
dependent upon the timing of future dispositions and net sale proceeds distributions to the limited partners.

Comparison of the year ended
December 31, 2005 vs. the year ended December 31, 2004

Equity in Income of Joint Ventures

Equity in income of Joint Ventures was $1,553,813 and $1,073,182 for the years ended December 31, 2005 and 2004, respectively. The 2005 increase in equity in income
of Joint Ventures, as compared to 2004, is primarily attributable to (i) the gains recognized on the sales of the Alstom Power  Knoxville Building in the first quarter of 2005 and the Gartner Building in the second quarter of 2005,
(ii) a reduction in depreciation expense as a result of changing the estimated weighted-average composite useful life from 25 years to 40 years for all buildings owned through the Joint Ventures effective July 1, 2004, partially offset by
(iii) the gain recognized on the sale of the Johnson Matthey Building in the fourth quarter of 2004, (iv) a reduction in operating income due to the sales of the aforementioned properties, and (v) the recognition of an early lease
termination fee from Sprint, the sole tenant of the 20/20 Building, effective in May 2004.

Expenses

Total expenses were $200,956 and $148,663 for the years ended December 31, 2005 and 2004, respectively. The 2005 increase, as compared to 2004, is primarily
attributable to increases in administrative costs, accounting fees, legal fees, and printing costs, all of which have occurred in association with increased reporting and regulatory requirements, as well as, increase in Tennessee partnership taxes
as a result of the gain recognized on the sale of the Alstom Power  Knoxville Building. We estimate Tennessee partnership franchise and excise taxes based on an estimate of the apportionment of income allocable to the Partnership from
properties in Tennessee relative to income allocable to the Partnership from all properties as if earned ratably during the calendar year.

Interest and Other Income

Interest and other income was $142,487 and $13,624 for the years ended December 31, 2005 and
2004, respectively. The 2005 increase, as compared to 2004, is a result of (i) an increase in the average amount of net sale proceeds held during the respective periods as a result of the sale of the Alstom Power  Knoxville Building in
March 2005, the Gartner Building in April 2005, and the Johnson Matthey Building in October 2004, and (ii) an increase in the daily interest yield, partially offset by (iii) the distribution of net sale proceeds in November 2005.

Inflation

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

Application of Critical
Accounting Policies

Our accounting policies have been established to conform with U.S. generally accepted accounting principles (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



Page 32



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

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

Investment
in Real Estate Assets

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



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

Effective July 1, 2004, the Joint Ventures extended the weighted-average composite useful life for all
building assets from 25 years to 40 years. We believe that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice. The change resulted in an increase to net income
of approximately $104,000 for the year ended December 31, 2004. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be misstated.

Valuation of Real Estate Assets

We continually monitor events and
changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest through investments in the Joint Ventures may not be recoverable. When indicators of potential impairment are
present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered
through the undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real
estate assets to the fair value, as defined by Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated
based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including
estimated salvage value. In the third quarter of 2006, Fund IX-X-XI-REIT Associates recorded an impairment loss for 1315 West Century Drive of approximately $354,000, of which approximately $31,000 was allocated to the Partnership to reduce the
carrying value of 1315 West Century Drive to its fair value, less costs to sell as a result of a change in our intended holding period for this asset.

Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it
takes to re-lease the property, and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the



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propertys future cash flows and fair value, and could result in the overstatement of the carrying value of real estate assets held by the Joint
Ventures and net income of the Partnership.

Related-Party Transactions and Agreements

We have entered into agreements with Wells Capital and Wells Management, affiliates of our General Partners, and their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells
Management and their affiliates for asset management, the management and leasing of our properties; administrative services relating to accounting, property management, and other partnership administration; and incur the related expenses. See
Item 13, Certain Relationships and Related Transactions for a description of these fees and reimbursements and amounts incurred and Risk Factors  Conflicts of Interest in Item 1A. of this report.

Potential Tax Impact for Limited Partners Holding Class B Units  American Jobs Creation Act of 2004

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

Subsequent Events

Property Sale

On January 31, 2007, the Fund IX-X-XI-REIT Associates sold the Iomega Building to an unrelated third party for a gross sales price of $4,867,000. As a result of the
sale, the Partnership received net sale proceeds of approximately $412,000 and was allocated a gain of approximately $16,000, which may be adjusted as additional information becomes available in subsequent periods.

Purchase and Sale Agreement

On March 6, 2007, Fund XI-XII-REIT
Associates entered into a purchase and sale agreement to sell 111 Southchase Boulevard to an unrelated third party. The completion of this transaction is currently subject to, among other things, a due diligence period expiring on April 5,
2007. Accordingly, there are no assurances that this sale will be completed. If the transaction progresses, the Partnership believes the closing of this transaction is likely to occur during the second quarter of 2007.



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|-------- | -----------------------------------------------------------

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



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------

Our financial
statements and supplementary data are detailed under Item 15(a) and filed as part of the report on the pages indicated.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

On September 22, 2006, the Financial Oversight Committee of the General Partners dismissed Ernst & Young LLP as the Partnerships independent registered public accounting firm, effective
immediately. Also, on September 22, 2006, the Financial Oversight Committee engaged Frazier & Deeter, LLC as its independent registered public accounting firm.

Ernst & Young LLPs reports on the financial statements of the Partnership for the years ended December 31, 2005 and 2004 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principle.

During the years ended December 31, 2005 and 2004, and the subsequent
interim period through September 22, 2006, there were no disagreements with Ernst & Young LLP on any matters related to accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which, if not
resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference thereto in their reports on the financial statements of the Partnership for such years. There were no reportable events as set
forth in Item 304(a)(1)(v) of Regulation S-K.

The Partnership provided Ernst & Young LLP with a copy of the Form 8-K filed with regard to
the change in independent registered public accounting firm, which was filed with the SEC on September 27, 2006, and requested that Ernst & Young LLP furnish the Partnership with a letter addressed to the Securities and Exchange
Commission stating whether or not it agrees with the foregoing statements. A copy of Ernst & Young LLPs letter dated September 27, 2006, was filed as Exhibit 16.1 to the September 27, 2006 Form 8-K.

During the years ended December 31, 2005 and 2004, and through September 22, 2006, the Partnership did not consult with Frazier & Deeter, LLC with
respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnerships financial statements, or any other matters or reportable
events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

There were no disagreements with the Partnerships independent public
accountants during the years ended December 31, 2006 and 2005.



|ITEM 9A. | 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 one of our General Partners, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period



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covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and
communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in our internal control over financial reporting during the quarter ended December 31, 2006 that have materially affected, or are likely to materially affect, our internal
control over financial reporting.



|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------

For the quarter ended
December 31, 2006, all items required to be disclosed under Form 8-K were reported under Form 8-K.



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PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS GENERAL PARTNERS.
|-------- | ----------------------------------------------------------------------

Wells Partners

The sole general partner of Wells Partners, one of our General Partners, is Wells Capital, a Georgia corporation. The
executive offices of Wells Capital are located at 6200 The Corners Parkway, Norcross, Georgia 30092. Wells Capital was organized on April 18, 1984 under the Georgia Business Corporation Code, and is primarily in the business of serving as
general partner or as an affiliate to the general partner in affiliated public limited partnerships (Wells Real Estate Funds). Wells Capital or its affiliates serves as the advisor to the Wells Real Estate Investment Trust, Inc., Wells
Real Estate Investment Trust II, Inc., Wells Timberland REIT, Inc., and Institutional REIT, Inc. (collectively, Wells REITs), each of which are Maryland corporations. Wells Real Estate Investment Trust, Inc. and Wells Real Estate
Investment Trust II, Inc. qualify as real estate investment trusts, and Wells Timberland REIT, Inc. and Institutional REIT, Inc. intend to qualify as real estate investment trusts beginning with the year ending December 31, 2007. In these
capacities, Wells Capital performs certain services for the Wells Real Estate Funds and the Wells REITs, including presenting, structuring, and acquiring real estate investment opportunities; entering into leases and service contracts on acquired
properties; arranging for and completing the disposition of properties; and providing other services such as accounting and administrative functions. Wells Capital is a wholly owned subsidiary of WREF, of which Leo F. Wells, III is the sole
stockholder.

Leo F. Wells, III

Mr. Wells, 63,
who serves as one of our General Partners, is the president, treasurer, and sole director of Wells Capital, which is our corporate general partner. He is also the sole stockholder, president, and sole director of WREF, the parent corporation of
Wells Capital, Wells Management, Wells Investment Securities, Inc. (WIS), and Wells & Associates, Inc., a real estate brokerage and investment company formed in 1976 and incorporated in 1978, for which Mr. Wells serves
as principal broker. He is also the president, treasurer, and sole director of:



| |  |  | Wells Management, our property manager;
| | - |  | ---------------------------------------



| |  |  | Wells Asset Management, Inc.;
| | - |  | -----------------------------



| |  |  | Wells & Associates, Inc.; and
| | - |  | -----------------------------



| |  |  | Wells Development Corporation, a company he organized in 1997 to develop real properties.
| | - |  | -----------------------------------------------------------------------------------------

Mr. Wells is a director of each of the Wells REITs, which are Maryland corporations that either currently qualify as real estate investment trusts or intend to
qualify as real estate investment trusts beginning with the year ending December 31, 2007.

Mr. Wells was a real estate salesman and property
manager from 1970 to 1973 for Roy D. Warren & Company, an Atlanta-based real estate company, and he was associated from 1973 to 1976 with Sax Gaskin Real Estate Company. From 1980 to February 1985 he served as Vice President of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business. Mr. Wells holds a Bachelor of Business Administration degree in economics from the University of Georgia. Mr. Wells is a member of the Financial Planning
Association.

On August 26, 2003, Mr. Wells and WIS entered into a Letter of Acceptance, Waiver and Consent (AWC) with the National
Association of Securities Dealers, Inc. (NASD) relating to alleged rule violations. The AWC set forth the NASDs findings that WIS and Mr. Wells had violated conduct rules relating to the provision of noncash compensation of
more than $100 to associated persons of NASD member firms in connection with their attendance at the annual educational and due diligence conferences sponsored by WIS in 2001 and 2002. Without



Page 37



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admitting or denying the allegations and findings against them, WIS and Mr. Wells consented in the AWC to various findings by the NASD, which are
summarized in the following paragraph:

In 2001 and 2002, WIS sponsored conferences attended by registered representatives who sold its real
estate investment products. WIS also paid for certain expenses of guests of the registered representatives who attended the conferences. In 2001, WIS paid the costs of travel to the conference and meals for many of the guests, and paid the costs of
playing golf for some of the registered representatives and their guests. WIS later invoiced registered representatives for the cost of golf and for travel expenses of guests, but was not fully reimbursed for such. In 2002, WIS paid for meals for
the guests. WIS also conditioned most of the 2001 conference invitations on attainment by the registered representatives of a predetermined sales goal for WIS products. This conduct violated the prohibitions against payment and receipt of noncash
compensation in connection with the sales of these products contained in NASDs Conduct Rules 2710, 2810, and 3060. In addition, WIS and Mr. Wells failed to adhere to all of the terms of their written undertaking made in March 2001 not to
engage in the conduct described above, and thereby engaged in conduct that was inconsistent with high standards of commercial honor and just and equitable principles of trade in violation of NASD Conduct Rule 2110.

WIS consented to a censure and Mr. Wells consented to suspension from acting in a principal capacity with an NASD member firm for one year. WIS and Mr. Wells
also agreed to the imposition of a joint and several fine in the amount of $150,000. Mr. Wells one-year suspension from acting in a principal capacity ended on October 6, 2004. Mr. Wells continues to represent the issuer and
perform other nonprincipal activities on behalf of WIS.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the officers and directors of the general partner of our general partner, and persons who own 10% or
more of any class of equity interests in the Partnership, to report their beneficial ownership of equity interests in the Partnership to the SEC. Their initial reports are required to be filed using the SECs Form 3, and they are required
to report subsequent purchases, sales, and other changes using the SECs Form 4, which must be filed within two business days of most transactions. Officers, directors, and partners owning more than 10% of any class of equity interests in
the Partnership are required by SEC regulations to furnish us with copies of all of reports they file pursuant to Section 16(a).

Financial
Oversight Committee

The Partnership does not have a board of directors or an audit committee. Accordingly, as the corporate general partner of one of
the General Partners of the Partnership, Wells Capital has established a Financial Oversight Committee consisting of Leo F. Wells, III, as the Principal Executive Officer; Douglas P. Williams, as the Principal Financial Officer; and Randall D.
Fretz, as the Senior Vice President of Wells Capital. The Financial Oversight Committee serves the equivalent function of an audit committee for, among others, the following purposes: appointment, compensation, review and oversight of the work of
our independent registered public accountant, and establishing and enforcing the code of ethics. However, since neither the Partnership nor its corporate general partner has an audit committee and the Financial Oversight Committee is not independent
of the Partnership or the General Partners, we do not have an audit committee financial expert.

Code of Ethics

The Partnership has adopted a code of ethics applicable to Wells Capitals Principal Executive Officer and Principal Financial Officer, as well as the principal
accounting officer, controller or other employees of Wells Capital performing similar functions on behalf of the Partnership, if any. The code of ethics is contained in the Business Standards/Code of Conduct/General Policies established by WREF. You
may obtain a copy of this code of ethics, without charge, upon request by calling our Client Services Department at 800-557-4830 or 770-243-8282.



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|ITEM 11. | COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
|-------- | ------------------------------------------------

The Partnership
has not made payments directly to the General Partners. Further, the Partnership does not have any employees, officers, or directors and, accordingly, no compensation has been awarded to, earned by, or paid to any individuals. See Item 13,
Certain Relationships and Related Transactions for a description of the fees incurred by the Partnership payable to affiliates of the General Partners during the year ended December 31, 2006.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
|-------- | ---------------------------------------------------------------

(a) No limited partner owns beneficially more than 5% of any class of the outstanding units of the Partnership.

(b) Set forth below is the
security ownership of management as of February 28, 2007.



|                          |  |                          |  |                                           |  |                 
|------------------------- |  | ------------------------ |  | ----------------------------------------- |  | ----------------
|Title of Class            |  | Name of Beneficial Owner |  | Amount and Nature of Beneficial Ownership |  | Percent of Class
|Limited Partnership Units |  | Leo F. Wells, III        |  | 5,131.319 Units(1)                        |  | Less than 1%    



| | (1) | Leo F. Wells, III owns 5,109.22 Class A Units through an Individual Retirement Account and
22.099 Class A Units through Wells Capital, Inc., which is a wholly owned subsidiary of WREF.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(c) No arrangements exist which
would, upon execution, result in a change in control of the Partnership.



|ITEM 13.    CERTAIN | RELATIONSHIPS AND RELATED TRANSACTIONS.
|------------------- | ---------------------------------------

The compensation and fees
we pay to our General Partners and their affiliates in connection with our operations are as follows:

Interest in Partnership Cash Flow and Net Sale
Proceeds

The General Partners are entitled to receive a subordinated participation in net cash flow from operations equal to 10% of net cash flow after
the limited partners holding Class A Units have received preferential distributions equal to 10% of their adjusted capital accounts in each fiscal year. The General Partners are also entitled to receive a subordinated participation in net sales
proceeds and net financing proceeds equal to 20% of residual proceeds available for distribution after limited partners holding Class A Units have received a return of their adjusted capital contributions plus a 10% cumulative return on their
adjusted capital contributions, and limited partners holding Class B Units have received a return of their adjusted capital contributions plus a 15% cumulative return on their adjusted capital contributions; provided, however, that in no event
shall the General Partners receive in the aggregate in excess of 15% of net sales proceeds and net financing proceeds remaining after payments to limited partners from such proceeds of amounts equal to the sum of their adjusted capital contributions
plus a 6% cumulative return on their adjusted capital contributions. The General Partners did not receive any distributions of net cash from operations or net sales proceeds for the year ended December 31, 2006.

Management and Leasing Fees

In accordance with the property
management and leasing agreement, Wells Management, an affiliate of the General Partners, receives compensation for asset management and the management and leasing of our properties owned through joint ventures equal to (a) of the gross
revenues collected monthly, 2.5% for management services and 2% for leasing services (aggregate maximum of 4.5%), 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
that are leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial



Page 39



---

leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Management and leasing fees are paid
by the Joint Ventures and, accordingly, included in equity in income of joint ventures in the accompanying statement of operations. Our share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures that are
payable to Wells Management and its affiliates is $9,449, $16,739, and $51,266 for the years ended December 31, 2006, 2005, and 2004, respectively.

Real Estate Commissions

In connection with the sale of our properties, the General Partners or their affiliates may receive commissions not
exceeding the lesser of (a) 50% of the commissions customarily charged by other brokers in arms-length transactions involving comparable properties in the same geographic area or (b) 3% of the gross sales price of the property, and
provided that payments of such commissions will be made only after limited partners have received prior distributions totaling 100% of their capital contributions plus a 6% cumulative return on their adjusted capital contributions. No real estate
commissions were paid to the General Partners or affiliates for the years ended December 31, 2006, 2005, or 2004.

Procedures Regarding
Related-Party Transactions

Our policies and procedures governing related-party transactions with our General Partners and their affiliates, including,
but not limited to, all transactions required to be disclosed under Item 404(a) of Regulation S-K, are restricted or severely limited under many circumstances pursuant to the provisions of Articles XI, XII, XIII, and XIV of our partnership
agreement, which has been filed with the SEC. No transaction has been entered into with either of our General Partners or their affiliates that does not comply with those policies and procedures. In addition, in any transaction involving a potential
conflict of interest, including any transaction that would require disclosure under Item 404(a) of Regulation S-K, our General Partners must view such a transaction after taking into consideration their fiduciary duties to the Partnership.

Administrative Reimbursement

Wells Capital, the
corporate general partner of Wells Partners, one of the Partnerships 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. We reimbursed Wells Capital and Wells Management for administrative expenses of $50,821, $64,001, and $64,555 for the years ended December 31, 2006, 2005, and 2004, respectively.



|ITEM 14.    PRINCIPAL | ACCOUNTING FEES AND SERVICES.
|--------------------- | -----------------------------

Preapproval Policies and
Procedures

The Financial Oversight Committee preapproves all auditing and permissible nonauditing services provided by our independent registered
public accountants. The approval may be given as part of the Financial Oversight Committees approval of the scope of the engagement of our independent registered public accountants or on an individual basis. The preapproval of certain
audit-related services and certain nonauditing services not exceeding enumerated dollar limits may be delegated to one or more of the Financial Oversight Committees members, but the member to whom such authority is delegated shall report any
preapproval decisions to the full Financial Oversight Committee. Our independent registered public accountants may not be retained to perform the nonauditing services specified in Section 10A(g) of the Securities Exchange Act of 1934.

Fees Paid to the Independent Registered Public Accountants

On September 22, 2006, the Financial Oversight Committee of the General Partners dismissed Ernst & Young LLP as the Partnerships independent registered public accounting firm, which had served as the Partnerships



Page 40



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independent registered public accountants since July 3, 2002, and appointed Frazier & Deeter, LLC to serve in that capacity for the fiscal year
ended December 31, 2006. All such fees are recognized in the period to which the services relate. A portion of such fees are allocated to the joint ventures in which the Partnership invests. The aggregate fees billed to the Partnership for
professional accounting services by Frazier & Deeter, LLC and Ernst & Young LLP, including the audit of the Partnerships annual financial statements, for the fiscal years ended December 31, 2006 and 2005, are set forth
in the table below.



|                   |  |                       |        |                   |   |        |  |   |       
|------------------ |  | --------------------- | ------ | ----------------- | - | ------ |  | - | ------
|                   |  | Frazier & Deeter, LLC |        | Ernst & Young LLP
|                   |  | 2006                  |        | 2006              |   | 2005  
|Audit Fees         |  | $                     | 18,081 |                   | $ | 7,006  |  | $ | 28,512
|Audit-Related Fees |  |                       | 0      |                   |   | 0      |  |   | 0     
|Tax Fees           |  |                       | 0      |                   |   | 16,309 |  |   | 24,194
|Other Fees         |  |                       | 0      |                   |   | 0      |  |   | 0     
|                   |  |                       |        |                   |   |        |  |   |       
|Total              |  | $                     | 18,081 |                   | $ | 23,315 |  | $ | 52,706
|                   |  |                       |        |                   |   |        |  |   |       

For purposes of the preceding table, the professional fees are classified as follows:



| |  |  | Audit Fees  These are fees for professional services performed for the audit of our annual financial statements and review of financial statements included in
our Form 10-Q filings, services that are normally provided by independent registered public accountants in connection with statutory and regulatory filings or engagements, and services that generally independent registered public accountants
reasonably can provide, such as statutory audits, attest services, consents, and assistance with and review of documents filed with the SEC.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit-Related Fees  These are fees for assurance and related services that traditionally are performed by independent registered public accountants, such as
due diligence related to acquisitions and dispositions, internal control reviews, attestation services that are not required by statute or regulation, and consultation concerning financial accounting and reporting standards.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tax Fees  These are fees for all professional services performed by professional staff in our independent registered public accountants tax division,
except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice. Tax compliance involves preparation of any federal, state or local tax returns. Tax planning and tax advice
encompass a diverse range of services, including assistance with tax audits and appeals, tax advice related to acquisitions and dispositions of assets, and requests for rulings or technical advice from taxing authorities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other Fees  These are fees for other permissible work performed that do not meet the above-described categories, including assistance with internal audit
plans and risk assessments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the fiscal years ended December 31, 2006 and 2005, 100% of the services performed by
Frazier & Deeter, LLC and Ernst & Young LLP described above under the captions Audit Fees, Audit-Related Fees, Tax Fees, and Other Fees were approved in advance by a member of the
Financial Oversight Committee.



Page 41



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PART IV



|ITEM 15.    EXHIBITS | AND FINANCIAL STATEMENT SCHEDULES.
|-------------------- | ----------------------------------



|(a) | 1. The financial statements are contained on pages F-2 through F-70 of this Annual Report on Form 10-K, and the list of the financial statements contained herein is set forth
on page F-1, which is hereby incorporated by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
|--- | -------------------------------------------------------------------------------------------------------------



|(c) | See (a) 1 above.
|--- | ----------------



Page 42



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SIGNATURES

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



WELLS REAL ESTATE FUND XI, L.P.(Registrant)




By:

WELLS PARTNERS, L.P.(General Partner)By:

WELLS CAPITAL, INC.(Corporate General Partner)




|               |  |                                                          
|-------------- |  | ---------------------------------------------------------
|March 27, 2007 |  | /s/    LEO F. WELLS, III                                 
|               |  | Leo F. Wells, III                                        
|               |  | President, Principal Executive Officer, and Sole Director
|               |  | of Wells Capital, Inc.                                   
|               | 
|March 27, 2007 |  | /s/    DOUGLAS P. WILLIAMS                               
|               |  | Douglas P. Williams                                      
|               |  | Principal Financial Officer                              
|               |  | of Wells Capital, Inc.                                   



Page 43



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WELLS REAL ESTATE FUND XI, L.P.



TABLE
OF CONTENTS



|                                                                                                              |  |     
|------------------------------------------------------------------------------------------------------------- |  | ----
|FINANCIAL STATEMENTS                                                                                          |  | Page
|                                                                                                              | 
|WELLS REAL ESTATE FUND XI, L.P.                                                                               |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                               |  | F-2 
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                   |  | F-3 
|Balance Sheets as of December 31, 2006 and 2005                                                               |  | F-4 
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-5 
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                         |  | F-6 
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-7 
|Notes to Financial Statements                                                                                 |  | F-8 
|                                                                                                              | 
|THE FUND IX, FUND X, FUND XI, AND REIT JOINT VENTURE                                                          |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                               |  | F-20
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                   |  | F-21
|Balance Sheets as of December 31, 2006 and 2005                                                               |  | F-22
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-23
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                         |  | F-24
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-25
|Notes to Financial Statements                                                                                 |  | F-26
|Schedule III  Real Estate and Accumulated Depreciation                                                       |  | F-33
|                                                                                                              | 
|FUND X AND FUND XI ASSOCIATES                                                                                 |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                               |  | F-35
|Balance Sheets as of December 31, 2006 and 2005 (unaudited)                                                   |  | F-36
|Statements of Operations for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited)        |  | F-37
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited) |  | F-38
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited)        |  | F-39
|Notes to Financial Statements                                                                                 |  | F-40
|                                                                                                              | 
|WELLS/FREMONT ASSOCIATES                                                                                      |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                               |  | F-45
|Balance Sheets as of December 31, 2006 and 2005 (unaudited)                                                   |  | F-46
|Statements of Operations for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited)        |  | F-47
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited) |  | F-48
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005 (unaudited), and 2004 (unaudited)        |  | F-49
|Notes to Financial Statements                                                                                 |  | F-50
|Schedule III  Real Estate and Accumulated Depreciation                                                       |  | F-55
|                                                                                                              | 
|THE WELLS FUND XI-FUND XII-REIT JOINT VENTURE                                                                 |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                               |  | F-57
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                   |  | F-58
|Balance Sheets as of December 31, 2006 and 2005                                                               |  | F-59
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-60
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                         |  | F-61
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                |  | F-62
|Notes to Financial Statements                                                                                 |  | F-63
|Schedule III  Real Estate and Accumulated Depreciation                                                       |  | F-69



Page F-1



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Wells Real Estate Fund XI, L.P.

We have
audited the accompanying balance sheet of Wells Real Estate Fund XI, L.P. (the Partnership) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended
December 31, 2006. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnerships internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wells Real Estate Fund XI, L.P. as of December 31, 2006, and the results of its
operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

/S/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-2



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Wells Real Estate Fund XI, L.P.

We have
audited the accompanying balance sheet of Wells Real Estate Fund XI, L.P. (the Partnership) as of December 31, 2005, and the related statements of operations, partners capital, and cash flows for each of the two years in the
period ended December 31, 2005. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnerships internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wells Real Estate Fund XI, L.P. at December 31, 2005, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/S/    ERNST & YOUNG LLP

Atlanta, Georgia

March 23, 2007



Page F-3



---

WELLS REAL ESTATE FUND XI, L.P.



BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                             |  |      |           |      |   |          
|---------------------------- |  | ---- | --------- | ---- | - | ---------
|                             |  | 2006 |           | 2005
|Investment in joint ventures |  | $    | 5,395,260 |      | $ | 6,094,820
|Cash and cash equivalents    |  |      | 1,806,579 |      |   | 1,431,624
|Due from joint ventures      |  |      | 20,312    |      |   | 29,284   
|Other assets                 |  |      | 5,596     |      |   | 0        
|                             |  |      |           |      |   |          
|Total assets                 |  | $    | 7,227,747 |      | $ | 7,555,728
|                             |  |      |           |      |   |          

LIABILITIES AND PARTNERS CAPITAL



|                                                                                                                    |  |   |           |  |   |          
|------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ---------
|Liabilities:                                                                                                        |  |   |           |  |   |          
|Accounts payable and accrued expenses                                                                               |  | $ | 17,202    |  | $ | 63,962   
|Due to affiliates                                                                                                   |  |   | 4,485     |  |   | 6,137    
|                                                                                                                    |  |   |           |  |   |          
|Total liabilities                                                                                                   |  |   | 21,687    |  |   | 70,099   
|                                                                                                                    |  |  
|Commitments and contingencies                                                                                       |  |   | 0         |  |   | 0        
|                                                                                                                    |  |  
|Partners capital:                                                                                                  |  |   |           |  |   |          
|Limited partners:                                                                                                   |  |   |           |  |   |          
|Class A  1,425,174 units and 1,420,174 units issued and outstanding as of December 31, 2006 and 2005,
respectively |  |   | 7,206,060 |  |   | 7,485,629
|Class B  228,106 units and 233,106 units issued and outstanding as of December 31, 2006 and 2005, respectively     |  |   | 0         |  |   | 0        
|                                                                                                                    |  |   |           |  |   |          
|Total partners capital                                                                                             |  |   | 7,206,060 |  |   | 7,485,629
|                                                                                                                    |  |   |           |  |   |          
|Total liabilities and partners capital                                                                             |  | $ | 7,227,747 |  | $ | 7,555,728
|                                                                                                                    |  |   |           |  |   |          

See accompanying notes.



Page F-4



---

WELLS REAL ESTATE FUND XI, L.P.



STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                             |  |      |           |   |      |   |           |      |  |   |          
|------------------------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ---------
|                                                             |  | 2006 |           |   | 2005 |   |           | 2004
|EQUITY IN INCOME (LOSS) OF JOINT VENTURES                    |  | $    | (222,194  | ) |      | $ | 1,553,813 |      |  | $ | 1,073,182
|                                                             |  |      |          
|EXPENSES:                                                    |  |      |           |   |      |   |           |      |  |   |          
|General and administrative                                   |  |      | 130,883   |   |      |   | 200,956   |      |  |   | 148,663  
|                                                             |  |      |          
|INTEREST AND OTHER INCOME                                    |  |      | 73,508    |   |      |   | 142,487   |      |  |   | 13,624   
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|NET INCOME (LOSS)                                            |  | $    | (279,569  | ) |      | $ | 1,495,344 |      |  | $ | 938,143  
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|                                                             |  |      |          
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:             |  |      |           |   |      |   |           |      |  |   |          
|CLASS A                                                      |  | $    | (279,569  | ) |      | $ | (172,777  | )    |  | $ | 759,499  
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|CLASS B                                                      |  | $    | 0         |   |      | $ | 1,668,121 |      |  | $ | 178,644  
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|                                                             |  |      |          
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |      |           |   |      |   |           |      |  |   |          
|CLASS A                                                      |  |      | $(0.20)   |   |      |   | $(0.12)   |      |  |   | $0.55    
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|CLASS B                                                      |  |      | $  0.00   |   |      |   | $  6.90   |      |  |   | $0.67    
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|                                                             |  |      |          
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:          |  |      |           |   |      |   |           |      |  |   |          
|CLASS A                                                      |  |      | 1,421,424 |   |      |   | 1,411,549 |      |  |   | 1,386,366
|                                                             |  |      |           |   |      |   |           |      |  |   |          
|CLASS B                                                      |  |      | 231,856   |   |      |   | 241,731   |      |  |   | 266,915  
|                                                             |  |      |           |   |      |   |           |      |  |   |          

See accompanying notes.



Page F-5



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WELLS REAL ESTATE FUND XI, L.P.



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                                                      |  |                  |   |  |                  |            |                         |       |         |   |        |   |            |   |  |   |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------- | - |  | ---------------- | ---------- | ----------------------- | ----- | ------- | - | ------ | - | ---------- | - |  | - | - |  | - | ---------- | -
|                                                                                                                      |  | Limited Partners |   |  | General Partners |            | Total Partners Capital |      
|                                                                                                                      |  | Class A          |   |  | Class B          |            |                         |      
|                                                                                                                      |  | Units            |   |  | Amount           |            |                         | Units |         |   | Amount |   |            |  
|BALANCE, December 31, 2003                                                                                            |  | 1,387,253        |   |  | $                | 12,119,023 |                         |       | 266,027 |   |        | $ | 97,189     |   |  | $ | 0 |  | $ | 12,216,212 |  
|                                                                                                                      |  |                  |   |  |                  |           
|Class A conversions                                                                                                   |  | (7,500           | ) |  |                  | (66,252    | )                       |       | 7,500   |   |        |   | 66,252     |   |  |   | 0 |  |   | 0          |  
|Class B conversions                                                                                                   |  | 4,450            |   |  |                  | 0          |                         |       | (4,450  | ) |        |   | 0          |   |  |   | 0 |  |   | 0          |  
|Net income                                                                                                            |  | 0                |   |  |                  | 759,499    |                         |       | 0       |   |        |   | 178,644    |   |  |   | 0 |  |   | 938,143    |  
|Distributions of operating cash flow ($0.21 per weighted-average Class A Unit)                                        |  | 0                |   |  |                  | (294,738   | )                       |       | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (294,738   | )
|                                                                                                                      |  |                  |   |  |                  |            |                         |       |         |   |        |   |            |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2004                                                                                            |  | 1,384,203        |   |  |                  | 12,517,532 |                         |       | 269,077 |   |        |   | 342,085    |   |  |   | 0 |  |   | 12,859,617 |  
|                                                                                                                      |  |                  |   |  |                  |           
|Class A conversions                                                                                                   |  | (2,862           | ) |  |                  | (25,878    | )                       |       | 2,862   |   |        |   | 25,878     |   |  |   | 0 |  |   | 0          |  
|Class B conversions                                                                                                   |  | 38,833           |   |  |                  | 99,407     |                         |       | (38,833 | ) |        |   | (99,407    | ) |  |   | 0 |  |   | 0          |  
|Net income (loss)                                                                                                     |  | 0                |   |  |                  | (172,777   | )                       |       | 0       |   |        |   | 1,668,121  |   |  |   | 0 |  |   | 1,495,344  |  
|Distributions of operating cash flow ($0.05 per weighted-average Class A Unit)                                        |  | 0                |   |  |                  | (69,332    | )                       |       | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (69,332    | )
|Distributions of net sale proceeds ($3.45 and $8.01 per weighted-average Class A Unit and Class B Unit,
respectively) |  | 0                |   |  |                  | (4,863,323 | )                       |       | 0       |   |        |   | (1,936,677 | ) |  |   | 0 |  |   | (6,800,000 | )
|                                                                                                                      |  |                  |   |  |                  |            |                         |       |         |   |        |   |            |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2005                                                                                            |  | 1,420,174        |   |  |                  | 7,485,629  |                         |       | 233,106 |   |        |   | 0          |   |  |   | 0 |  |   | 7,485,629  |  
|                                                                                                                      |  |                  |   |  |                  |           
|Class B conversions                                                                                                   |  | 5,000            |   |  |                  | 0          |                         |       | (5,000  | ) |        |   | 0          |   |  |   | 0 |  |   | 0          |  
|Net loss                                                                                                              |  | 0                |   |  |                  | (279,569   | )                       |       | 0       |   |        |   | 0          |   |  |   | 0 |  |   | (279,569   | )
|                                                                                                                      |  |                  |   |  |                  |            |                         |       |         |   |        |   |            |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2006                                                                                            |  | 1,425,174        |   |  | $                | 7,206,060  |                         |       | 228,106 |   |        | $ | 0          |   |  | $ | 0 |  | $ | 7,206,060  |  
|                                                                                                                      |  |                  |   |  |                  |            |                         |       |         |   |        |   |            |   |  |   |   |  |   |            |  

See accompanying notes.



Page F-6



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WELLS REAL ESTATE FUND XI, L.P.



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                         |  | 2006 |           |   | 2005 |   |            | 2004 | 
|                                                                                         |  |      |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |      |           |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                                        |  | $    | (279,569  | ) |      | $ | 1,495,344  |      |  | $ | 938,143    |  
|Operating distributions received from joint ventures                                     |  |      | 144,082   |   |      |   | 189,587    |      |  |   | 894,514    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |      |           |   |      |   |            |      |  |   |            |  
|Equity in (income) loss of joint ventures                                                |  |      | 222,194   |   |      |   | (1,553,813 | )    |  |   | (1,073,182 | )
|Operating changes in assets and liabilities:                                             |  |      |           |   |      |   |            |      |  |   |            |  
|Decrease (increase) in due from affiliate                                                |  |      | 0         |   |      |   | 2,254      |      |  |   | (2,254     | )
|Increase in other assets                                                                 |  |      | (5,596    | ) |      |   | 0          |      |  |   | 0          |  
|(Decrease) increase in accounts payable and accrued expenses                             |  |      | (46,760   | ) |      |   | 43,400     |      |  |   | 22,957     |  
|(Decrease) increase in due to affiliates                                                 |  |      | (1,652    | ) |      |   | 3,807      |      |  |   | (272       | )
|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                                |  |      | 32,699    |   |      |   | 180,579    |      |  |   | 779,906    |  
|                                                                                         |  |      |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |      |           |   |      |   |            |      |  |   |            |  
|Net sale proceeds received from joint ventures                                           |  |      | 708,328   |   |      |   | 4,265,059  |      |  |   | 2,529,818  |  
|Investment in joint ventures                                                             |  |      | (366,072  | ) |      |   | (227,058   | )    |  |   | (69,942    | )
|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  
|Net cash provided by investing activities                                                |  |      | 342,256   |   |      |   | 4,038,001  |      |  |   | 2,459,876  |  
|                                                                                         |  |      |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |      |           |   |      |   |            |      |  |   |            |  
|Operating distributions paid to partners from accumulated operating income               |  |      | 0         |   |      |   | (69,332    | )    |  |   | (520,167   | )
|Net sale proceeds distributions paid to limited partners                                 |  |      | 0         |   |      |   | (6,800,000 | )    |  |   | 0          |  
|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                                    |  |      | 0         |   |      |   | (6,869,332 | )    |  |   | (520,167   | )
|                                                                                         |  |      |          
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |      | 374,955   |   |      |   | (2,650,752 | )    |  |   | 2,719,615  |  
|                                                                                         |  |      |          
|CASH AND CASH EQUIVALENTS, beginning of year                                             |  |      | 1,431,624 |   |      |   | 4,082,376  |      |  |   | 1,362,761  |  
|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  
|CASH AND CASH EQUIVALENTS, end of year                                                   |  | $    | 1,806,579 |   |      | $ | 1,431,624  |      |  | $ | 4,082,376  |  
|                                                                                         |  |      |           |   |      |   |            |      |  |   |            |  

See accompanying notes.



Page F-7



---

WELLS REAL ESTATE FUND XI, L.P.



NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



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

Wells Real Estate Fund XI, 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. Leo F. Wells, III is the
president and sole director of Wells Capital and the president, sole director, and sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on June 20, 1996 for the purpose of acquiring, developing, owning, operating, improving,
leasing, and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elected to have their units treated as Class A Units or Class B Units. The limited partners have the right to change their
prior elections to have some or all of their units treated as Class A Units or Class B Units one time during each annual 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; and (c) add or remove a general partner. A majority vote on any of the above-described matters will bind the Partnership without the
concurrence of the General Partners. Each limited partnership unit has equal voting rights, regardless of class.

On December 31, 1997, the
Partnership commenced an offering of up to $35,000,000 of Class A or Class B limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active
operations upon receiving and accepting subscriptions for 125,000 units on March 3, 1998. The offering was terminated on December 30, 1998, at which time the Partnership had sold approximately 1,302,942 and 350,338 units to 1,250 and 95
Class A and Class B Limited Partners, respectively, for total limited partner capital contributions of $16,532,802.

The Partnership owns indirect
interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners. During the periods presented, the Partnership owned interests in the following joint ventures (the Joint
Ventures) and properties:



|                                                                                       |  |                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                                          |  | Joint Venture Partners                                                                                                                          |  | Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|The Fund IX, Fund X, Fund XI    and REIT Joint Venture(Fund IX-X-XI-REIT Associates) |  |   Wells Real Estate Fund IX, L.P.   Wells Real Estate Fund X, L.P.   Wells Real Estate Fund XI, L.P.   Wells Operating Partnership, L.P.(1) |  | 1. Alstom Power  Knoxville Building(2)A three-story office building
located in Knoxville, Tennessee  2. 360 Interlocken BuildingA three-story office building located in Broomfield, Colorado  3. Avaya Building A one-story office building located in Oklahoma City, Oklahoma  4. Iomega Building(3)A single-story warehouse and office building located in Ogden, Utah  5. 1315 West Century Drive(4)A two-story office building located in Louisville, Colorado



Page F-8



---

|                                                                                |  |                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                                   |  | Joint Venture Partners                                                                                         |  | Properties                                                                                                                                                                                                                                                                                                                                                                          
|Fund X and Fund XI Associates (Fund X-XI Associates)                          |  |   Wells Real Estate Fund X, L.P.   Wells Real Estate Fund XI, L.P.                                           |  | This joint venture owns interests only in other joint ventures and does not own any properties directly.                                                                                                                                                                                                                                                                            
|                                                                                |  |                                                                                                               
|Wells/Orange County Associates                                                  |  |   Fund X-XI Associates   Wells Operating Partnership, L.P.(1)                                                |  | 6. Cort Building(5)A one-story office and warehouse building located in Fountain Valley, California                                                                                                                                                                                                                                                                                 
|                                                                                |  |                                                                                                               
|Wells/Fremont Associates                                                        |  |   Fund X-XI Associates   Wells Operating Partnership, L.P.(1)                                                |  | 7. 47320 Kato RoadA two-story warehouse and office building located in Fremont,
California                                                                                                                                                                                                                                                                                          
|                                                                                |  |                                                                                                               
|The Wells Fund XI-Fund    XII-REIT Joint Venture(Fund XI-XII-REIT Associates) |  |   Wells Real Estate Fund XI, L.P.   Wells Real Estate Fund XII, L.P.   Wells Operating Partnership, L.P.(1) |  | 8. 111 Southchase BoulevardA two-story
manufacturing and office building located in Fountain Inn, South Carolina  9. 20/20 BuildingA three-story office building located in Leawood, Kansas  10.Johnson Matthey Building(6)A one-story office building and warehouse located in Wayne, Pennsylvania  11.Gartner Building(7)A two-story office building located in Ft. Myers, Florida



| | (1) | Wells Operating Partnership, L.P.(Wells OP) is a Delaware limited partnership with Wells
Real Estate Investment Trust, Inc. (Wells REIT) serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | This property was sold in March 2005.
| | --- | -------------------------------------



| | (3) | This property was sold in
January 2007.
| | --- | ---------------------------------------



| | (4) | This property was sold in December 2006.
| | --- | ----------------------------------------



| | (5) | The property was sold in September 2003. Wells/Orange County Associates was liquidated in 2005.
| | --- | -----------------------------------------------------------------------------------------------



| | (6) | The property was sold in October 2004.
| | --- | --------------------------------------



| | (7) | This property was sold in April 2005.
| | --- | -------------------------------------

Wells Real Estate Fund IX, L.P., Wells Real Estate Fund X, L.P., and Wells Real Estate Fund XII, L.P. are affiliated with the Partnership through common general
partners. Each of the properties described above was acquired on an all-cash basis.



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

Basis of
Presentation

The Partnerships financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).



Page F-9



---

Use of Estimates

The
preparation of the Partnerships financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses and related disclosures of
contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in
Joint Ventures

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

Cash and Cash Equivalents

The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments. Short-term
investments are stated at cost, which approximate fair value, and consist of investments in money market accounts.

Distributions of Net Cash from
Operations

Net cash from operations, if available, is generally distributed to limited partners on a quarterly basis. In accordance with the
partnership agreement, such distributions are paid first to limited partners holding Class A Units until the limited partners have received a 10% per annum return on their respective net capital contributions, as defined. Then, such
distributions are paid to the General Partners until they have received 10% of the total amount distributed to date. Any remaining cash from operations is to be allocated 90% to the limited partners holding Class A Units and 10% to the General
Partners. No distributions of net cash from operations will be made to limited partners holding Class B Units.

Distribution of Sale Proceeds

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



| |  |  | In the event that the particular property sold sells for a price that is less than its original property purchase price, to the limited partners holding
Class A 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 Class B Units with respect to such property;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners holding units which at any time have been treated as Class B Units until the limited partners have received an amount necessary to equal the net
cash from operations previously distributed to the limited partners holding Class A Units on a per-unit basis;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-10



---

| |  |  | To all limited partners on a per-unit basis until the limited partners have received 100% of their respective net capital contributions, as defined;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners on a per-unit basis until the limited partners have received a cumulative 10% per annum return on their respective net capital
contributions, as defined;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until the limited partners have received an amount equal to their respective 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 Class A Units and a 15% per annum cumulative return on net capital contributions for all periods during
which the units were treated as Class B 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 Class A Units and the General Partners. To the extent the Partnerships Net
Income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners holding Class A Units and 1% to the General Partners.

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

Gains on the sale or exchange of the Partnerships properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are
made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement, (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored
to zero, and (c) allocations to limited partners holding Class B Units in amounts equal to the deductions for depreciation and amortization 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.

Income Taxes

The Partnership is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners are
required to include their respective shares of profits and losses in their individual income tax returns.

Impairment of Real Estate Assets

The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned
through the Partnerships investment in the Joint Ventures may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective



Page F-11



---

carrying values will be recovered with the undiscounted future operating cash flows expected from the use of the asset and its 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 such assets to the respective estimated fair values, as defined by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and
recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties,
or (iii) the present value of undiscounted cash flows, including estimated salvage value.

Reclassifications

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

Recent Accounting Pronouncements

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year
misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Partnership for the year ended December 31, 2006. The adoption of this
pronouncement has not had a material impact on the Partnerships financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be
effective for the Partnership beginning January 1, 2007. The Partnership is currently assessing provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this
pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for
and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was
adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to
determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing
accounting pronouncements. The adoption of this pronouncement has not had a material impact on the Partnerships financial statements.



Page F-12



---

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

Impairment of Real Estate Assets

Fund IX-X-XI-REIT Associates reevaluated the recoverability of the carrying value of 1315 West Century Drive pursuant to the Partnerships policy
for evaluating and accounting for the impairment of real estate assets described above in Note 2. Fund IX-X-XI-REIT Associates determined that the carrying value of the real estate assets of 1315 West Century Drive was not recoverable, as compared
to the estimated fair value, primarily as a result of reducing the estimated holding period of such assets. Accordingly, Fund IX-X-XI-REIT Associates reduced the carrying value of its real estate assets to the estimated fair value by recognizing an
impairment loss of approximately $354,000 during the third quarter in 2006, of which approximately $31,000 is allocable to the Partnership. This impairment loss is included in income (loss) from discontinued operations for the year ended
December 31, 2006 in the Summary of Financial Information table below.

Due from Joint Ventures

As of December 31, 2006 and 2005, due from Joint Ventures represents the Partnerships share of the operating cash flow to be distributed for the fourth
quarters of 2006 and 2005, respectively, from the following Joint Ventures:



|                             |  |      |        |      |   |       
|---------------------------- |  | ---- | ------ | ---- | - | ------
|                             |  | 2006 |        | 2005
|Fund IX-X-XI-REIT Associates |  | $    | 14,546 |      | $ | 20,458
|Fund X-XI Associates         |  |      | 5,766  |      |   | 8,826 
|                             |  |      |        |      |   |       
|                             |  | $    | 20,312 |      | $ | 29,284
|                             |  |      |        |      |   |       

Summary of Investments

The Partnerships investments and approximate ownership percentages in the Joint Ventures as of December 31, 2006 and 2005 are summarized below:



|                             |  |        |           |            |     |        |   |            |  |    
|---------------------------- |  | ------ | --------- | ---------- | --- | ------ | - | ---------- |  | ---
|                             |  | 2006   |           | 2005      
|                             |  | Amount |           | Percentage |     | Amount |   | Percentage
|Fund IX-X-XI-REIT Associates |  | $      | 1,428,788 |            | 9%  |        | $ | 2,227,886  |  | 9% 
|Fund X-XI Associates         |  |        | 694,287   |            | 42% |        |   | 705,984    |  | 42%
|Fund XI-XII-REIT Associates  |  |        | 3,272,185 |            | 26% |        |   | 3,160,950  |  | 26%
|                             |  |        |           |            |     |        |   |            |  |    
|                             |  | $      | 5,395,260 |            |     |        | $ | 6,094,820  |  |    
|                             |  |        |           |            |     |        |   |            |  |    

Summary of Activity

Roll-forwards of the Partnerships investment in the Joint Ventures for the years ended December 31, 2006 and 2005 are presented below:



|                                                |  |      |           |   |      |   |            |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                |  | 2006 |           |   | 2005 |  
|Investment in Joint Ventures, beginning of year |  | $    | 6,094,820 |   |      | $ | 8,710,862  |  
|Equity in income (loss) of Joint Ventures       |  |      | (222,194  | ) |      |   | 1,553,813  |  
|Contributions to Joint Ventures                 |  |      | 366,072   |   |      |   | 227,058    |  
|Distributions from Joint Ventures               |  |      | (843,438  | ) |      |   | (4,396,913 | )
|                                                |  |      |           |   |      |   |            |  
|Investment in Joint Ventures, end of year       |  | $    | 5,395,260 |   |      | $ | 6,094,820  |  
|                                                |  |      |           |   |      |   |            |  



Page F-13



---

Summary of Financial Information

Condensed financial information for the Joint Ventures as of December 31, 2006 and 2005, and for the years ended December 31, 2006, 2005, and 2004 is presented below:



|                             |  |                   |            |                   |   |                   |  |                   |         |                   |   |                   |  |   |            |  |   |           
|---------------------------- |  | ----------------- | ---------- | ----------------- | - | ----------------- |  | ----------------- | ------- | ----------------- | - | ----------------- |  | - | ---------- |  | - | ----------
|                             |  | Total Assets      |            | Total Liabilities |   | Total Equity     
|                             |  | December 31, 2006 |            | December 31, 2005 |   | December 31, 2006 |  | December 31, 2005 |         | December 31, 2006 |   | December 31, 2005
|Fund IX-X-XI-REIT Associates |  | $                 | 16,761,986 |                   | $ | 26,163,790        |  | $                 | 504,159 |                   | $ | 813,530           |  | $ | 16,257,827 |  | $ | 25,350,260
|Fund X-XI Associates         |  |                   | 1,667,056  |                   |   | 1,702,202         |  |                   | 13,733  |                   |   | 21,021            |  |   | 1,653,323  |  |   | 1,681,181 
|Fund XI-XII-REIT Associates  |  |                   | 12,587,744 |                   |   | 12,282,960        |  |                   | 73,440  |                   |   | 194,061           |  |   | 12,514,304 |  |   | 12,088,899
|                             |  |                   |            |                   |   |                   |  |                   |         |                   |   |                   |  |   |            |  |   |           
|                             |  | $                 | 31,016,786 |                   | $ | 40,148,952        |  | $                 | 591,332 |                   | $ | 1,028,612         |  | $ | 30,425,454 |  | $ | 39,120,340
|                             |  |                   |            |                   |   |                   |  |                   |         |                   |   |                   |  |   |            |  |   |           



|                             |  |                                 |           |                                          |   |           |                                            |      |                                 |  |      |           |   |      |   |          |      |  |   |          |   |      |   |            |   |  |      |           |      |   |           |  |   |          |   |  |   |            |  |   |          
|---------------------------- |  | ------------------------------- | --------- | ---------------------------------------- | - | --------- | ------------------------------------------ | ---- | ------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | -------- | - | ---- | - | ---------- | - |  | ---- | --------- | ---- | - | --------- |  | - | -------- | - |  | - | ---------- |  | - | ---------
|                             |  | Total Revenues                  |           | Income (Loss) From Continuing Operations |   |           | Income (Loss) From Discontinued Operations |      | Net Income (Loss)(1)           
|                             |  | For the Years EndedDecember 31, |           | For the Years EndedDecember 31,          |   |           | For the Years EndedDecember 31,            |      | For the Years EndedDecember 31,
|                             |  | 2006                            |           | 2005                                     |   | 2004      |                                            | 2006 |                                 |  | 2005 |           |   | 2004 |   |          | 2006 |  |   | 2005     |   | 2004 |   | 2006       |   |  | 2005 |           | 2004
|Fund IX-X-XI-REIT Associates |  | $                               | 2,389,989 |                                          | $ | 2,250,847 |                                            | $    | 2,159,316                       |  | $    | 1,148,179 |   |      | $ | 984,806  |      |  | $ | 678,556  |   |      | $ | (1,033,384 | ) |  | $    | 5,208,818 |      | $ | 1,404,616 |  | $ | 114,795  |   |  | $ | 6,193,624  |  | $ | 2,083,172
|Fund X-XI Associates         |  |                                 | 0         |                                          |   | 0         |                                            |      | 0                               |  |      | 53,716    |   |      |   | 49,867   |      |  |   | 109,754  |   |      |   | 0          |   |  |      | 0         |      |   | 0         |  |   | 53,716   |   |  |   | 49,867     |  |   | 109,754  
|Fund XI-XII-REIT Associates  |  |                                 | 30,441    |                                          |   | 22,722    |                                            |      | 746,322                         |  |      | (974,595  | ) |      |   | (904,938 | )    |  |   | (221,752 | ) |      |   | 0          |   |  |      | 4,685,505 |      |   | 3,449,599 |  |   | (974,595 | ) |  |   | 3,780,567  |  |   | 3,227,847
|                             |  |                                 |           |                                          |   |           |                                            |      |                                 |  |      |           |   |      |   |          |      |  |   |          |   |      |   |            |   |  |      |           |      |   |           |  |   |          |   |  |   |            |  |   |          
|                             |  | $                               | 2,420,430 |                                          | $ | 2,273,569 |                                            | $    | 2,905,638                       |  | $    | 227,300   |   |      | $ | 129,735  |      |  | $ | 566,558  |   |      | $ | (1,033,384 | ) |  | $    | 9,894,323 |      | $ | 4,854,215 |  | $ | (806,084 | ) |  | $ | 10,024,058 |  | $ | 5,420,773
|                             |  |                                 |           |                                          |   |           |                                            |      |                                 |  |      |           |   |      |   |          |      |  |   |          |   |      |   |            |   |  |      |           |      |   |           |  |   |          |   |  |   |            |  |   |          



| | (1) | Effective July 1, 2004, the Joint Ventures extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to net income for the 12 months ended
December 31, 2004 of approximately $263,964 and $206,612 for Fund IX-X-XI-REIT Associates and for Fund XI-XII-REIT Associates, respectively. Management believes that this change more appropriately reflects the estimated useful lives of real
estate assets and is consistent with prevailing industry practice.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following information summarizes the
financial position of the joint ventures in which the Partnership held an interest through its interest in Fund X-XI Associates as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005, and 2004:



|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          
|------------------------------ |  | ----------------- | --------- | ----------------- | - | ----------------- |  | ----------------- | ------- | ----------------- | - | ----------------- |  | - | --------- |  | - | ---------
|                               |  | Total Assets      |           | Total Liabilities |   | Total Equity     
|                               |  | December 31, 2006 |           | December 31, 2005 |   | December 31, 2006 |  | December 31, 2005 |         | December 31, 2006 |   | December 31, 2005
|Wells/Orange County Associates |  | $                 | 0         |                   | $ | 0                 |  | $                 | 0       |                   | $ | 0                 |  | $ | 0         |  | $ | 0        
|Wells/Fremont Associates       |  |                   | 7,517,454 |                   |   | 7,583,387         |  |                   | 167,997 |                   |   | 110,095           |  |   | 7,349,457 |  |   | 7,473,292
|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          
|                               |  | $                 | 7,517,454 |                   | $ | 7,583,387         |  | $                 | 167,997 |                   | $ | 110,095           |  | $ | 7,349,457 |  | $ | 7,473,292
|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          



|                               |  |                                 |         |                                          |   |         |                                 |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |  
|------------------------------ |  | ------------------------------- | ------- | ---------------------------------------- | - | ------- | ------------------------------- | ---- | ------- | ------------------------------- | - | ------- |  | - | ------- |  | ---- | ------- | ---- |  | - | ---- |  | ---- | - | ---- | - | ------- | - |  | - | ------- |  | - | ------- |  | - | ------- | -
|                               |  | Total Revenues                  |         | Income (Loss) From Continuing Operations |   |         | Loss FromDiscontinuedOperations |      |         | Net Income (Loss)(1)            |  
|                               |  | For the Years EndedDecember 31, |         | For the Years EndedDecember 31,          |   |         | For the Years EndedDecember 31, |      |         | For the Years EndedDecember 31, |  
|                               |  | 2006                            |         | 2005                                     |   | 2004    |                                 | 2006 |         | 2005                            |   | 2004    |  |   | 2006    |  | 2005 |         | 2004 |  |   | 2006 |  | 2005 |   | 2004 |  
|Wells/Orange County Associates |  | $                               | 0       |                                          | $ | 0       |                                 | $    | 0       |                                 | $ | 0       |  | $ | 0       |  | $    | (7,573  | )    |  | $ | 0    |  | $    | 0 |      | $ | (18,944 | ) |  | $ | 0       |  | $ | 0       |  | $ | (26,517 | )
|Wells/Fremont Associates       |  |                                 | 501,941 |                                          |   | 475,989 |                                 |      | 880,778 |                                 |   | 238,781 |  |   | 221,672 |  |      | 556,594 |      |  |   | 0    |  |      | 0 |      |   | 0       |   |  |   | 238,781 |  |   | 221,672 |  |   | 556,594 |  
|                               |  |                                 |         |                                          |   |         |                                 |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |  
|                               |  | $                               | 501,941 |                                          | $ | 475,989 |                                 | $    | 880,778 |                                 | $ | 238,781 |  | $ | 221,672 |  | $    | 549,021 |      |  | $ | 0    |  | $    | 0 |      | $ | (18,944 | ) |  | $ | 238,781 |  | $ | 221,672 |  | $ | 530,077 |  
|                               |  |                                 |         |                                          |   |         |                                 |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |  



| | (1) | Effective July 1, 2004, the Wells/Fremont Associates extended the weighted-average composite
useful life for all building assets from 25 years to 40 years, which resulted in an increase to net income for the year ended December 31, 2004 of approximately $62,984. Management believes that this change more appropriately reflects the
estimated useful lives of real estate assets and is consistent with prevailing industry practice
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-14



---

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



|                               |  |               |          |   |                |   |          |             |  |   |          |   |  |                 |            |             |  |       |         |                 |   |           |              |   |           |  |   |           |   |  |   |           |  |   |           |  
|------------------------------ |  | ------------- | -------- | - | -------------- | - | -------- | ----------- |  | - | -------- | - |  | --------------- | ---------- | ----------- |  | ----- | ------- | --------------- | - | --------- | ------------ | - | --------- |  | - | --------- | - |  | - | --------- |  | - | --------- | -
|                               |  | 2006          |          |   | 2005           |   | 2004     |            
|                               |  | OperatingLoss |          |   | ImpairmentLoss |   |          | Loss onSale |  |   | Total    |   |  | OperatingIncome |            | Gain onSale |  | Total |         | OperatingIncome |   |           | Gain on Sale |   | Total     | 
|Fund IX-X-XI-REIT Associates   |  | $             | (537,040 | ) |                | $ | (354,326 | )           |  | $ | (142,018 | ) |  | $               | (1,033,384 | )           |  | $     | 176,856 |                 | $ | 5,031,962 |              | $ | 5,208,818 |  | $ | 1,404,616 |   |  | $ | 0         |  | $ | 1,404,616 |  
|Fund X-XI Associates           |  |               | 0        |   |                |   | 0        |             |  |   | 0        |   |  |                 | 0          |             |  |       | 0       |                 |   | 0         |              |   | 0         |  |   | 0         |   |  |   | 0         |  |   | 0         |  
|Wells/Orange County Associates |  |               | 0        |   |                |   | 0        |             |  |   | 0        |   |  |                 | 0          |             |  |       | 0       |                 |   | 0         |              |   | 0         |  |   | (18,944   | ) |  |   | 0         |  |   | (18,944   | )
|Wells/Fremont Associates       |  |               | 0        |   |                |   | 0        |             |  |   | 0        |   |  |                 | 0          |             |  |       | 0       |                 |   | 0         |              |   | 0         |  |   | 0         |   |  |   | 0         |  |   | 0         |  
|Fund XI-XII-REIT Associates    |  |               | 0        |   |                |   | 0        |             |  |   | 0        |   |  |                 | 0          |             |  |       | 204,646 |                 |   | 4,480,859 |              |   | 4,685,505 |  |   | 1,030,989 |   |  |   | 2,418,610 |  |   | 3,449,599 |  
|                               |  |               |          |   |                |   |          |             |  |   |          |   |  |                 |            |             |  |       |         |                 |   |           |              |   |           |  |   |           |   |  |   |           |  |   |           |  
|                               |  | $             | (537,040 | ) |                | $ | (354,326 | )           |  | $ | (142,018 | ) |  | $               | (1,033,384 | )           |  | $     | 381,502 |                 | $ | 9,512,821 |              | $ | 9,894,323 |  | $ | 2,416,661 |   |  | $ | 2,418,610 |  | $ | 4,835,271 |  
|                               |  |               |          |   |                |   |          |             |  |   |          |   |  |                 |            |             |  |       |         |                 |   |           |              |   |           |  |   |           |   |  |   |           |  |   |           |  



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

Management and Leasing Fees

The Partnership entered into a property management and leasing agreement with Wells Management Company, Inc. (Wells Management), an
affiliate of the General Partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Partnerships properties owned through the Joint Ventures, equal
to (a) of the gross revenues collected monthly, 2.5% of the gross revenues for management and 2% of the gross revenues for leasing (aggregate maximum of 4.5%), plus a separate competitive fee for the one-time initial lease-up of newly
constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties, which is assessed periodically based on market
studies, or (b) in the case of commercial properties leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except
for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Management and leasing fees are paid by the Joint Ventures and, accordingly, included in equity in income
(loss) of joint ventures in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures that are payable to Wells Management and its
affiliates is $9,449, $16,739, and $51,266 for the years ended December 31, 2006, 2005, and 2004, respectively.

Administrative Reimbursements

Wells Capital, the corporate general partner of Wells Partners, one of the Partnerships General Partners, and Wells Management perform certain
administrative services for the Partnership, relating to accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated among other entities affiliated with the General Partners
based on time spent on each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation of such expenses. The Partnership reimbursed Wells Capital and Wells Management for
administrative expenses of $50,821, $64,001, and $64,555 for the years ended December 31, 2006, 2005, and 2004, respectively, which are included in general and administrative expenses in the accompanying statements of operations. In addition,
Wells Capital pays for certain operating expenses of the Partnership (bill-backs) directly, and generally invoices the Partnership for the reimbursement thereof on a quarterly basis. As of December 31, 2006 and 2005, due to
affiliates represent administrative reimbursements and/or bill-backs due to Wells Capital and/or Wells Management.



|5. | PER-UNIT AMOUNTS
|-- | ----------------

Income (loss) per limited partnership unit
amounts are calculated based upon weighted-average units outstanding during the respective periods. Income (loss) per limited partnership unit, as presented in the accompanying financial statements, will vary from the per-unit amounts attributable
to the individual investors due to the differences between the GAAP and tax basis treatment



Page F-15



---

of certain items of income and expense and the fact that, within the respective classes of Class A Units and Class B Units, individual units have
different characteristics including capital bases, cumulative operating and net property sales proceeds distributions and cumulative earnings allocations as a result of, among other things, the ability of unit holders to elect to be treated as
Class A Units or Class B Units, or to change their prime elections, on a quarterly basis.

For the reasons mentioned above, distributions of net sale
proceeds per unit also vary among individual unit holders. Distributions of net sale proceeds have been calculated at the investor level pursuant to the partnership agreement and allocated between the Class A and Class B limited partners in the
period paid. Accordingly, distributions of net sale proceeds per unit, as presented in the accompanying financial statements, vary from the per-unit amounts attributable to the individual investors.



|6. | INCOME TAX BASIS NET INCOME AND PARTNERS CAPITAL
|-- | -------------------------------------------------

A
reconciliation of the Partnerships financial statement net income to net income presented in accordance with the Federal Income Tax basis of accounting is as follows for the years ended December 31, 2006, 2005, and 2004:



|                                                                                                                         |  |      |          |   |      |   |           |      |  |   |         |    
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | -------- | - | ---- | - | --------- | ---- |  | - | ------- | ---
|                                                                                                                         |  | 2006 |          |   | 2005 |   |           | 2004 | 
|Financial statement net income (loss)                                                                                    |  | $    | (279,569 | ) |      | $ | 1,495,344 |      |  | $ | 938,143 |    
|Increase (decrease) in net income (loss) resulting from:                                                                 |  |      |          |   |      |   |           |      |  |   |         |    
|Meals and entertainment                                                                                                  |  |      | 0        |   |      |   | 0         |      |  |   | 393     |    
|Depreciation expense for financial reporting purposes (less than) greater than amounts for income tax purposes           |  |      | (9,789   | ) |      |   | (13,729   | )    |  |   | 80,493  | (1)
|Bad debt expense for financial reporting purposes in excess of amounts for income tax purposes                           |  |      | 0        |   |      |   | 0         |      |  |   | 86      |    
|Rental income accrued for financial reporting purposes less than (greater than) amounts for income tax purposes          |  |      | 1,423    |   |      |   | (24,128   | )    |  |   | 11,528  |    
|Gains/losses on sale of properties for financial reporting purposes in excess of/less than income tax reporting purposes |  |      | (62,880  | ) |      |   | (151,365  | )    |  |   | (79,500 | )  
|Other                                                                                                                    |  |      | 6,298    |   |      |   | (45,723   | )    |  |   | (14,564 | )  
|                                                                                                                         |  |      |          |   |      |   |           |      |  |   |         |    
|Income tax basis net income (loss)                                                                                       |  | $    | (344,517 | ) |      | $ | 1,260,399 |      |  | $ | 936,579 |    
|                                                                                                                         |  |      |          |   |      |   |           |      |  |   |         |    



| | (1) | Effective July 1, 2004, the Joint Ventures extended the weighted-average composite useful lives
for all building assets from 25 years to 40 years. This change has no impact on the statutory life used for Federal income tax purposes of 40 years, upon which tax depreciation is based (see Note 2).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-16



---

A reconciliation of the partners capital balances, as presented in the accompanying financial statements, to
partners capital balances, as presented in accordance with the Federal Income Tax basis of accounting, is as follows for the years ended December 31, 2006, 2005, and 2004:



|                                                                                                                                         |  |      |           |   |      |   |           |      |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ---------- | -
|                                                                                                                                         |  | 2006 |           |   | 2005 |   |           | 2004 | 
|Financial statements partners capital                                                                                                   |  | $    | 7,206,060 |   |      | $ | 7,485,629 |      |  | $ | 12,859,617 |  
|Increase (decrease) in partners capital resulting from:                                                                                 |  |      |           |   |      |   |           |      |  |   |            |  
|Accumulated meals and entertainment                                                                                                      |  |      | 556       |   |      |   | 556       |      |  |   | 556        |  
|Accumulated bad debt expense, net, for financial reporting purposes in excess of amounts for income tax purposes                         |  |      | 86        |   |      |   | 86        |      |  |   | 86         |  
|Accumulated depreciation expense for financial reporting purposes greater than amounts for income tax purposes                           |  |      | 962,289   |   |      |   | 972,079   |      |  |   | 985,808    |  
|Capitalization of syndication costs for income tax purposes, which are accounted for as cost of capital for financial reporting
purposes |  |      | 2,035,389 |   |      |   | 2,035,389 |      |  |   | 2,035,389  |  
|Accumulated rental income accrued for financial reporting purposes greater than amounts for income tax purposes                          |  |      | (185,142  | ) |      |   | (186,564  | )    |  |   | (162,436   | )
|Accumulated expenses deductible when paid for income tax purposes less than amounts accrued for financial reporting purposes             |  |      | 1,981     |   |      |   | 1,981     |      |  |   | 1,981      |  
|Accumulated gains on sale of properties for financial reporting purposes in excess of amounts for income tax purposes                    |  |      | (366,562  | ) |      |   | (303,682  | )    |  |   | (152,317   | )
|Partnerships distributions payable                                                                                                      |  |      | 0         |   |      |   | 0         |      |  |   | 0          |  
|Other                                                                                                                                    |  |      | (53,988   | ) |      |   | (60,287   | )    |  |   | (14,564    | )
|                                                                                                                                         |  |      |           |   |      |   |           |      |  |   |            |  
|Income tax basis partners capital                                                                                                       |  | $    | 9,600,669 |   |      | $ | 9,945,187 |      |  | $ | 15,554,120 |  
|                                                                                                                                         |  |      |           |   |      |   |           |      |  |   |            |  



Page F-17



---

|7. | QUARTERLY RESULTS (UNAUDITED)
|-- | -----------------------------

Presented below is a summary of the
unaudited quarterly financial information for the years ended December 31, 2006 and 2005:



|                                                                                              |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|--------------------------------------------------------------------------------------------- |  | ------------------- | ------- | - | ------- | - | --------- | ------------ |  | - | ----------- | - |  | - | -------- | -
|                                                                                              |  | 2006 Quarters Ended |        
|                                                                                              |  | March 31            |         |   | June 30 |   |           | September 30 |  |   | December 31 |  
|Equity in loss of joint ventures                                                              |  | $                   | (53,578 | ) |         | $ | (53,840   | )            |  | $ | (89,414     | ) |  | $ | (25,362  | )
|Interest and other income                                                                     |  | $                   | 24,541  |   |         | $ | 15,666    |              |  | $ | 16,791      |   |  | $ | 16,510   |  
|Net loss                                                                                      |  | $                   | (77,534 | ) |         | $ | (75,444   | )            |  | $ | (98,115     | ) |  | $ | (28,476  | )
|Net loss allocated to limited partners:                                                       |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  | $                   | (77,534 | ) |         | $ | (75,444   | )            |  | $ | (98,115     | ) |  | $ | (28,476  | )
|Class B                                                                                       |  | $                   | 0       |   |         | $ | 0         |              |  | $ | 0           |   |  | $ | 0        |  
|Net loss per weighted-average limited partner unit outstanding:                               |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A(a)                                                                                    |  |                     | $(0.05  | ) |         |   | $(0.05    | )            |  |   | $(0.07      | ) |  |   | $(0.02   | )
|Class B                                                                                       |  |                     | $ 0.00  |   |         |   | $ 0.00    |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|Distribution of operating cash per weighted-average limited partner unit outstanding:         |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  |                     | $ 0.00  |   |         |   | $ 0.00    |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|Class B                                                                                       |  |                     | $ 0.00  |   |         |   | $ 0.00    |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|Distribution of net sale proceeds cash per weighted-average limited partner unit outstanding: |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  |                     | $ 0.00  |   |         |   | $ 0.00    |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|Class B                                                                                       |  |                     | $ 0.00  |   |         |   | $ 0.00    |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|                                                                                              | 
|                                                                                              |  | 2005 Quarters Ended |        
|                                                                                              |  | March 31            |         |   | June 30 |   |           | September 30 |  |   | December 31 |  
|Equity in income of joint ventures                                                            |  | $                   | 491,235 |   |         | $ | 1,164,662 |              |  | $ | (62,015     | ) |  | $ | (40,069  | )
|Interest and other income                                                                     |  | $                   | 17,700  |   |         | $ | 27,322    |              |  | $ | 46,983      |   |  | $ | 50,482   |  
|Net income                                                                                    |  | $                   | 460,681 |   |         | $ | 1,142,418 |              |  | $ | (76,896     | ) |  | $ | (30,859  | )
|Net income (loss) allocated to limited partners:                                              |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  | $                   | 85,660  |   |         | $ | 40,908    |              |  | $ | 0           |   |  | $ | (299,345 | )
|Class B                                                                                       |  | $                   | 375,021 |   |         | $ | 1,101,510 |              |  | $ | (76,896     | ) |  | $ | 268,486  |  
|Net income (loss) per weighted-average limited partner unit outstanding:                      |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  |                     | $0.06   |   |         |   | $0.03     |              |  |   | $ 0.00      |   |  |   | $(0.21   | )
|Class B(a)                                                                                    |  |                     | $1.41   |   |         |   | $4.71     |              |  |   | $(0.33      | ) |  |   | $ 1.15   |  
|Distribution of operating cash per weighted-average limited partner unit outstanding:         |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A                                                                                       |  |                     | $0.05   |   |         |   | $0.00     |              |  |   | $ 0.00      |   |  |   | $ 0.00   |  
|Distribution of net sale proceeds cash per weighted-average limited partner unit outstanding: |  |                     |         |   |         |   |           |              |  |   |             |   |  |   |          |  
|Class A(b)                                                                                    |  |                     | $0.00   |   |         |   | $0.71     |              |  |   | $ 0.00      |   |  |   | $ 2.72   |  
|Class B(b)                                                                                    |  |                     | $0.00   |   |         |   | $5.52     |              |  |   | $ 0.00      |   |  |   | $ 2.76   |  



| | (a) | The quarterly per-unit amounts have been calculated using actual income (loss) for the respective
quarters. Conversely, the corresponding annual income (loss) per-unit amounts have been calculated assuming that income (loss) was earned ratably over the year. As a result, the sum of these quarterly per-unit amounts does not equal the respective
annual per-unit amount presented in the accompanying financial statements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The quarterly per-unit amounts have been calculated using actual distribution for the
respective quarters. Conversely, the corresponding distributions per-unit amounts have been calculated assuming that the total distribution was earned ratably over the year. As a result, the sum of these quarterly per-unit amounts does not equal the
respective annual per-unit amount presented in the accompanying financial statements.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-18



---

|8. | GENERAL AND ADMINISTRATIVE COSTS
|-- | --------------------------------

General and administrative costs
for the years ended December 31, 2006, 2005, and 2004 are comprised of the following items:



|                                       |  |      |         |      |   |         |  |   |         |  
|-------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | -
|                                       |  | 2006 |         | 2005 |   | 2004    | 
|Salary reimbursements                  |  | $    | 50,821  |      | $ | 64,001  |  | $ | 64,555  |  
|Printing expenses                      |  |      | 25,667  |      |   | 25,802  |  |   | 21,569  |  
|Legal fees                             |  |      | 21,587  |      |   | 48,557  |  |   | 18,371  |  
|Independent accounting fees            |  |      | 20,732  |      |   | 29,523  |  |   | 28,921  |  
|Taxes and licensing fees               |  |      | 4,825   |      |   | 18,868  |  |   | 7,011   |  
|Postage and delivery expenses          |  |      | 3,860   |      |   | 4,018   |  |   | 8,726   |  
|Other professional fees                |  |      | 1,188   |      |   | 3,200   |  |   | 1,771   |  
|Computer costs                         |  |      | 1,047   |      |   | 1,382   |  |   | 1,961   |  
|Registration and filing fees           |  |      | 597     |      |   | 0       |  |   | 978     |  
|Life insurance                         |  |      | 559     |      |   | 280     |  |   | 559     |  
|Bank service charges                   |  |      | 0       |      |   | 0       |  |   | 303     |  
|Other                                  |  |      | 0       |      |   | 5,325   |  |   | (6,062  | )
|                                       |  |      |         |      |   |         |  |   |         |  
|Total general and administrative costs |  | $    | 130,883 |      | $ | 200,956 |  | $ | 148,663 |  
|                                       |  |      |         |      |   |         |  |   |         |  



|9. | SUBSEQUENT EVENTS
|-- | -----------------

Property Sale

On January 31, 2007, Fund IX-X-XI-REIT Associates sold the Iomega Building to an unrelated third party for a gross sales price of $4,867,000. As a result of the
sale, the Partnership received net sale proceeds of approximately $412,000 and was allocated a gain of approximately $16,000, which may be adjusted as additional information becomes available in subsequent periods.

Purchase and Sale Agreement

On March 6, 2007, Fund XI-XII-REIT
Associates entered into a purchase and sale agreement to sell 111 Southchase Boulevard to an unrelated third party. The completion of this transaction is currently subject to, among other things, a due diligence period expiring on April 5,
2007. Accordingly, there are no assurances that this sale will be completed. If the transaction progresses, the Partnership believes the closing of this transaction is likely to occur during the second quarter of 2007.



Page F-19



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

The Fund IX, Fund X, Fund XI and REIT Joint Venture:

We have audited the accompanying balance sheet of The Fund IX, Fund X, Fund XI and REIT Joint Venture (the Joint Venture) as of December 31, 2006, and the related statements of operations,
partners capital, and cash flows for the year ended December 31, 2006. Our audit also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the
Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Fund IX, Fund X, Fund XI and REIT Joint Venture as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

/s/    FRAZIER & DEETER,
LLC

Atlanta, Georgia

March 26, 2007



Page F-20



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

The Fund IX, Fund X, Fund XI and REIT Joint Venture:

We have audited the accompanying balance sheet of The Fund IX, Fund X, Fund XI and REIT Joint Venture (the Joint Venture) as of December 31, 2005, and the related statements of operations,
partners capital, and cash flows for each of the two years in the period ended December 31, 2005. Our audits also included the financial statement schedule as of December 31, 2005 and for each of the two years in the period then
ended listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Fund IX, Fund X, Fund XI and REIT
Joint Venture at December 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/    ERNST & YOUNG LLP

Atlanta, Georgia

March 9, 2007



Page F-21



---

THE FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE



BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                                                                                                                                  |  |      |            |      |   |           
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                                                                                  |  | 2006 |            | 2005
|Real estate assets, at cost:                                                                                                      |  |      |            |      |   |           
|Land                                                                                                                              |  | $    | 3,343,196  |      | $ | 6,090,090 
|Building and improvements, less accumulated depreciation of $5,386,439 and $7,292,823 at December 31, 2006 and 2005,
respectively |  |      | 12,549,986 |      |   | 18,815,022
|                                                                                                                                  |  |      |            |      |   |           
|Total real estate assets, net                                                                                                     |  |      | 15,893,182 |      |   | 24,905,112
|Cash and cash equivalents                                                                                                         |  |      | 358,870    |      |   | 693,878   
|Tenant receivables, net                                                                                                           |  |      | 225,673    |      |   | 239,666   
|Deferred leasing costs, less accumulated amortization of $129,088 and $77,615 at December 31, 2006 and 2005, respectively         |  |      | 166,924    |      |   | 211,267   
|Other assets                                                                                                                      |  |      | 117,337    |      |   | 113,867   
|                                                                                                                                  |  |      |            |      |   |           
|Total assets                                                                                                                      |  | $    | 16,761,986 |      | $ | 26,163,790
|                                                                                                                                  |  |      |            |      |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                                                     |  |   |            |  |   |           
|-------------------------------------------------------------------- |  | - | ---------- |  | - | ----------
|Liabilities:                                                         |  |   |            |  |   |           
|Accounts payable, accrued expenses, and refundable security deposits |  | $ | 320,116    |  | $ | 568,564   
|Deferred income                                                      |  |   | 96         |  |   | 4,980     
|Due to affiliates                                                    |  |   | 1,590      |  |   | 7,208     
|Accrued capital expenditures                                         |  |   | 16,844     |  |   | 0         
|Partnership distributions payable                                    |  |   | 165,513    |  |   | 232,778   
|                                                                     |  |   |            |  |   |           
|Total liabilities                                                    |  |   | 504,159    |  |   | 813,530   
|Partners capital:                                                   |  |   |            |  |   |           
|Wells Real Estate Fund IX, L.P.                                      |  |   | 6,345,520  |  |   | 9,894,351 
|Wells Real Estate Fund X, L.P.                                       |  |   | 7,883,619  |  |   | 12,292,658
|Wells Real Estate Fund XI, L.P.                                      |  |   | 1,428,787  |  |   | 2,227,884 
|Wells Operating Partnership, L.P.                                    |  |   | 599,901    |  |   | 935,367   
|                                                                     |  |   |            |  |   |           
|Total partners capital                                              |  |   | 16,257,827 |  |   | 25,350,260
|                                                                     |  |   |            |  |   |           
|Total liabilities and partners capital                              |  | $ | 16,761,986 |  | $ | 26,163,790
|                                                                     |  |   |            |  |   |           

See accompanying notes.



Page F-22



---

THE FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE



STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                           |  |      |            |   |      |   |           |  |   |          
|------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- |  | - | ---------
|                                           |  | 2006 |            |   | 2005 |   | 2004     
|REVENUES:                                  |  |      |            |   |      |   |           |  |   |          
|Rental income                              |  | $    | 2,204,697  |   |      | $ | 2,114,122 |  | $ | 2,089,604
|Tenant reimbursements                      |  |      | 154,623    |   |      |   | 106,558   |  |   | 69,223   
|Interest and other income                  |  |      | 30,669     |   |      |   | 30,167    |  |   | 489      
|                                           |  |      |            |   |      |   |           |  |   |          
|Total revenues                             |  |      | 2,389,989  |   |      |   | 2,250,847 |  |   | 2,159,316
|EXPENSES:                                  |  |      |            |   |      |   |           |  |   |          
|Property operating costs                   |  |      | 521,122    |   |      |   | 553,743   |  |   | 619,208  
|Management and leasing fees                |  |      | 111,529    |   |      |   | 103,849   |  |   | 123,917  
|Depreciation                               |  |      | 472,060    |   |      |   | 454,868   |  |   | 575,814  
|Amortization                               |  |      | 51,473     |   |      |   | 46,851    |  |   | 47,902   
|General and administrative                 |  |      | 85,626     |   |      |   | 106,730   |  |   | 113,919  
|                                           |  |      |            |   |      |   |           |  |   |          
|Total expenses                             |  |      | 1,241,810  |   |      |   | 1,266,041 |  |   | 1,480,760
|                                           |  |      |            |   |      |   |           |  |   |          
|NET INCOME FROM CONTINUING OPERATIONS      |  |      | 1,148,179  |   |      |   | 984,806   |  |   | 678,556  
|                                           |  |      |           
|DISCONTINUED OPERATIONS:                   |  |      |            |   |      |   |           |  |   |          
|Operating income (loss)                    |  |      | (537,040   | ) |      |   | 176,856   |  |   | 1,404,616
|Impairment loss                            |  |      | (354,326   | ) |      |   | 0         |  |   | 0        
|Gain (loss) on disposition                 |  |      | (142,018   | ) |      |   | 5,031,962 |  |   | 0        
|                                           |  |      |            |   |      |   |           |  |   |          
|Income (loss) from discontinued operations |  |      | (1,033,384 | ) |      |   | 5,208,818 |  |   | 1,404,616
|                                           |  |      |            |   |      |   |           |  |   |          
|NET INCOME                                 |  | $    | 114,795    |   |      | $ | 6,193,624 |  | $ | 2,083,172
|                                           |  |      |            |   |      |   |           |  |   |          

See accompanying notes.



Page F-23



---

THE FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                           |  |                                |            |   |                               |   |            |                                |  |   |                                 |   |  |                         |           |   |  |   |             |  
|-------------------------- |  | ------------------------------ | ---------- | - | ----------------------------- | - | ---------- | ------------------------------ |  | - | ------------------------------- | - |  | ----------------------- | --------- | - |  | - | ----------- | -
|                           |  | Wells RealEstate Fund IX, L.P. |            |   | Wells RealEstate Fund X, L.P. |   |            | Wells RealEstate Fund XI, L.P. |  |   | Wells OperatingPartnership,L.P. |   |  | Total Partners Capital |          
|BALANCE, December 31, 2003 |  | $                              | 12,557,869 |   |                               | $ | 15,601,793 |                                |  | $ | 2,827,634                       |   |  | $                       | 1,187,145 |   |  | $ | 32,174,441  |  
|                           |  |                                |            |   |                              
|Net income                 |  |                                | 813,076    |   |                               |   | 1,010,157  |                                |  |   | 183,081                         |   |  |                         | 76,858    |   |  |   | 2,083,172   |  
|Partnership distributions  |  |                                | (905,433   | ) |                               |   | (1,124,903 | )                              |  |   | (203,878                        | ) |  |                         | (85,589   | ) |  |   | (2,319,803  | )
|                           |  |                                |            |   |                               |   |            |                                |  |   |                                 |   |  |                         |           |   |  |   |             |  
|BALANCE, December 31, 2004 |  |                                | 12,465,512 |   |                               |   | 15,487,047 |                                |  |   | 2,806,837                       |   |  |                         | 1,178,414 |   |  |   | 31,937,810  |  
|                           |  |                                |            |   |                              
|Net income                 |  |                                | 2,417,408  |   |                               |   | 3,003,369  |                                |  |   | 544,333                         |   |  |                         | 228,514   |   |  |   | 6,193,624   |  
|Partnership distributions  |  |                                | (4,988,569 | ) |                               |   | (6,197,758 | )                              |  |   | (1,123,286                      | ) |  |                         | (471,561  | ) |  |   | (12,781,174 | )
|                           |  |                                |            |   |                               |   |            |                                |  |   |                                 |   |  |                         |           |   |  |   |             |  
|BALANCE, December 31, 2005 |  |                                | 9,894,351  |   |                               |   | 12,292,658 |                                |  |   | 2,227,884                       |   |  |                         | 935,367   |   |  |   | 25,350,260  |  
|                           |  |                                |            |   |                              
|Net income                 |  |                                | 44,805     |   |                               |   | 55,666     |                                |  |   | 10,089                          |   |  |                         | 4,235     |   |  |   | 114,795     |  
|Partnership distributions  |  |                                | (3,593,636 | ) |                               |   | (4,464,705 | )                              |  |   | (809,186                        | ) |  |                         | (339,701  | ) |  |   | (9,207,228  | )
|                           |  |                                |            |   |                               |   |            |                                |  |   |                                 |   |  |                         |           |   |  |   |             |  
|BALANCE, December 31, 2006 |  | $                              | 6,345,520  |   |                               |   | $7,883,619 |                                |  |   | $1,428,787                      |   |  |                         | $599,901  |   |  |   | $16,257,827 |  
|                           |  |                                |            |   |                               |   |            |                                |  |   |                                 |   |  |                         |           |   |  |   |             |  

See accompanying notes.



Page F-24



---

THE FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                                                                    |  | 2006 |            |   | 2005 |   |             | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |  |      |            |   |      |   |             |      |  |   |            |  
|Net income                                                                          |  | $    | 114,795    |   |      | $ | 6,193,624   |      |  | $ | 2,083,172  |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |      |            |   |      |   |             |      |  |   |            |  
|Impairment loss                                                                     |  |      | 354,326    |   |      |   | 0           |      |  |   | 0          |  
|(Gain) loss on sale of property                                                     |  |      | 142,018    |   |      |   | (5,031,962  | )    |  |   | 0          |  
|Depreciation                                                                        |  |      | 624,402    |   |      |   | 681,018     |      |  |   | 1,177,848  |  
|Amortization                                                                        |  |      | 51,473     |   |      |   | 62,275      |      |  |   | 107,421    |  
|Changes in assets and liabilities:                                                  |  |      |            |   |      |   |             |      |  |   |            |  
|Decrease (increase) in tenant receivables, net                                      |  |      | 13,993     |   |      |   | (64,124     | )    |  |   | (398,908   | )
|Decrease (increase) in other assets                                                 |  |      | 950        |   |      |   | 358         |      |  |   | (3,884     | )
|(Decrease) increase in accounts payable and accrued expenses                        |  |      | (252,867   | ) |      |   | (326,807    | )    |  |   | 289,882    |  
|Decrease in due to affiliates                                                       |  |      | (5,618     | ) |      |   | (12,801     | )    |  |   | (626       | )
|Decrease in deferred income                                                         |  |      | (4,884     | ) |      |   | (124,569    | )    |  |   | (19,758    | )
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Net cash provided by operating activities                                           |  |      | 1,038,588  |   |      |   | 1,377,012   |      |  |   | 3,235,147  |  
|                                                                                    |  |      |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |      |            |   |      |   |             |      |  |   |            |  
|Net proceeds from sale of real estate                                               |  |      | 8,059,625  |   |      |   | 11,646,089  |      |  |   | 0          |  
|Investment in real estate assets                                                    |  |      | (151,598   | ) |      |   | (79,675     | )    |  |   | (308,577   | )
|Payment of deferred leasing costs                                                   |  |      | (7,130     | ) |      |   | (241,558    | )    |  |   | (641,736   | )
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Net cash provided by (used in) investing activities                                 |  |      | 7,900,897  |   |      |   | 11,324,856  |      |  |   | (950,313   | )
|                                                                                    |  |      |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |      |            |   |      |   |             |      |  |   |            |  
|Net sale proceeds distributions to joint venture partners                           |  |      | (8,059,625 | ) |      |   | (11,646,089 | )    |  |   | 0          |  
|Operating distributions to joint venture partners in excess of accumulated earnings |  |      | (1,214,868 | ) |      |   | (1,515,725  | )    |  |   | (2,641,497 | )
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Net cash used in financing activities                                               |  |      | (9,274,493 | ) |      |   | (13,161,814 | )    |  |   | (2,641,497 | )
|                                                                                    |  |      |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                           |  |      | (335,008   | ) |      |   | (459,946    | )    |  |   | (356,663   | )
|                                                                                    |  |      |           
|CASH AND CASH EQUIVALENTS, beginning of year                                        |  |      | 693,878    |   |      |   | 1,153,824   |      |  |   | 1,510,487  |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                              |  | $    | 358,870    |   |      | $ | 693,878     |      |  | $ | 1,153,824  |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:              |  |      |            |   |      |   |             |      |  |   |            |  
|Partnership distributions payable                                                   |  | $    | 165,513    |   |      | $ | 232,778     |      |  | $ | 613,418    |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Accrued capital expenditures                                                        |  | $    | 16,844     |   |      | $ | 0           |      |  | $ | 0          |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Write-off of fully depreciated real estate assets                                   |  | $    | 13,819     |   |      | $ | 0           |      |  | $ | 0          |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  
|Write-off of fully amortized deferred leasing costs                                 |  | $    | 0          |   |      | $ | 0           |      |  | $ | 52,232     |  
|                                                                                    |  |      |            |   |      |   |             |      |  |   |            |  

See accompanying notes.



Page F-25



---

THE FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE



NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



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

In March 1997, Wells Real Estate
Fund IX, L.P. (Fund IX) entered into a Georgia general partnership with Wells Real Estate Fund X, L.P. (Fund X) to form Fund IX and Fund X Associates (Fund IX-X Associates) for the purpose of acquiring,
developing, operating, and selling real properties. On March 20, 1997, Fund IX contributed a 5.62-acre tract of real property in Knoxville, Tennessee, and improvements thereon to Fund IX-X Associates on which an approximately 84,000 square
foot, three-story office building, the Alstom Power-Knoxville Building, was constructed and commenced operations. On February 13, 1998, Fund IX-X Associates purchased an approximate 107,000 square foot, two-story office building, 1315 West
Century Drive, in Louisville, Colorado. On March 20, 1998, Fund IX-X Associates purchased an approximately 52,000 square foot, three-story office building, the 360 Interlocken Building, in Broomfield, Colorado. On June 11, 1998,
Fund IX-X Associates was amended and restated as The Fund IX, Fund X, Fund XI and REIT Joint Venture (the Joint Venture) upon admitting Wells Real Estate Fund XI, L.P. (Fund XI) and Wells Operating Partnership,
L.P. (Wells OP). Wells OP is a Delaware limited partnership with Wells Real Estate Investment Trust, Inc. (Wells REIT) serving as its general partner. Wells REIT is a Maryland corporation that qualifies as a real estate
investment trust. On June 24, 1998, the Joint Venture purchased an approximately 57,000 square foot, one-story office building, the Avaya Building, in Oklahoma City, Oklahoma. On April 1, 1998, Fund X purchased an approximately 108,000
square foot, one-story office and warehouse building, the Iomega Building, in Ogden, Utah. In 1998, Fund X contributed the Iomega Building to the Joint Venture. Ownership interests were recomputed based on the relative cumulative capital
contributions from the joint venture partners.

On March 15, 2005, the Joint Venture sold the Alstom Power  Knoxville Building to an unrelated
third party for a gross sales price of $12,000,000. As a result of the sale, the Joint Venture received net sale proceeds of approximately $11,646,000 and recognized a gain of approximately $5,032,000.

On December 22, 2006, the Joint Venture sold 1315 West Century Drive to an unrelated third party for a gross sales price of $8,325,000. As a result of the sale, the
Joint Venture received net sale proceeds of approximately $8,060,000. As of September 30, 2006, the Joint Venture recognized an impairment loss of approximately $354,000 in order to reduce the carrying value of 1315 West Century Drive to its
estimated fair value, less costs to sell, and recognized an additional loss on sale of approximately $142,000.



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

Basis of
Presentation

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

The Joint Ventures leases typically include renewal options, escalation provisions, and provisions requiring tenants to reimburse the Joint
Venture for a pro-rata share of operating costs incurred. All of the Joint Ventures



Page F-26



---

leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases based on
the Consumer Price Index) is recognized on a straight-line basis over the terms of the respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheets.

Lease termination income is recognized when the tenant loses the right to lease the space and the Joint Venture has satisfied all obligations under the related lease or
lease termination agreement.

The Joint Venture records the sale of real estate assets pursuant to the provisions of Statement of Financial Accounting
Standards (SFAS) No. 66, Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the risks and rewards of
ownership without significant continuing involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.

Real Estate Assets

Real estate assets are stated at cost, less
accumulated depreciation. Amounts capitalized to real estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which extend the useful life of the related asset. We consider
the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants intention to terminate a lease, undepreciated tenant
improvements are written off to lease termination expense. All repairs and maintenance are expensed as incurred.

The estimated useful lives of the Joint
Ventures real estate assets by class are provided below:



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

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts
of the real estate assets owned by the Joint Venture may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating
cash flows expected from the use of the asset and its 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 such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. In the third quarter of 2006, the Joint Venture recognized an impairment loss of
approximately $354,000 in order to reduce the carrying value of 1315 West Century Drive to its fair value, less costs to sell, as a result of a change in managements intended holding period for this asset.

In the third quarter of 2004, the Joint Venture completed a review of its real estate depreciation by performing an analysis of the components of each property type in
an effort to determine weighted-average composite useful lives of its real estate assets. As a result of this review, the Joint Venture changed its estimate of the weighted-average composite useful lives for all building assets. Effective
July 1, 2004, for all building assets, the Joint Venture extended the weighted-average composite useful life from 25 years to 40 years. The change resulted in



Page F-27



---

an increase to net income of approximately $263,964 for the year ended December 31, 2004. We believe the change more appropriately reflects the
estimated useful lives of the building assets and is consistent with prevailing industry practice.

Cash and Cash Equivalents

The Joint Venture considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include
cash and short-term investments. Short-term investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.

Tenant Receivables, net

Tenant receivables are comprised of tenant receivables and straight-line rent receivables. Management assesses the
collectibility of tenant receivables on an ongoing basis and provides for allowances as such balances, or portions thereof, become uncollectible. Upon receiving notification of a tenants intention to terminate a lease, unamortized
straight-line rent receivables are written off to lease termination expense. No such allowances have been recorded as of December 31, 2006 or 2005.

Deferred Leasing Costs, net

Deferred leasing costs reflect costs incurred to procure operating leases, which are capitalized and amortized
on a straight-line basis over the terms of the respective leases. The remaining unamortized balance of deferred leasing costs will be amortized over a weighted-average period of approximately three years. Upon receiving notification of a
tenants intention to terminate a lease, unamortized deferred leasing costs are written-off to lease termination expense.

Other Assets

Other assets as of December 31, 2006 and 2005 is comprised of the following items:



|                             |  |      |         |      |   |        
|---------------------------- |  | ---- | ------- | ---- | - | -------
|                             |  | 2006 |         | 2005
|Refundable security deposits |  | $    | 106,672 |      | $ | 102,253
|Prepaid expenses             |  |      | 8,426   |      |   | 2,135  
|Interest receivable          |  |      | 2,239   |      |   | 9,479  
|                             |  |      |         |      |   |        
|Total                        |  | $    | 117,337 |      | $ | 113,867
|                             |  |      |         |      |   |        

Refundable security deposits represent cash deposits received from tenants. Pursuant to the respective leases, the
Joint Venture may apply such balances toward unpaid receivable balances or property damages, where applicable, and is obligated to refund any residual balances to the tenants upon the expiration of the related lease terms. Prepaid expenses are
primarily comprised of prepaid insurance and contract labor costs. Interest receivable represents interest earned during the period presented, which will be received in the following month. Balances without a future economic benefit are written off
as they are identified.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the joint venture partners based on their respective ownership interests as determined by relative cumulative capital contributions, as defined.
For the periods presented, Fund IX, Fund X, Fund XI, and Wells OP held ownership interests in the Joint Venture of approximately 39%, 48%, 9%, and 4% respectively. Net cash from operations is generally distributed to the joint venture on a quarterly
basis.



Page F-28



---

Income Taxes

The
Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners of Fund IX, Fund X, Fund XI, and Wells OP are required to include their respective share of
profits and losses from the Joint Venture in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of
a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Joint Venture for the year ended December 31, 2006. The adoption of this pronouncement has not had a material
impact on the Joint Ventures financial statements.

In July 2006, the FASB issued Financial Accounting Standards Board Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain
tax positions. FIN No. 48 will be effective for the Joint Venture beginning January 1, 2007. The Joint Venture is currently assessing provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however,
does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS
No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS
No. 154 changes the method to account for and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income
during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods
financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change
the transition provisions of any of the existing accounting pronouncements. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.



|3. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

The joint venture partners, Fund IX, Fund X, Fund XI, and Wells OP are all parties to individual property management and leasing agreements with Wells
Management Company, Inc. (Wells Management), an affiliate of each of their respective general partners.



Page F-29



---

The various fees payable under each of the respective agreements are summarized as
follows:



|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |  | Management Services                                                                                                      |  | Leasing Services                                                                                                                                                                                                                |  | Management and LeasingServices Industrial
andCommercial properties leasedon a net basis for ten years ormore                                                     
|Fund IX  |  | 3% of gross revenues collected monthly                                                                                   |  | Initial lease up fee for newly constructed properties based on market rate charged for similar services for similar properties in the same geographic
area. Recurring fee based on 3% of gross revenues collected monthly.      |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly.
|Fund X   |  | 3% of gross revenues collected monthly                                                                                   |  | Initial lease up fee for newly constructed properties based on market rate charged for similar services for similar properties in the same geographic
area. Recurring fee based on 3% of gross revenues collected monthly.      |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly.
|Fund XI  |  | 2.5% of gross revenues collected monthly                                                                                 |  | Initial lease up fee based for newly constructed properties based on market rate charged for similar services for similar properties in the same
geographic area. Recurring fee based on 2% of gross revenues collected monthly |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly 
|Wells OP |  | Lesser of 4.5% of gross revenues generally paid over the life of the lease or .6% of Net Asset Value calculated annually |  | Not applicable                                                                                                                                                                                                                  |  | Not applicable                                                                                                                                                    

Management and leasing fees are recognized in accordance with the terms of the aforementioned agreements, weighted
based on joint venture partners respective ownership interests in the Joint Venture. During the years ended December 31, 2006, 2005, and 2004, the Joint Venture incurred management and leasing fee expenses that are payable to Wells Management
and its affiliates of $84,054, $127,392, and $232,074, respectively, portions of which are included in income (loss) from discontinued operations in the accompanying statements of operations.

Administration Reimbursements

Wells Management and its affiliates
perform certain administrative services for the Joint Venture, relating to accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated among these entities based on the amount of
time spent on the respective entities by individual personnel. In the opinion of management, this allocation is a reasonable estimation of such expenses. During 2006, 2005, and 2004, the Joint Venture reimbursed $48,520, $79,832, and $90,107,
respectively, to Wells Management and its affiliates for these services, portions of which are included in income (loss) from discontinued operations in the accompanying statements of operations.



Page F-30



---

Assignment of Related-Party Agreements

Wells Capital (Wells Capital) and Wells Management assigned rights to receive certain fees and reimbursements with Wells OP to Wells Advisory Services I, LLC (WASI). WASI assigned its rights to
receive certain fees and reimbursements to Wells Real Estate Advisory Services, Inc. (WREAS), a wholly owned subsidiary of WASI. Accordingly, the Joint Venture began paying property management fees and administrative reimbursements to
WREAS.

Due to Affiliates

As of December 31, 2006
and December 31, 2005, due to affiliates balances reflect amounts due to WREAS and/or Wells Management for the following items:



|                              |  |      |       |      |   |      
|----------------------------- |  | ---- | ----- | ---- | - | -----
|                              |  | 2006 |       | 2005
|Administrative reimbursements |  | $    | 1,590 |      | $ | 4,549
|Management and leasing fees   |  |      | 0     |      |   | 2,659
|                              |  |      |       |      |   |      
|                              |  | $    | 1,590 |      | $ | 7,208
|                              |  |      |       |      |   |      



|4. | DISCONTINUED OPERATIONS
|-- | -----------------------

In accordance with SFAS No. 144, the
Joint Venture has classified the results of operations related to the office components of the Alstom Power  Knoxville Building, which was sold on March 15, 2005, and 1315 West Century Drive, which was sold on December 22, 2006, as
discontinued operations in the accompanying statements of operations. The details comprising income (loss) from discontinued operations are presented below:



|                                           |  |      |            |   |      |   |           |  |   |          
|------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- |  | - | ---------
|                                           |  | 2006 |            |   | 2005 |   | 2004     
|Rental income                              |  | $    | 0          |   |      | $ | 676,887   |  | $ | 2,359,886
|Tenant reimbursements                      |  |      | 0          |   |      |   | 290,908   |  |   | 561,863  
|Interest and other income                  |  |      | 5,122      |   |      |   | 0         |  |   | 3,149    
|                                           |  |      |            |   |      |   |           |  |   |          
|Total property revenues                    |  |      | 5,122      |   |      |   | 967,795   |  |   | 2,924,898
|                                           |  |      |           
|Property operating costs                   |  |      | 351,967    |   |      |   | 441,876   |  |   | 656,285  
|Management and leasing fees                |  |      | 6,308      |   |      |   | 42,374    |  |   | 141,335  
|Depreciation                               |  |      | 152,342    |   |      |   | 226,150   |  |   | 602,034  
|Amortization                               |  |      | 0          |   |      |   | 15,424    |  |   | 59,519   
|General and administrative                 |  |      | 31,545     |   |      |   | 65,115    |  |   | 61,109   
|                                           |  |      |            |   |      |   |           |  |   |          
|Total expenses                             |  |      | 542,162    |   |      |   | 790,939   |  |   | 1,520,282
|                                           |  |      |            |   |      |   |           |  |   |          
|Operating income (loss)                    |  |      | (537,040   | ) |      |   | 176,856   |  |   | 1,404,616
|Impairment loss                            |  |      | (354,326   | ) |      |   | 0         |  |   | 0        
|Gain (loss) on disposition                 |  |      | (142,018   | ) |      |   | 5,031,962 |  |   | 0        
|                                           |  |      |            |   |      |   |           |  |   |          
|Income (loss) from discontinued operations |  | $    | (1,033,384 | ) |      | $ | 5,208,818 |  | $ | 1,404,616
|                                           |  |      |            |   |      |   |           |  |   |          



Page F-31



---

|5. | RENTAL INCOME
|-- | -------------

The future minimum rental income due to the Joint
Venture under noncancelable operating leases as of December 31, 2006 follows:



|                        |  |   |          
|----------------------- |  | - | ---------
|Year ended December 31: |  |   |          
|2007                    |  | $ | 2,203,092
|2008                    |  |   | 1,277,673
|2009                    |  |   | 515,565  
|2010                    |  |   | 250,394  
|2011                    |  |   | 111,180  
|Thereafter              |  |   | 56,005   
|                        |  |   |          
|                        |  | $ | 4,413,909
|                        |  |   |          

Three tenants generated approximately 30%, 29%, and 28% of rental income for the year ended December 31,
2006, and four tenants will generate approximately 35%, 21%, 15%, and 11% of future minimum rental income.



|6. | SUBSEQUENT EVENT
|-- | ----------------

On January 31, 2007, the Joint Venture sold the
Iomega Building to an unrelated third party for a gross sales price of $4,867,000. As a result of the sale, the Joint Venture received net sale proceeds of approximately $4,685,000 and recognized a gain of approximately $178,000, which may be
adjusted as additional information becomes available in subsequent periods. As of December 31, 2006, the carrying value of the Iomega Building was approximately $4,518,000.



Page F-32



---

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                            |  |              |  |              |           |                                               |   |                                               |      |                             |                            |                      |                          |               |       |   |            |  |   |   |  |   |            |  |   |           |  |      |  |        
|--------------------------- |  | ------------ |  | ------------ | --------- | --------------------------------------------- | - | --------------------------------------------- | ---- | --------------------------- | -------------------------- | -------------------- | ------------------------ | ------------- | ----- | - | ---------- |  | - | - |  | - | ---------- |  | - | --------- |  | ---- |  | -------
|                            |  |              |  | Initial Cost |           | CostsCapitalized Subsequent To
Acquisition(e) |   | Gross Carrying Amount as of December 31, 2006 |      | Accumulated Depreciation(d) |                            | Date of Construction |                          | Date Acquired
|Description                 |  | Encumbrances |  | Land         |           | Buildings and Improvements                    |   |                                               | Land |                             | Buildings and Improvements |                      | Construction in Progress |               | Total |   |            | 
|AVAYA BUILDING(A)           |  | None         |  | $            | 1,051,138 |                                               | $ | 4,461,334                                     |      | $                           | 118,866                    |                      | $                        | 1,051,138     |       | $ | 4,580,200  |  | $ | 0 |  | $ | 5,631,338  |  | $ | 1,369,971 |  | 1998 |  | 6/24/98
|360 INTERLOCKEN BUILDING(B) |  | None         |  |              | 1,650,070 |                                               |   | 6,917,274                                     |      |                             | 932,856                    |                      |                          | 1,650,070     |       |   | 7,850,130  |  |   | 0 |  |   | 9,500,200  |  |   | 2,386,797 |  | 1996 |  | 3/20/98
|IOMEGA BUILDING(C)          |  | None         |  |              | 641,988   |                                               |   | 5,292,262                                     |      |                             | 213,833                    |                      |                          | 641,988       |       |   | 5,506,095  |  |   | 0 |  |   | 6,148,083  |  |   | 1,629,671 |  | 1998 |  | 4/01/98
|                            |  |              |  |              |           |                                               |   |                                               |      |                             |                            |                      |                          |               |       |   |            |  |   |   |  |   |            |  |   |           |  |      |  |        
|Total                       |  |              |  | $            | 3,343,196 |                                               | $ | 16,670,870                                    |      | $                           | 1,265,555                  |                      | $                        | 3,343,196     |       | $ | 17,936,425 |  | $ | 0 |  | $ | 21,279,621 |  | $ | 5,386,439 |  |      |  |        
|                            |  |              |  |              |           |                                               |   |                                               |      |                             |                            |                      |                          |               |       |   |            |  |   |   |  |   |            |  |   |           |  |      |  |        



| | (a) | The Avaya Building is a one-story office building located in Oklahoma City, Oklahoma.
| | --- | -------------------------------------------------------------------------------------



| | (b) | The 360 Interlocken Building
is a three-story office building located in Broomfield, Colorado.
| | --- | ----------------------------------------------------------------------------------------------



| | (c) | The Iomega Building is a one-story office and warehouse building located in Ogden, Utah.
| | --- | ----------------------------------------------------------------------------------------



| | (d) | Buildings, land improvements, building improvements, and tenant improvements are depreciated using
the straight-line method over 40 years, 20 years, 5 to 25 years, and the shorter of the economic life or corresponding lease terms, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Includes acquisition and advisory fees and acquisition expense reimbursements applied at acquisition.
| | --- | -----------------------------------------------------------------------------------------------------



Page F-33



---

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                             |  |      |             |   |                          |   |            |  
|---------------------------- |  | ---- | ----------- | - | ------------------------ | - | ---------- | -
|                             |  | Cost |             |   | Accumulated Depreciation |  
|BALANCE AT DECEMBER 31, 2003 |  | $    | 39,943,030  |   |                          | $ | 8,484,278  |  
|                             |  |     
|Additions                    |  |      | 308,577     |   |                          |   | 1,177,848  |  
|                             |  |      |             |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2004 |  |      | 40,251,607  |   |                          |   | 9,662,126  |  
|                             |  |     
|Additions                    |  |      | 79,675      |   |                          |   | 681,018    |  
|Dispositions                 |  |      | (8,133,347  | ) |                          |   | (3,050,321 | )
|                             |  |      |             |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2005 |  |      | 32,197,935  |   |                          |   | 7,292,823  |  
|                             |  |     
|Additions                    |  |      | 168,442     |   |                          |   | 624,402    |  
|Dispositions                 |  |      | (10,732,430 | ) |                          |   | (2,530,786 | )
|Impairments(1)               |  |      | (354,326    | ) |                          |   | 0          |  
|                             |  |      |             |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2006 |  | $    | 21,279,621  |   |                          | $ | 5,386,439  |  
|                             |  |      |             |   |                          |   |            |  



| | (1) | As of September 30,
2006, The Fund IX, Fund X, Fund XI, and REIT Joint Venture wrote-down the basis of 1315 West Century Drive to approximate a recently contracted sale price as a result of reducing the intended holding period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-34



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund X and Fund XI Associates:

We
have audited the accompanying balance sheet of Fund X and Fund XI Associates (the Joint Venture) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended
December 31, 2006. These financial statements are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint
Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fund X and Fund XI Associates as of
December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-35



---

FUND X AND FUND XI ASSOCIATES



BALANCE SHEETS

DECEMBER 31, 2006 AND 2005 (UNAUDITED)

ASSETS



|                             |  |      |           |                  |   |          
|---------------------------- |  | ---- | --------- | ---------------- | - | ---------
|                             |  | 2006 |           | 2005 (unaudited)
|Investment in joint ventures |  | $    | 1,653,323 |                  | $ | 1,681,181
|Due from joint ventures      |  |      | 13,733    |                  |   | 21,021   
|                             |  |      |           |                  |   |          
|Total assets                 |  | $    | 1,667,056 |                  | $ | 1,702,202
|                             |  |      |           |                  |   |          

LIABILITIES AND PARTNERS CAPITAL



|                                        |  |   |           |  |   |          
|--------------------------------------- |  | - | --------- |  | - | ---------
|Liabilities:                            |  |   |           |  |   |          
|Partnership distributions payable       |  | $ | 13,733    |  | $ | 21,021   
|                                        |  |  
|Partners capital:                      |  |   |           |  |   |          
|Wells Real Estate Fund X, L.P.          |  |   | 959,129   |  |   | 975,290  
|Wells Real Estate Fund XI, L.P.         |  |   | 694,194   |  |   | 705,891  
|                                        |  |   |           |  |   |          
|Total partners capital                 |  |   | 1,653,323 |  |   | 1,681,181
|                                        |  |   |           |  |   |          
|Total liabilities and partners capital |  | $ | 1,667,056 |  | $ | 1,702,202
|                                        |  |   |           |  |   |          

See accompanying notes.



Page F-36



---

FUND X AND FUND XI ASSOCIATES



STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005 (UNAUDITED), AND 2004 (UNAUDITED)



|                                   |  |      |        |                  |   |                  |  |   |         |  
|---------------------------------- |  | ---- | ------ | ---------------- | - | ---------------- |  | - | ------- | -
|                                   |  | 2006 |        | 2005 (unaudited) |   | 2004 (unaudited) | 
|EQUITY IN INCOME OF JOINT VENTURES |  | $    | 53,716 |                  | $ | 49,867           |  | $ | 110,273 |  
|                                   |  |      |       
|EXPENSES                           |  |      | 0      |                  |   | 0                |  |   | (519    | )
|                                   |  |      |        |                  |   |                  |  |   |         |  
|NET INCOME                         |  | $    | 53,716 |                  | $ | 49,867           |  | $ | 109,754 |  
|                                   |  |      |        |                  |   |                  |  |   |         |  

See accompanying notes.



Page F-37



---

FUND X AND FUND XI ASSOCIATES



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005 (UNAUDITED), AND 2004 (UNAUDITED)



|                                       |  |                               |           |   |                                |   |         |                         |  |   |           |  
|-------------------------------------- |  | ----------------------------- | --------- | - | ------------------------------ | - | ------- | ----------------------- |  | - | --------- | -
|                                       |  | Wells RealEstate Fund X, L.P. |           |   | Wells RealEstate Fund XI, L.P. |   |         | Total Partners Capital | 
|BALANCE, DECEMBER 31, 2003             |  | $                             | 1,041,012 |   |                                | $ | 753,622 |                         |  | $ | 1,794,634 |  
|                                       |  |                               |          
|Net income                             |  |                               | 63,671    |   |                                |   | 46,083  |                         |  |   | 109,754   |  
|Partnership distributions              |  |                               | (113,975  | ) |                                |   | (82,655 | )                       |  |   | (196,630  | )
|                                       |  |                               |           |   |                                |   |         |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2004 (UNAUDITED) |  |                               | 990,708   |   |                                |   | 717,050 |                         |  |   | 1,707,758 |  
|                                       |  |                               |          
|Net income                             |  |                               | 28,929    |   |                                |   | 20,938  |                         |  |   | 49,867    |  
|Partnership distributions              |  |                               | (44,347   | ) |                                |   | (32,097 | )                       |  |   | (76,444   | )
|                                       |  |                               |           |   |                                |   |         |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2005 (UNAUDITED) |  |                               | 975,290   |   |                                |   | 705,891 |                         |  |   | 1,681,181 |  
|                                       |  |                               |          
|Net income                             |  |                               | 31,162    |   |                                |   | 22,554  |                         |  |   | 53,716    |  
|Partnership distributions              |  |                               | (47,323   | ) |                                |   | (34,251 | )                       |  |   | (81,574   | )
|                                       |  |                               |           |   |                                |   |         |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2006             |  | $                             | 959,129   |   |                                | $ | 694,194 |                         |  | $ | 1,653,323 |  
|                                       |  |                               |           |   |                                |   |         |                         |  |   |           |  

See accompanying notes.



Page F-38



---

FUND X AND FUND XI ASSOCIATES



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005 (UNAUDITED), AND 2004 (UNAUDITED)



|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|----------------------------------------------------------------------------------- |  | ---- | ------- | - | ---------------- | - | ------- | ---------------- |  | - | -------- | -
|                                                                                    |  | 2006 |         |   | 2005 (unaudited) |   |         | 2004 (unaudited) | 
|CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|Net income                                                                          |  | $    | 53,716  |   |                  | $ | 49,867  |                  |  | $ | 109,754  |  
|Operating distributions received from joint ventures                                |  |      | 88,862  |   |                  |   | 92,992  |                  |  |   | 203,591  |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |      |         |   |                  |   |         |                  |  |   |          |  
|Equity in income of joint ventures                                                  |  |      | (53,716 | ) |                  |   | (49,867 | )                |  |   | (110,273 | )
|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|Net cash provided by operating activities                                           |  |      | 88,862  |   |                  |   | 92,992  |                  |  |   | 203,072  |  
|                                                                                    |  |      |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |      |         |   |                  |   |         |                  |  |   |          |  
|Operating distributions to joint venture partners in excess of accumulated earnings |  |      | (88,862 | ) |                  |   | (92,992 | )                |  |   | (203,072 | )
|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|Net cash used in financing activities                                               |  |      | (88,862 | ) |                  |   | (92,992 | )                |  |   | (203,072 | )
|                                                                                    |  |      |        
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                             |  |      | 0       |   |                  |   | 0       |                  |  |   | 0        |  
|                                                                                    |  |      |        
|CASH AND CASH EQUIVALENTS, beginning of year                                        |  |      | 0       |   |                  |   | 0       |                  |  |   | 0        |  
|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of year                                              |  | $    | 0       |   |                  | $ | 0       |                  |  | $ | 0        |  
|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  
|                                                                                    |  |      |        
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:              |  |      |         |   |                  |   |         |                  |  |   |          |  
|Partnership distributions payable                                                   |  | $    | 13,733  |   |                  | $ | 21,021  |                  |  | $ | 37,568   |  
|                                                                                    |  |      |         |   |                  |   |         |                  |  |   |          |  

See accompanying notes.



Page F-39



---

FUND X AND FUND XI ASSOCIATES



NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005 (UNAUDITED), AND 2004 (UNAUDITED)



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

On July 15, 1998, Wells Real Estate
Fund X, L.P. (Fund X) and Wells Real Estate Fund XI, L.P. (Fund XI), entered into a Georgia general partnership to create Fund X and Fund XI Associates (the Joint Venture). The general partners of Fund X and
Fund XI are Leo F. Wells, III and Wells Partners, L.P., a private Georgia limited partnership. The Joint Venture was formed for the purpose of acquiring, developing, owning, operating, and selling real properties.

In July 1998, Wells Operating Partnership, L.P. (Wells OP) entered into a joint venture agreement with Wells Development Corporation, referred to as
Wells/Fremont Associates, which acquired an approximate 58,000 square foot two-story manufacturing and office buildings, 47320 Kato Road, located in Fremont, California. During 1998, the Joint Venture acquired Wells Development Corporations
interest in Wells/Fremont Associates, which resulted in the Joint Venture becoming a joint venture partner with Wells OP.

In July 1998, Wells OP
entered into a joint venture agreement with Wells Development Corporation, referred to as Wells/Orange County Associates, which acquired an approximate 52,000 square foot warehouse and office building, the Cort Building, located in Fountain Valley,
California. During 1998, the Joint Venture acquired Wells Development Corporations interest in Wells/Orange County Associates, which resulted in the Joint Venture becoming a joint venture partner with Wells OP. On September 11, 2003,
Wells/Orange County Associates sold the Cort Building to an unrelated third party for a gross selling price of $5,770,000. As a result of the sale, the Joint Venture recognized a loss of approximately $213,000 and received net sale proceeds of
approximately $3,134,000. Wells/Orange County Associates wound up its affairs in 2004 by, among other things, collecting the outstanding receivables, satisfying outstanding payables, and distributing any residual cash balances to the joint venture
partners. We terminated Wells/Orange County Associates during 2005 in accordance with the relevant dissolution and termination provisions of the Georgia Uniform Partnership Act.



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

Basis of
Presentation

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in
Wells/Fremont Associates and Wells/Orange County Associates

The Joint Venture has evaluated Wells/Fremont Associates and Wells/Orange County Associates
and concluded that neither entity is a variable interest entity under the provisions of Financial Accounting Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN
No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements. The Joint Venture does not have control over the operations of Wells/Fremont Associates and Wells/Orange County



Page F-40



---

Associates, however, does exercise significant influence. Approval by the Joint Venture as well as the other joint venture partners is required for any major
decision or any action that would materially affect Wells/Fremont Associates and Wells/Orange County Associates, or their real property investments. Accordingly, upon applying the provisions of Statement of Financial Accounting Standard
(SFAS) No. 94, Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Joint Venture accounted for its
investment in Wells/Fremont Associates and Wells/Orange County Associates 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 Joint Venture. 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.

In the third quarter of 2004, Wells/Fremont
Associates completed a review of its real estate depreciation by performing an analysis of the components of each property type in an effort to determine weighted-average composite useful lives of its real estate assets. As a result of this review,
Wells/Fremont Associates changed its estimate of the weighted-average composite useful lives for all building assets. Effective July 1, 2004, for all building assets, Wells/Fremont Associates extended the weighted-average composite useful life
from 25 years to 40 years. The change resulted in an increase to net income of approximately $62,984 for the year ended December 31, 2004. We believe the change more appropriately reflects the estimated useful lives of the building assets and
is consistent with prevailing industry practice.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the joint venture partners based upon their respective ownership interests
as determined by relative cumulative capital contributions, as defined. For the periods presented, Fund X and Fund XI held ownership interests in the Joint Venture of approximately 58% and 42%, respectively. Net cash from operations is generally
distributed to the joint venture partners on a quarterly basis.

Income Taxes

The Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners of Fund X and Fund XI are required to include their
respective share of profits and losses from the Joint Venture in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements



Page F-41



---

in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after
November 15, 2006, and is effective for the Joint Venture for the year ended December 31, 2006. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the
relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be effective for the Joint Venture beginning January 1, 2007. The Joint Venture is currently assessing
provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20,
Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in accounting principles and corrections of errors.
Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance
does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of
the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting pronouncements. The adoption of this pronouncement has not
had a material impact on the Joint Ventures financial statements.



|3. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

The joint venture partners, Fund X and Fund XI are both parties to individual property management and leasing agreements with Wells Management Company,
Inc. (Wells Management), an affiliate of each of their respective general partners.



Page F-42



---

The various fees payable under each of the respective agreements are summarized as follows:



|        |  |                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|------- |  | ---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  | ManagementServices                       |  | Leasing Services                                                                                                                                                                                                                |  | Management and LeasingServices Industrial
andCommercial properties leased on anet basis for ten years or more                                                    
|Fund X  |  | 3% of gross revenues collected monthly   |  | Initial lease up fee for newly constructed properties based on market rate charged for similar services for similar properties in the same geographic
area. Recurring fee based on 3% of gross revenues collected monthly.      |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly.
|Fund XI |  | 2.5% of gross revenues collected monthly |  | Initial lease up fee based for newly constructed properties based on market rate charged for similar services for similar properties in the same
geographic area. Recurring fee based on 2% of gross revenues collected monthly |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly 

Management and leasing fees are recognized in accordance with the terms of the aforementioned agreements, weighted
based on joint venture partners respective ownership interests in the Joint Venture. Through its interests in Wells/Fremont Associates and Wells/Orange County Associates, the Joint Venture incurred management and leasing fees that are payable to
Wells Management and its affiliates of $4,907, $3,928, and $8,571 during the years ended December 31, 2006, 2005, and 2004, respectively.

Administration Reimbursements

Wells Management and its affiliates perform certain administrative services for the Joint Ventures
properties owned through Wells/Fremont Associates and Wells/Orange County Associates related to accounting, property management, and other administrative activities, and incurs the related expenses. Such expenses are allocated among the various
Wells Real Estate Funds based on estimates of the amount of time dedicated to each fund by individual administrative personnel. In the opinion of management, this allocation is a reasonable estimation of such expenses. Through its interests in
Wells/Fremont Associates and Wells/Orange County Associates, the Joint Venture reimbursed through its equity in income of joint ventures $3,114, $3,545, and $3,271 to Wells Management and its affiliates for these services during the years ended
December 31, 2006, 2005, and 2004, respectively.



Page F-43



---

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

The Joint Ventures investments
and approximate ownership percentages in Wells/Fremont Associates and Wells/ Orange County Associates as of December 31, 2006 and 2005 are presented below:



|                               |  |        |           |         |     |        |   |           |  |    
|------------------------------ |  | ------ | --------- | ------- | --- | ------ | - | --------- |  | ---
|                               |  | 2006   |           | 2005   
|                               |  | Amount |           | Percent |     | Amount |   | Percent  
|Wells/Orange County Associates |  | $      | 0         |         | 56% |        | $ | 0         |  | 56%
|Wells/Fremont Associates       |  |        | 1,653,323 |         | 23% |        |   | 1,681,181 |  | 23%
|                               |  |        |           |         |     |        |   |           |  |    
|                               |  | $      | 1,653,323 |         |     |        | $ | 1,681,181 |  |    
|                               |  |        |           |         |     |        |   |           |  |    

Roll-forwards of the Joint Ventures investment in Wells/Fremont Associates and Wells/Orange County
Associates for the years ended December 31, 2006 and 2005 are presented below:



|                                                |  |      |           |   |      |   |           |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                |  | 2006 |           |   | 2005 |  
|Investment in joint ventures, beginning of year |  | $    | 1,681,181 |   |      | $ | 1,707,758 |  
|Equity in income of joint ventures              |  |      | 53,716    |   |      |   | 49,867    |  
|Distributions from joint ventures               |  |      | (81,574   | ) |      |   | (76,444   | )
|                                                |  |      |           |   |      |   |           |  
|Investment in joint ventures, end of year       |  | $    | 1,653,323 |   |      | $ | 1,681,181 |  
|                                                |  |      |           |   |      |   |           |  

Condensed financial information for the joint ventures in which the Joint Venture held an interest as of
December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005, and 2004 is presented below:



|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          
|------------------------------ |  | ----------------- | --------- | ----------------- | - | ----------------- |  | ----------------- | ------- | ----------------- | - | ----------------- |  | - | --------- |  | - | ---------
|                               |  | Total Assets      |           | Total Liabilities |   | Total Equity     
|                               |  | December 31, 2006 |           | December 31, 2005 |   | December 31, 2006 |  | December 31, 2005 |         | December 31, 2006 |   | December 31, 2005
|Wells/Fremont Associates       |  | $                 | 7,517,454 |                   | $ | 7,583,387         |  | $                 | 167,997 |                   | $ | 110,095           |  | $ | 7,349,457 |  | $ | 7,473,292
|Wells/Orange County Associates |  |                   | 0         |                   |   | 0                 |  |                   | 0       |                   |   | 0                 |  |   | 0         |  |   | 0        
|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          
|                               |  | $                 | 7,517,454 |                   | $ | 7,583,387         |  | $                 | 167,997 |                   | $ | 110,095           |  | $ | 7,349,457 |  | $ | 7,473,292
|                               |  |                   |           |                   |   |                   |  |                   |         |                   |   |                   |  |   |           |  |   |          



|                               |  |                                 |         |                                          |   |         |                                           |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |    
|------------------------------ |  | ------------------------------- | ------- | ---------------------------------------- | - | ------- | ----------------------------------------- | ---- | ------- | ------------------------------- | - | ------- |  | - | ------- |  | ---- | ------- | ---- |  | - | ---- |  | ---- | - | ---- | - | ------- | - |  | - | ------- |  | - | ------- |  | - | ------- | ---
|                               |  | Total Revenues                  |         | Income (Loss) From Continuing Operations |   |         | Income (Loss) From DiscontinuedOperations |      |         | Net Income (Loss)               |  
|                               |  | For The Years EndedDecember 31, |         | For The Years EndedDecember 31,          |   |         | For The YearsEndedDecember 31,            |      |         | For The Years EndedDecember 31, |  
|                               |  | 2006                            |         | 2005                                     |   | 2004    |                                           | 2006 |         | 2005                            |   | 2004    |  |   | 2006    |  | 2005 |         | 2004 |  |   | 2006 |  | 2005 |   | 2004 |  
|Wells/Orange County Associates |  | $                               | 0       |                                          | $ | 0       |                                           | $    | 0       |                                 | $ | 0       |  | $ | 0       |  | $    | (7,573  | )    |  | $ | 0    |  | $    | 0 |      | $ | (18,944 | ) |  | $ | 0       |  | $ | 0       |  | $ | (26,517 | )  
|Wells/Fremont Associates       |  |                                 | 501,941 |                                          |   | 475,989 |                                           |      | 880,778 |                                 |   | 238,781 |  |   | 221,672 |  |      | 556,594 |      |  |   | 0    |  |      | 0 |      |   | 0       |   |  |   | 238,781 |  |   | 221,672 |  |   | 556,594 | (1)
|                               |  |                                 |         |                                          |   |         |                                           |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |    
|                               |  | $                               | 501,941 |                                          | $ | 475,989 |                                           | $    | 880,778 |                                 | $ | 238,781 |  | $ | 221,672 |  | $    | 549,021 |      |  | $ | 0    |  | $    | 0 |      | $ | (18,944 | ) |  | $ | 238,781 |  | $ | 221,672 |  | $ | 530,077 |    
|                               |  |                                 |         |                                          |   |         |                                           |      |         |                                 |   |         |  |   |         |  |      |         |      |  |   |      |  |      |   |      |   |         |   |  |   |         |  |   |         |  |   |         |    



| | (1) | Effective July 1, 2004, Wells/Fremont Associates extended the weighted-average composite useful
life for all building assets from 25 years to 40 years, which resulted in an increase to net income for the year ended December 31, 2004 of approximately $62,984. Management believes that this change more appropriately reflects the estimated
useful lives of real estate assets and is consistent with prevailing industry practice.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due from Joint Ventures

Due from joint ventures as of December 31, 2006 and 2005 represents the Joint Ventures share of operating cash to be distributed from the Wells/Fremont
Associates for the fourth quarters of 2006 and 2005, respectively.



Page F-44



---

REPORT OF INDEPENDENT AUDITORS

The General Partners of

Wells/Fremont Associates:

We have audited the accompanying balance sheet of Wells/Fremont Associates (the Joint
Venture) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended December 31, 2006. Our audit also included the financial statement schedule listed in the index at
Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint
Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wells/Fremont Associates as of
December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-45



---

WELLS/FREMONT ASSOCIATES



BALANCE SHEETS

DECEMBER 31, 2006 AND 2005 (UNAUDITED)

ASSETS



|                                                                                                                        |  |      |           |                  |   |          
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---------------- | - | ---------
|                                                                                                                        |  | 2006 |           | 2005 (unaudited)
|Real estate assets, at cost:                                                                                            |  |      |           |                  |   |          
|Land                                                                                                                    |  | $    | 2,219,251 |                  | $ | 2,219,251
|Building, less accumulated depreciation of $2,112,016 and $1,952,456 at December 31, 2006 and 2005, respectively        |  |      | 5,026,143 |                  |   | 5,185,703
|                                                                                                                        |  |      |           |                  |   |          
|Total real estate assets                                                                                                |  |      | 7,245,394 |                  |   | 7,404,954
|Cash and cash equivalents                                                                                               |  |      | 163,183   |                  |   | 105,050  
|Tenant receivables                                                                                                      |  |      | 42,065    |                  |   | 30,380   
|Deferred leasing costs, less accumulated amortization of $20,144 and $9,216 at December 31, 2006 and 2005, respectively |  |      | 61,998    |                  |   | 39,126   
|Other assets                                                                                                            |  |      | 4,814     |                  |   | 3,877    
|                                                                                                                        |  |      |           |                  |   |          
|Total assets                                                                                                            |  | $    | 7,517,454 |                  | $ | 7,583,387
|                                                                                                                        |  |      |           |                  |   |          

LIABILITIES AND PARTNERS' CAPITAL



|                                        |  |   |           |  |   |          
|--------------------------------------- |  | - | --------- |  | - | ---------
|Liabilities:                            |  |   |           |  |   |          
|Accounts payable and accrued expenses   |  | $ | 20,083    |  | $ | 11,897   
|Due to affiliates                       |  |   | 3,591     |  |   | 2,639    
|Deferred income                         |  |   | 83,278    |  |   | 2,115    
|Partnership distributions payable       |  |   | 61,045    |  |   | 93,444   
|                                        |  |   |           |  |   |          
|Total liabilities                       |  |   | 167,997   |  |   | 110,095  
|                                        |  |  
|Partners capital:                      |  |   |           |  |   |          
|Fund X and Fund XI Associates           |  |   | 1,653,323 |  |   | 1,681,180
|Wells Operating Partnership, L.P.       |  |   | 5,696,134 |  |   | 5,792,112
|                                        |  |   |           |  |   |          
|Total partners capital                 |  |   | 7,349,457 |  |   | 7,473,292
|                                        |  |   |           |  |   |          
|Total liabilities and partners capital |  | $ | 7,517,454 |  | $ | 7,583,387
|                                        |  |   |           |  |   |          

See accompanying notes.



Page F-46



---

WELLS/FREMONT ASSOCIATES



STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006 AND 2005 (UNAUDITED) AND 2004 (UNAUDITED)



|                            |  |      |         |                  |   |                  |  |   |        
|--------------------------- |  | ---- | ------- | ---------------- | - | ---------------- |  | - | -------
|                            |  | 2006 |         | 2005 (unaudited) |   | 2004 (unaudited)
|REVENUES:                   |  |      |         |                  |   |                  |  |   |        
|Rental income               |  | $    | 474,881 |                  | $ | 444,897          |  | $ | 864,894
|Reimbursement income        |  |      | 27,060  |                  |   | 30,769           |  |   | 3,201  
|Interest and other income   |  |      | 0       |                  |   | 323              |  |   | 12,683 
|                            |  |      |         |                  |   |                  |  |   |        
|Total revenues              |  |      | 501,941 |                  |   | 475,989          |  |   | 880,778
|                            |  |      |        
|EXPENSES:                   |  |      |         |                  |   |                  |  |   |        
|Property operating costs    |  |      | 30,200  |                  |   | 27,698           |  |   | 12,267 
|Management and leasing fees |  |      | 21,809  |                  |   | 17,460           |  |   | 38,100 
|Depreciation                |  |      | 159,560 |                  |   | 159,560          |  |   | 222,543
|Amortization                |  |      | 5,198   |                  |   | 5,000            |  |   | 417    
|General and administrative  |  |      | 46,393  |                  |   | 44,599           |  |   | 50,857 
|                            |  |      |         |                  |   |                  |  |   |        
|Total expenses              |  |      | 263,160 |                  |   | 254,317          |  |   | 324,184
|                            |  |      |         |                  |   |                  |  |   |        
|NET INCOME                  |  | $    | 238,781 |                  | $ | 221,672          |  | $ | 556,594
|                            |  |      |         |                  |   |                  |  |   |        

See accompanying notes.



Page F-47



---

WELLS/FREMONT ASSOCIATES



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006 AND 2005 (UNAUDITED) AND 2004 (UNAUDITED)



|                                       |  |                               |           |   |                                   |   |           |                         |  |   |           |  
|-------------------------------------- |  | ----------------------------- | --------- | - | --------------------------------- | - | --------- | ----------------------- |  | - | --------- | -
|                                       |  | Fund X and Fund XI Associates |           |   | Wells Operating Partnership, L.P. |   |           | Total Partners' Capital | 
|BALANCE, DECEMBER 31, 2003 (UNAUDITED) |  | $                             | 1,766,911 |   |                                   | $ | 6,087,475 |                         |  | $ | 7,854,386 |  
|                                       |  |                               |          
|Net income                             |  |                               | 125,211   |   |                                   |   | 431,384   |                         |  |   | 556,594   |  
|Partnership distributions              |  |                               | (184,365  | ) |                                   |   | (635,182  | )                       |  |   | (819,546  | )
|                                       |  |                               |           |   |                                   |   |           |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2004 (UNAUDITED) |  |                               | 1,707,757 |   |                                   |   | 5,883,677 |                         |  |   | 7,591,434 |  
|                                       |  |                               |          
|Net income                             |  |                               | 49,867    |   |                                   |   | 171,805   |                         |  |   | 221,672   |  
|Partnership distributions              |  |                               | (76,444   | ) |                                   |   | (263,370  | )                       |  |   | (339,814  | )
|                                       |  |                               |           |   |                                   |   |           |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2005 (UNAUDITED) |  |                               | 1,681,180 |   |                                   |   | 5,792,112 |                         |  |   | 7,473,292 |  
|                                       |  |                               |          
|Net income                             |  |                               | 53,716    |   |                                   |   | 185,065   |                         |  |   | 238,781   |  
|Partnership distributions              |  |                               | (81,573   | ) |                                   |   | (281,043  | )                       |  |   | (362,616  | )
|                                       |  |                               |           |   |                                   |   |           |                         |  |   |           |  
|BALANCE, DECEMBER 31, 2006             |  | $                             | 1,653,323 |   |                                   | $ | 5,696,134 |                         |  | $ | 7,349,457 |  
|                                       |  |                               |           |   |                                   |   |           |                         |  |   |           |  

See accompanying notes.



Page F-48



---

WELLS/FREMONT ASSOCIATES



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006 AND 2005 (UNAUDITED) AND 2004 (UNAUDITED)



|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|----------------------------------------------------------------------------------- |  | ---- | -------- | - | ---------------- | - | -------- | ---------------- |  | - | -------- | -
|                                                                                    |  | 2006 |          |   | 2005 (unaudited) |   |          | 2004 (unaudited) | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |  |      |          |   |                  |   |          |                  |  |   |          |  
|Net income                                                                          |  | $    | 238,781  |   |                  | $ | 221,672  |                  |  | $ | 556,594  |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |      |          |   |                  |   |          |                  |  |   |          |  
|Depreciation                                                                        |  |      | 159,560  |   |                  |   | 159,560  |                  |  |   | 222,543  |  
|Amortization                                                                        |  |      | 10,928   |   |                  |   | 8,799    |                  |  |   | 417      |  
|Changes in assets and liabilities:                                                  |  |      |          |   |                  |   |          |                  |  |   |          |  
|(Increase) decrease in tenant receivables                                           |  |      | (11,685  | ) |                  |   | (24,842  | )                |  |   | 64,160   |  
|Increase in other assets                                                            |  |      | (937     | ) |                  |   | (2,470   | )                |  |   | (1,407   | )
|Increase (decrease) in accounts payable and accrued expenses                        |  |      | 8,186    |   |                  |   | (4,159   | )                |  |   | 16,056   |  
|Increase in due to affiliates                                                       |  |      | 952      |   |                  |   | 326      |                  |  |   | 273      |  
|Increase in deferred income                                                         |  |      | 81,163   |   |                  |   | 2,115    |                  |  |   | 0        |  
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|Net cash provided by operating activities                                           |  |      | 486,948  |   |                  |   | 361,001  |                  |  |   | 858,636  |  
|                                                                                    |  |      |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |      |          |   |                  |   |          |                  |  |   |          |  
|Investment in deferred leasing costs                                                |  |      | (33,800  | ) |                  |   | (23,342  | )                |  |   | (25,000  | )
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|Net cash used in investing activities                                               |  |      | (33,800  | ) |                  |   | (23,342  | )                |  |   | (25,000  | )
|                                                                                    |  |      |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |      |          |   |                  |   |          |                  |  |   |          |  
|Operating distributions to joint venture partners in excess of accumulated earnings |  |      | (395,015 | ) |                  |   | (413,372 | )                |  |   | (872,047 | )
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|Net cash used in financing activities                                               |  |      | (395,015 | ) |                  |   | (413,372 | )                |  |   | (872,047 | )
|                                                                                    |  |      |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                |  |      | 58,133   |   |                  |   | (75,713  | )                |  |   | (38,411  | )
|                                                                                    |  |      |         
|CASH AND CASH EQUIVALENTS, beginning of year                                        |  |      | 105,050  |   |                  |   | 180,763  |                  |  |   | 219,174  |  
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                              |  | $    | 163,183  |   |                  | $ | 105,050  |                  |  | $ | 180,763  |  
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  
|                                                                                    |  |      |         
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:              |  |      |          |   |                  |   |          |                  |  |   |          |  
|Partnership Distributions Payable                                                   |  | $    | 61,045   |   |                  | $ | 93,444   |                  |  | $ | 167,002  |  
|                                                                                    |  |      |          |   |                  |   |          |                  |  |   |          |  

See accompanying notes.



Page F-49



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WELLS/FREMONT ASSOCIATES



NOTES
TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005 (UNAUDITED), AND 2004 (UNAUDITED)



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

On July 15, 1998, Wells Real Estate
Fund X, L.P. (Fund X) and Wells Real Estate Fund XI, L.P. (Fund XI), entered into a Georgia general partnership to create Fund X and Fund XI Associates. The general partners of Fund X and Fund XI are Leo F. Wells, III
and Wells Partners, L.P., a private Georgia limited partnership. Fund X and Fund XI Associates was formed for the purpose of acquiring, developing, owning, operating, and selling real properties.

In July 1998, Wells Operating Partnership, L.P. (Wells OP) entered into a joint venture agreement with Wells Development Corporation, referred to as
Wells/Fremont Associates (the Joint Venture), which acquired an approximate 58,000 square foot two-story manufacturing and office buildings, 47320 Kato Road, located in Fremont, California. Wells OP is a Delaware limited partnership with
Wells Real Estate Investment Trust, Inc. (Wells REIT) serving as its general partner. Wells REIT is a Maryland corporation that qualifies as a real estate investment trust. During 1998, Fund X and Fund XI Associates acquired Wells
Development Corporations interest in the Joint Venture, which resulted in Fund X and Fund XI Associates becoming a joint venture partner with Wells OP.



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

Basis of
Presentation

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

The Joint Ventures leases typically include renewal options, escalation provisions and provisions requiring tenants to reimburse the Joint
Venture for a pro-rata share of operating costs incurred. All of the Joint Ventures leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases based on
the Consumer Price Index) is recognized on a straight-line basis over the terms of the respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheets.

Lease termination income is recognized when the tenant loses the right to lease the space and the Joint Venture has satisfied all obligations under the related lease or
lease termination agreement.

The Joint Venture records the sale of real estate assets pursuant to the provisions of Statement of Financial Accounting
Standards (SFAS) No. 66, Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the risks and rewards of
ownership without significant continuing involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.



Page F-50



---

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation. Amounts capitalized to real estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which
extend the useful life of the related asset. We consider the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants
intention to terminate a lease, undepreciated tenant improvements are written off to lease termination expense. All repairs and maintenance are expensed as incurred.

The estimated useful lives of the Joint Ventures real estate assets by class are provided below:



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

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts
of the real estate assets owned by the Joint Venture may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating
cash flows expected from the use of the asset and its 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 such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. The Joint Venture has determined that there has been no impairment in the
carrying value of any of the real estate assets held as of December 31, 2006.

In the third quarter of 2004, the Joint Venture completed a review of
its real estate depreciation by performing an analysis of the components of each property type in an effort to determine weighted-average composite useful lives of its real estate assets. As a result of this review, the Joint Venture changed its
estimate of the weighted-average composite useful lives for all building assets. Effective July 1, 2004, for all building assets, the Joint Venture extended the weighted-average composite useful life from 25 years to 40 years. The change
resulted in an increase to net income of approximately $62,984 for the year ended December 31, 2004. We believe the change more appropriately reflects the estimated useful lives of the building assets and is consistent with prevailing industry
practice. We believe the change more appropriately reflects the estimated useful lives of the building assets and is consistent with prevailing industry practice.

Cash and Cash Equivalents

The Joint Venture considers all highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash equivalents include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.

Tenant Receivables

Tenant receivables are comprised of tenant
receivables and straight-line rent receivables. Management assesses the collectibility of tenant receivables on an ongoing basis and provides for allowances as such balances, or portions thereof, become uncollectible. Upon receiving notification of
a tenants intention to terminate a lease, unamortized straight-line rent receivables are written off to lease termination expense. No such allowances have been recorded as of December 31, 2006 or 2005.



Page F-51



---

Deferred Leasing Costs, net

Deferred leasing costs reflect costs incurred to procure operating leases, which are capitalized and amortized on a straight-line basis over the terms of the respective leases. The remaining unamortized balance of deferred leasing costs
will be amortized over a weighted-average period of approximately three years. Upon receiving notification of a tenants intention to terminate a lease, unamortized deferred leasing costs are written-off to lease termination expense.

Other Assets

Other assets is comprised of prepaid
property insurance, which is recognized in the period in which the coverage is provided.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the joint venture partners based upon their respective ownership interests
as determined by relative cumulative capital contributions, as defined. For the periods presented, Fund X and Fund XI Associates and Wells OP held ownership interests in the Joint Venture of approximately 22% and 78%, respectively. Net cash from
operations is generally distributed to the joint venture partners on a quarterly basis.

Income Taxes

The Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners of Fund
X, Fund XI, and Wells OP are required to include their respective share of profits and losses from the Joint Venture in their individual income tax returns.

Recent Accounting Pronouncements

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is
effective for fiscal years ending after November 15, 2006, and is effective for the Joint Venture for the year ended December 31, 2006. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial
statements.

In July 2006, the FASB issued Financial Accounting Standards Board Interpretation (FIN) No. 48, Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be effective for the Joint
Venture beginning January 1, 2007. The Joint Venture is currently assessing provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this pronouncement will have a
material impact on its financial statements.



Page F-52



---

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces
Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in
accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in
circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the
period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting
pronouncements. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.



|3. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

The joint venture partners, Fund X, Fund XI, and Wells OP are all parties to individual property management and leasing agreements with Wells
Management Company, Inc. (Wells Management), an affiliate of each of their respective general partners.

The various fees payable under each of
the respective agreements are summarized as follows:



|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |  | Management Services                                                                                                      |  | Leasing Services                                                                                                                                                                                                                |  | Management and Leasing Services Industrial and Commercial properties leased on a net basis for ten years or more                                                  
|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|Fund X   |  | 3% of gross revenues collected monthly                                                                                   |  | Initial lease up fee for newly constructed properties based on market rate charged for similar services for
similar properties in the same geographic area. Recurring fee based on 3% of gross revenues collected monthly.      |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly.
|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|Fund XI  |  | 2.5% of gross revenues collected monthly                                                                                 |  | Initial lease up fee based for newly constructed properties based on market rate charged for similar services
for similar properties in the same geographic area. Recurring fee based on 2% of gross revenues collected monthly |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly 
|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                   
|Wells OP |  | Lesser of 4.5% of gross revenues generally paid over the life of the lease or .6% of Net Asset Value
calculated annually |  | Not applicable                                                                                                                                                                                                                  |  | Not applicable                                                                                                                                                    

Management and leasing fees are recognized in accordance with the terms of the aforementioned agreements, weighted
based on joint venture partners respective ownership interests in the Joint Venture. During the years ended December 31, 2006, 2005, and 2004, the Joint Venture incurred management and leasing fee expenses that are payable to Wells Management
and its affiliates of $21,809, $17,460, and $38,100, respectively.



Page F-53



---

Administration Reimbursements

Wells Management and its affiliates perform certain administrative services for the Joint Venture, relating to accounting, property management, and other Joint Venture administration, and incur the related expenses. Such expenses are
allocated among these entities based on time spent on each entity by individual personnel. In the opinion of management, this is a reasonable estimation of such expenses. During 2006, 2005, and 2004, the Joint Venture reimbursed $13,842, $15,757,
and $13,872, respectively, to Wells Management and its affiliates for these services.

Assignment of Related-Party Agreements

Wells Capital (Wells Capital) and Wells Management assigned rights to receive certain fees and reimbursements with Wells OP to Wells Advisory Services I, LLC
(WASI). WASI assigned its rights to receive certain fees and reimbursements to Wells Real Estate Advisory Services, Inc. (WREAS), a wholly owned subsidiary of WASI. Accordingly, the Joint Venture began paying property
management fees and administrative reimbursements to WREAS.

Due to affiliates

As of December 31, 2006 and December 31, 2005, due to affiliates balances reflect amounts due to WREAS and/or Wells Management for the following items:



|                              |  |      |       |      |   |      
|----------------------------- |  | ---- | ----- | ---- | - | -----
|                              |  | 2006 |       | 2005
|Property management fees      |  | $    | 3,331 |      | $ | 1,516
|Administrative reimbursements |  |      | 260   |      |   | 1,123
|                              |  |      |       |      |   |      
|Total                         |  | $    | 3,591 |      | $ | 2,639
|                              |  |      |       |      |   |      



|4. | RENTAL INCOME
|-- | -------------

The future minimum rental income due to the Joint
Venture under noncancelable operating leases as of December 31, 2006 follows:



|                        |  |   |          
|----------------------- |  | - | ---------
|Year ended December 31: |  |   |          
|2007                    |  | $ | 449,865  
|2008                    |  |   | 463,887  
|2009                    |  |   | 437,012  
|2010                    |  |   | 0        
|2011                    |  |   | 0        
|Thereafter              |  |   | 0        
|                        |  |   |          
|                        |  | $ | 1,350,764
|                        |  |   |          

One tenant generated approximately 100% of rental income for the year ended December 31, 2006, and one tenant
will generate approximately 100% of future minimum rental income.



Page F-54



---

SCHEDULE III  REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                   |  |              |  |              |  |                                              |  |                                                    |      |            |                            |            |                          |    |       |            |                             |            |                      |      |               |         
|------------------ |  | ------------ |  | ------------ |  | -------------------------------------------- |  | -------------------------------------------------- | ---- | ---------- | -------------------------- | ---------- | ------------------------ | -- | ----- | ---------- | --------------------------- | ---------- | -------------------- | ---- | ------------- | --------
|                   |  |              |  | Initial Cost |  | CostsCapitalized Subsequent ToAcquisition(c) |  | Gross Amount at Which Carried at December 31, 2006 |      |            |                            |            |                          |   
|Description        |  | Encumbrances |  | Land         |  | Buildings and Improvements                   |  |                                                    | Land |            | Buildings and Improvements |            | Construction in Progress |    | Total |            | Accumulated Depreciation(b) |            | Date of Construction |      | Date Acquired
|47320 KATO ROAD(a) |  | None         |  | $2,130,480   |  | $6,852,630                                   |  | $374,300                                           |      | $2,219,251 |                            | $7,138,159 |                          | $0 |       | $9,357,410 |                             | $2,112,016 |                      | 1998 |               | 07/21/98



| | (a) | 47320 Kato Road consists of a
two-story warehouse and office building located in Fremont, California.
| | --- | -----------------------------------------------------------------------------------------------------



| | (b) | Buildings, land improvements,
building improvements, and tenant improvements are depreciated using the straight-line method over 40 years, 20 years, 5 to 25 years, and the shorter of the economic life or corresponding lease terms, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Includes acquisition and advisory fees and acquisition expense reimbursements applied at
acquisition.
| | --- | -----------------------------------------------------------------------------------------------------



Page F-55



---

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                             |  |      |           |                          |   |          
|---------------------------- |  | ---- | --------- | ------------------------ | - | ---------
|                             |  | Cost |           | Accumulated Depreciation
|BALANCE AT DECEMBER 31, 2003 |  | $    | 9,357,410 |                          | $ | 1,570,353
|                             |  |     
|Additions                    |  |      | 0         |                          |   | 222,543  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2004 |  |      | 9,357,410 |                          |   | 1,792,896
|                             |  |     
|Additions                    |  |      | 0         |                          |   | 159,560  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2005 |  |      | 9,357,410 |                          |   | 1,952,456
|                             |  |     
|Additions                    |  |      | 0         |                          |   | 159,560  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2006 |  | $    | 9,357,410 |                          | $ | 2,112,016
|                             |  |      |           |                          |   |          



Page F-56



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

The Wells Fund XI-Fund XII-REIT Joint Venture:

We have audited the
accompanying balance sheet of The Wells Fund XI-Fund XII-REIT Joint Venture (the Joint Venture) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended
December 31, 2006. Our audit also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to
express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Joint Ventures internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The
Wells Fund XI-Fund XII-REIT Joint Venture as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-57



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

The Wells Fund XI-Fund XII-REIT Joint Venture:

We have audited the accompanying balance sheet of The Wells Fund XI-Fund XII-REIT Joint Venture (the Joint Venture) as of December 31, 2005, and the related statements of operations, partners capital, and cash
flows for each of the two years in the period ended December 31, 2005. Our audits also included the financial statement schedule as of December 31, 2005 and for each of the two years in the period then ended listed in the index at
Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint
Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Wells Fund XI-Fund XII-REIT Joint
Venture at December 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/    ERNST & YOUNG LLP

Atlanta, Georgia

March 9, 2007



Page F-58



---

THE WELLS FUND XI - FUND XII - REIT JOINT VENTURE



BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                                                                                                                                  |  |      |            |      |   |           
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                                                                                  |  | 2006 |            | 2005
|Real estate assets, at cost:                                                                                                      |  |      |            |      |   |           
|Land                                                                                                                              |  | $    | 2,110,417  |      | $ | 2,110,417 
|Building and improvements, less accumulated depreciation of $3,432,913 and $3,127,646 at December 31, 2006 and 2005,
respectively |  |      | 9,794,875  |      |   | 10,073,164
|Construction in progress                                                                                                          |  |      | 43,726     |      |   | 0         
|                                                                                                                                  |  |      |            |      |   |           
|Total real estate assets                                                                                                          |  |      | 11,949,018 |      |   | 12,183,581
|Cash and cash equivalents                                                                                                         |  |      | 112,490    |      |   | 87,150    
|Tenant receivables, net                                                                                                           |  |      | 30,441     |      |   | 0         
|Deferred leasing costs, less accumulated depreciation of $2,142 and $0 at December 31, 2006 and 2005, respectively                |  |      | 490,082    |      |   | 0         
|Other assets                                                                                                                      |  |      | 5,713      |      |   | 12,229    
|                                                                                                                                  |  |      |            |      |   |           
|Total assets                                                                                                                      |  | $    | 12,587,744 |      | $ | 12,282,960
|                                                                                                                                  |  |      |            |      |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                        |  |   |            |  |   |           
|--------------------------------------- |  | - | ---------- |  | - | ----------
|Liabilities:                            |  |   |            |  |   |           
|Accounts payable and accrued expenses   |  | $ | 61,993     |  | $ | 191,471   
|Accrued deferred leasing costs          |  |   | 11,040     |  |   | 0         
|Due to affiliates                       |  |   | 407        |  |   | 2,590     
|                                        |  |   |            |  |   |           
|Total liabilities                       |  |   | 73,440     |  |   | 194,061   
|                                        |  |  
|Partners capital:                      |  |   |            |  |   |           
|Wells Real Estate Fund XI, L.P.         |  |   | 3,272,186  |  |   | 3,160,951 
|Wells Real Estate Fund XII, L.P.        |  |   | 2,138,666  |  |   | 2,065,968 
|Wells Operating Partnership, L.P.       |  |   | 7,103,452  |  |   | 6,861,980 
|                                        |  |   |            |  |   |           
|Total partners capital                 |  |   | 12,514,304 |  |   | 12,088,899
|                                        |  |   |            |  |   |           
|Total liabilities and partners capital |  | $ | 12,587,744 |  | $ | 12,282,960
|                                        |  |   |            |  |   |           

See accompanying notes.



Page F-59



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THE WELLS FUND XI - FUND XII - REIT JOINT VENTURE



STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|----------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                    |  | 2006 |           |   | 2005 |   |           | 2004 | 
|REVENUES:                           |  |      |           |   |      |   |           |      |  |   |           |  
|Rental income                       |  | $    | 30,441    |   |      | $ | 0         |      |  | $ | 293,201   |  
|Lease termination income            |  |      | 0         |   |      |   | 0         |      |  |   | 450,200   |  
|Reimbursement income                |  |      | 0         |   |      |   | 0         |      |  |   | 201       |  
|Interest and other income           |  |      | 0         |   |      |   | 22,722    |      |  |   | 2,720     |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|Total revenues                      |  |      | 30,441    |   |      |   | 22,722    |      |  |   | 746,322   |  
|                                    |  |      |          
|EXPENSES:                           |  |      |           |   |      |   |           |      |  |   |           |  
|Property operating costs            |  |      | 535,229   |   |      |   | 515,386   |      |  |   | 408,662   |  
|Management and leasing fees         |  |      | 16,950    |   |      |   | 13,241    |      |  |   | 48,712    |  
|Depreciation                        |  |      | 305,267   |   |      |   | 304,722   |      |  |   | 416,764   |  
|Amortization                        |  |      | 2,142     |   |      |   | 0         |      |  |   | 0         |  
|General and administrative          |  |      | 145,448   |   |      |   | 94,311    |      |  |   | 93,936    |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|Total expenses                      |  |      | 1,005,036 |   |      |   | 927,660   |      |  |   | 968,074   |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|LOSS FROM CONTINUING OPERATIONS     |  |      | (974,595  | ) |      |   | (904,938  | )    |  |   | (221,752  | )
|                                    |  |      |          
|DISCONTINUED OPERATIONS:            |  |      |           |   |      |   |           |      |  |   |           |  
|Operating income                    |  |      | 0         |   |      |   | 204,646   |      |  |   | 1,030,989 |  
|Gain on dispositions                |  |      | 0         |   |      |   | 4,480,859 |      |  |   | 2,418,610 |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|Income from discontinued operations |  |      | 0         |   |      |   | 4,685,505 |      |  |   | 3,449,599 |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  
|NET INCOME (LOSS)                   |  | $    | (974,595  | ) |      | $ | 3,780,567 |      |  | $ | 3,227,847 |  
|                                    |  |      |           |   |      |   |           |      |  |   |           |  

See accompanying notes.



Page F-60



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THE WELLS FUND XI - FUND XII - REIT JOINT VENTURE



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                           |  |                               |            |   |                                |   |            |                                  |  |   |                         |   |  |   |             |  
|-------------------------- |  | ----------------------------- | ---------- | - | ------------------------------ | - | ---------- | -------------------------------- |  | - | ----------------------- | - |  | - | ----------- | -
|                           |  | Wells RealEstateFund XI, L.P. |            |   | Wells RealEstateFund XII, L.P. |   |            | Wells OperatingPartnership, L.P. |  |   | Total Partners Capital |  
|BALANCE, DECEMBER 31, 2003 |  | $                             | 7,245,379  |   |                                | $ | 4,735,342  |                                  |  | $ | 15,728,600              |   |  | $ | 27,709,321  |  
|                           |  |                               |            |  
|Net income                 |  |                               | 844,017    |   |                                |   | 551,607    |                                  |  |   | 1,832,223               |   |  |   | 3,227,847   |  
|Partnership distributions  |  |                               | (2,902,427 | ) |                                |   | (1,896,875 | )                                |  |   | (6,300,681              | ) |  |   | (11,099,977 | )
|                           |  |                               |            |   |                                |   |            |                                  |  |   |                         |   |  |   |             |  
|BALANCE, DECEMBER 31, 2004 |  |                               | 5,186,975  |   |                                |   | 3,390,074  |                                  |  |   | 11,260,142              |   |  |   | 19,837,191  |  
|                           |  |                               |            |  
|Net income                 |  |                               | 988,543    |   |                                |   | 646,061    |                                  |  |   | 2,145,963               |   |  |   | 3,780,567   |  
|Partnership contributions  |  |                               | 226,964    |   |                                |   | 148,332    |                                  |  |   | 492,704                 |   |  |   | 868,000     |  
|Partnership distributions  |  |                               | (3,241,531 | ) |                                |   | (2,118,499 | )                                |  |   | (7,036,829              | ) |  |   | (12,396,859 | )
|                           |  |                               |            |   |                                |   |            |                                  |  |   |                         |   |  |   |             |  
|BALANCE, DECEMBER 31, 2005 |  |                               | 3,160,951  |   |                                |   | 2,065,968  |                                  |  |   | 6,861,980               |   |  |   | 12,088,899  |  
|                           |  |                               |            |  
|Net income                 |  |                               | (254,837   | ) |                                |   | (166,548   | )                                |  |   | (553,210                | ) |  |   | (974,595    | )
|Partnership contributions  |  |                               | 366,072    |   |                                |   | 239,246    |                                  |  |   | 794,682                 |   |  |   | 1,400,000   |  
|                           |  |                               |            |   |                                |   |            |                                  |  |   |                         |   |  |   |             |  
|BALANCE, DECEMBER 31, 2006 |  | $                             | 3,272,186  |   |                                | $ | 2,138,666  |                                  |  | $ | 7,103,452               |   |  | $ | 12,514,304  |  
|                           |  |                               |            |   |                                |   |            |                                  |  |   |                         |   |  |   |             |  

See accompanying notes.



Page F-61



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THE WELLS FUND XI - FUND XII - REIT JOINT VENTURE



STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|-------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                                   |  | 2006 |           |   | 2005 |   |             | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |      |           |   |      |   |             |      |  |   |             |  
|Net Income (loss)                                                                                  |  | $    | (974,595  | ) |      | $ | 3,780,567   |      |  | $ | 3,227,847   |  
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |      |           |   |      |   |             |      |  |   |             |  
|Gain on disposition                                                                                |  |      | 0         |   |      |   | (4,480,859  | )    |  |   | (2,418,610  | )
|Depreciation                                                                                       |  |      | 305,267   |   |      |   | 340,970     |      |  |   | 832,061     |  
|Amortization                                                                                       |  |      | 2,142     |   |      |   | 5,478       |      |  |   | 5,015       |  
|Changes in assets and liabilities:                                                                 |  |      |           |   |      |   |             |      |  |   |             |  
|(Increase) decrease in tenant receivables, net                                                     |  |      | (30,441   | ) |      |   | (474        | )    |  |   | 143,071     |  
|Decrease (increase) in other assets                                                                |  |      | 6,516     |   |      |   | (1,311      | )    |  |   | (10,919     | )
|(Decrease) increase in accounts payable and accrued expenses                                       |  |      | (129,478  | ) |      |   | (482,945    | )    |  |   | 547,664     |  
|Decrease in due to affiliates                                                                      |  |      | (2,183    | ) |      |   | (953        | )    |  |   | (13,823     | )
|Decrease in deferred income                                                                        |  |      | 0         |   |      |   | 0           |      |  |   | (230,776    | )
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|Net cash (used in) provided by operating activities                                                |  |      | (822,772  | ) |      |   | (839,527    | )    |  |   | 2,081,530   |  
|                                                                                                   |  |      |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |      |           |   |      |   |             |      |  |   |             |  
|Net proceeds from sale of real estate                                                              |  |      | 0         |   |      |   | 12,396,859  |      |  |   | 9,675,000   |  
|Investment in real estate assets                                                                   |  |      | (70,704   | ) |      |   | (16,437     | )    |  |   | (481,469    | )
|Investment in deferred leasing costs                                                               |  |      | (481,184  | ) |      |   | 0           |      |  |   | (161,342    | )
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|Net cash (used in) provided by investing activities                                                |  |      | (551,888  | ) |      |   | 12,380,422  |      |  |   | 9,032,189   |  
|                                                                                                   |  |      |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |      |           |   |      |   |             |      |  |   |             |  
|Contribution from joint venture partners                                                           |  |      | 1,400,000 |   |      |   | 868,000     |      |  |   | 0           |  
|Net sale proceeds distributions to joint venture partners                                          |  |      | 0         |   |      |   | (12,396,859 | )    |  |   | (9,675,000  | )
|Operating distributions to joint venture partners in excess of accumulated earnings                |  |      | 0         |   |      |   | 0           |      |  |   | (2,005,517  | )
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|Net cash provided by (used in) financing activities                                                |  |      | 1,400,000 |   |      |   | (11,528,859 | )    |  |   | (11,680,517 | )
|                                                                                                   |  |      |          
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               |  |      | 25,340    |   |      |   | 12,036      |      |  |   | (566,798    | )
|                                                                                                   |  |      |          
|CASH AND CASH EQUIVALENTS, beginning of year                                                       |  |      | 87,150    |   |      |   | 75,114      |      |  |   | 641,912     |  
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|CASH AND CASH EQUIVALENTS, end of year                                                             |  | $    | 112,490   |   |      | $ | 87,150      |      |  | $ | 75,114      |  
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  
|                                                                                                   |  |      |          
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:                             |  |      |           |   |      |   |             |      |  |   |             |  
|Accrued deferred leasing costs                                                                     |  | $    | 11,040    |   |      | $ | 0           |      |  | $ | 0           |  
|                                                                                                   |  |      |           |   |      |   |             |      |  |   |             |  

See accompanying notes.



Page F-62



---

THE WELLS FUND XI - FUND XII - REIT JOINT VENTURE



NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



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

On May 1, 1999, Wells Real Estate
Fund XI, L.P. (Fund XI), Wells Real Estate Fund XII, L.P. (Fund XII), and Wells Operating Partnership, L.P. (Wells OP) entered into a Georgia general partnership known as The Wells Fund XI-Fund XII-REIT
Joint Venture (the Joint Venture). The general partners of Fund XI and Fund XII are Leo F. Wells, III and Wells Partners, L.P., a private Georgia limited partnership. Wells OP is a Delaware limited partnership with Wells Real
Estate Investment Trust, Inc. (Wells REIT) serving as its general partner. Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.

On May 18, 1999, the Joint Venture purchased a two-story manufacturing and office building containing approximately 168,000-square feet, known as 111 Southchase Boulevard, located in Fountain Inn, South Carolina.
On July 2, 1999, the Joint Venture purchased a three-story office building containing approximately 70,000-square feet, known as the 20/20 Building, located in Leawood, Kansas. On August 17, 1999, the Joint Venture purchased an office and
warehouse building containing approximately 130,000 square feet, known as the Johnson Matthey Building, located in Wayne, Pennsylvania. On September 20, 1999, the Joint Venture purchased a two-story office building containing approximately
62,000 square feet, known as the Gartner Building, located in Fort Myers, Florida.

On October 5, 2004, the Joint Venture sold the Johnson Matthey
Building to the sole tenant, Johnson Matthey, Inc., for a gross selling price of $10,000,000. As a result of the sale, the Joint Venture recognized a gain of approximately $2,419,000 and received net sale proceeds of $9,675,000.

On April 13, 2005, the Joint Venture sold the Gartner Building to an unrelated third party for a gross selling price of approximately $12,520,000. As a result of
the sale, the Joint Venture recognized a gain of approximately $4,481,000 and received net sale proceeds of approximately $12,397,000.



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

Basis of
Presentation

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

The Joint Ventures leases typically include renewal options, escalation provisions and provisions requiring tenants to reimburse the Joint
Venture for a pro-rata share of operating costs incurred. All of the Joint Ventures leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases based on
the Consumer Price Index) is recognized on a straight-line basis over the terms of the respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheets.

Lease termination income is recognized when the tenant loses the right to lease the space and the Joint Venture has satisfied all obligations under the related lease or
lease termination agreement.



Page F-63



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The Joint Venture records the sale of real estate assets pursuant to the provisions of Statement of Financial Accounting
Standards (SFAS) No. 66, Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the risks and rewards of
ownership without significant continuing involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.

Real Estate Assets

Real estate assets are stated at cost, less
accumulated depreciation. Amounts capitalized to real estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which extend the useful life of the related asset. We consider
the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants intention to terminate a lease, undepreciated tenant
improvements are written off to lease termination expense. All repairs and maintenance are expensed as incurred.

The estimated useful lives of the Joint
Ventures real estate assets by class are provided below:



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

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts
of the real estate assets owned by the Joint Venture may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating
cash flows expected from the use of the asset and its 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 such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. The Joint Venture has determined that there has been no impairment in the
carrying value of any of the real estate assets held as of December 31, 2006.

In the third quarter of 2004, the Joint Venture completed a review of
its real estate depreciation by performing an analysis of the components of each property type in an effort to determine weighted-average composite useful lives of its real estate assets. As a result of this review, the Joint Venture changed its
estimate of the weighted-average composite useful lives for all building assets. Effective July 1, 2004, for all building assets, the Joint Venture extended the weighted-average composite useful life from 25 years to 40 years. The change
resulted in an increase to net income of approximately $206,612 for the year ended December 31, 2004. We believe the change more appropriately reflects the estimated useful lives of the building assets and is consistent with prevailing industry
practice. We believe the change more appropriately reflects the estimated useful lives of the building assets and is consistent with prevailing industry practice.

Cash and Cash Equivalents

The Joint Venture considers all highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash equivalents include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.



Page F-64



---

Tenant Receivables, net

Tenant receivables, net are comprised of tenant receivables and straight-line rent receivables. Management assesses the collectibility of tenant receivables on an ongoing basis and provides for allowances as such balances, or portions
thereof, become uncollectible. Upon receiving notification of a tenants intention to terminate a lease, unamortized straight-line rent receivables are written off to lease termination expense. Allowances of $5,956 and $0 are included in tenant
receivables as of December 31, 2006 and 2005, respectively.

Deferred Leasing Costs, net

Deferred leasing costs reflect costs incurred to procure operating leases, which are capitalized and amortized on a straight-line basis over the terms of the respective
leases. The remaining unamortized balance of deferred leasing costs will be amortized over a weighted-average period of approximately six years. Upon receiving notification of a tenants intention to terminate a lease, unamortized deferred
leasing costs are written-off to lease termination expense.

Other Assets

As of December 31, 2006 and December 31, 2005, other assets is comprised of the following:



|                                       |  |      |       |      |   |       
|-------------------------------------- |  | ---- | ----- | ---- | - | ------
|                                       |  | 2006 |       | 2005
|Prepaid expenses                       |  | $    | 5,713 |      | $ | 6,519 
|Due from Fund IV and Fund V Associates |  |      | 0     |      |   | 5,710 
|                                       |  |      |       |      |   |       
|Total                                  |  | $    | 5,713 |      | $ | 12,229
|                                       |  |      |       |      |   |       

Prepaid expenses are recognized as the related services are provided. Balances without a future economic benefit
are written off as they are identified.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the joint venture partners based their respective ownership interests as determined by relative cumulative capital
contributions, as defined. For the periods presented, Fund XI, Fund XII, and Wells OP held ownership interests in the Joint Venture of approximately 26%, 17%, and 57%, respectively. Net cash from operations is generally distributed to the joint
venture partners on a quarterly basis.

Income Taxes

The Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners of Fund XI, Fund XII, and Wells OP are required to include their respective
share of profits and losses from the Joint Venture in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial
Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under
GAAP, including amending SFAS No. 144. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be effective for the Joint Venture beginning January 1,
2008. The Joint



Page F-65



---

Venture is currently assessing provisions and evaluating the financial impact of SFAS No. 157 on its financial statements, however, does not believe the
adoption of this pronouncement will have a material impact on its financial statements.

In September 2006, the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of
the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Joint Venture
for the year ended December 31, 2006. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.

In July 2006, the FASB issued Financial Accounting Standards Board Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant
criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be effective for the Joint Venture beginning January 1, 2007. The Joint Venture is currently assessing provisions and
evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20,
Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in accounting principles and corrections of errors.
Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance
does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of
the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting pronouncements. The adoption of this pronouncement has not
had a material impact on the Joint Ventures financial statements.



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

Management and Leasing Fees

The joint venture partners, Fund XI, Fund XII, and Wells OP are all parties to individual property management and leasing agreements with Wells
Management Company, Inc. (Wells Management), an affiliate of each of their respective general partners.



Page F-66



---

The various fees payable under each of the respective agreements are summarized as
follows:



|         |  |                                                                                                                          |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                  
|-------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |  | Management Services                                                                                                      |  | Leasing Services                                                                                                                                                                                                                |  | Management and LeasingServices-Industrial andCommercial propertiesleased on a net basis forten years or more                                                     
|Fund XI  |  | 2.5% of gross revenues collected monthly                                                                                 |  | Initial lease up fee based for newly constructed properties based on market rate charged for similar services
for similar properties in the same geographic area. Recurring fee based on 2% of gross revenues collected monthly |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly
|Fund XII |  | 2.5% of gross revenues collected monthly                                                                                 |  | Initial lease up fee based for newly constructed properties based on market rate charged for similar services
for similar properties in the same geographic area. Recurring fee based on 2% of gross revenues collected monthly |  | Initial lease up fee based on 3% of the gross revenues over the first five years of the lease term.
Recurring fee based on 1% of gross revenues collected monthly
|Wells OP |  | Lesser of 4.5% of gross revenues generally paid over the life of the lease or .6% of Net Asset Value
calculated annually |  | Not applicable                                                                                                                                                                                                                  |  | Not applicable                                                                                                                                                   

Management and leasing fees are recognized in accordance with the terms of the aforementioned agreements, weighted
based on joint venture partners respective ownership interests in the Joint Venture. During the years ended December 31, 2006, 2005, and 2004, the Joint Venture incurred management and leasing fee expenses that are payable to Wells Management
and its affiliates of $0, $14,881, and $104,267, respectively, portions of which are included in income from discontinued operations in the accompanying statements of operations.

Administration Reimbursements

Wells Management and its affiliates perform certain administrative services for the
Joint Venture, relating to accounting, property management, and other Joint Venture administration, and incur the related expenses. Such expenses are allocated among these entities based on time spent on each entity by individual personnel. In the
opinion of management, this is a reasonable estimation of such expenses. During 2006, 2005, and 2004, the Joint Venture reimbursed $37,891, $49,811, and $54,181, respectively, to Wells Management and its affiliates for these services, portions of
which are included in income from discontinued operations in the accompanying statements of operations.

Due to Affiliates

As of December 31, 2006 and 2005, due to affiliates balances reflect administrative reimbursements due to Wells Management and/or WREAS.

Assignment of Related-Party Agreements

Wells Capital (Wells
Capital) and Wells Management assigned rights to receive certain fees and reimbursements with Wells OP to Wells Advisory Services I, LLC (WASI). WASI assigned its rights to



Page F-67



---

receive certain fees and reimbursements to Wells Real Estate Advisory Services, Inc. (WREAS), a wholly owned subsidiary of WASI. Accordingly, the
Joint Venture began paying property management fees and administrative reimbursements to WREAS.



|4. | DISCONTINUED OPERATIONS
|-- | -----------------------

In accordance with SFAS No. 144, the
Joint Venture has classified the results of operations related to the office components of the Johnson Matthey Building, which was sold on October 5, 2004, and the Gartner Building, which was sold on April 13, 2005 as discontinued
operations in the accompanying statements of operations. The details comprising income from discontinued operations are presented below:



|                                    |  |      |       |      |   |           |  |   |          
|----------------------------------- |  | ---- | ----- | ---- | - | --------- |  | - | ---------
|                                    |  | 2006 |       | 2005 |   | 2004     
|Rental income                       |  | $    | 0     |      | $ | 266,360   |  | $ | 1,533,189
|Reimbursement income                |  |      | 5,956 |      |   | 7,232     |  |   | 59,956   
|Interest and other income           |  |      | 0     |      |   | 187       |  |   | 300      
|                                    |  |      |       |      |   |           |  |   |          
|Total revenues                      |  |      | 5,956 |      |   | 273,779   |  |   | 1,593,445
|Property operating costs            |  |      | 0     |      |   | 6,318     |  |   | 29,495   
|Management and leasing fees         |  |      | 0     |      |   | 14,036    |  |   | 68,846   
|Depreciation                        |  |      | 0     |      |   | 36,247    |  |   | 415,297  
|Amortization                        |  |      | 0     |      |   | 5,478     |  |   | 5,015    
|Bad debt expense                    |  |      | 5,956 |      |   | 0         |  |   | 0        
|General and administrative          |  |      | 0     |      |   | 7,054     |  |   | 43,803   
|                                    |  |      |       |      |   |           |  |   |          
|Total expenses                      |  |      | 5,956 |      |   | 69,133    |  |   | 562,456  
|                                    |  |      |       |      |   |           |  |   |          
|Operating income                    |  |      | 0     |      |   | 204,646   |  |   | 1,030,989
|Gain on dispositions                |  |      | 0     |      |   | 4,480,859 |  |   | 2,418,610
|                                    |  |      |       |      |   |           |  |   |          
|Income from discontinued operations |  | $    | 0     |      | $ | 4,685,505 |  | $ | 3,449,599
|                                    |  |      |       |      |   |           |  |   |          



|5. | RENTAL INCOME
|-- | -------------

The future minimum rental income due to the Joint
Venture under noncancelable operating leases as of December 31, 2006 follows:



|                        |  |   |          
|----------------------- |  | - | ---------
|Year ended December 31: |  |   |          
|2007                    |  | $ | 900,037  
|2008                    |  |   | 1,642,989
|2009                    |  |   | 1,673,152
|2010                    |  |   | 1,703,725
|2011                    |  |   | 1,734,722
|Thereafter              |  |   | 859,766  
|                        |  |   |          
|                        |  | $ | 8,514,391
|                        |  |   |          

Both active properties were vacant throughout the year ended December 31, 2006. Three tenants will generate
approximately 43%, 40%, and 17% of future minimum rental income.



|6. | SUBSEQUENT EVENT
|-- | ----------------

On March 6, 2007, the Joint Venture entered
into a purchase and sale agreement to sell 111 Southchase Boulevard to an unrelated third party. The completion of this transaction is currently subject to, among other things, a due diligence period expiring on April 5, 2007. Accordingly,
there are no assurances that this sale will be completed. If the transaction progresses, the Joint Venture believes the closing of this transaction is likely to occur during the second quarter of 2007.



Page F-68



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SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                        |  |              |  |              |           |                                              |   |                                               |      |   |                            |  |                          |           |       |   |                             |  |                      |        |               |   |            |  |   |           |  |      |  |         
|----------------------- |  | ------------ |  | ------------ | --------- | -------------------------------------------- | - | --------------------------------------------- | ---- | - | -------------------------- |  | ------------------------ | --------- | ----- | - | --------------------------- |  | -------------------- | ------ | ------------- | - | ---------- |  | - | --------- |  | ---- |  | --------
|                        |  |              |  | Initial Cost |           | CostsCapitalized Subsequent ToAcquisition(d) |   | Gross Carrying Amount as of December 31, 2006 |      |   |                            |  |                          |          
|Description             |  | Encumbrances |  | Land         |           | Buildings and Improvements                   |   |                                               | Land |   | Buildings and Improvements |  | Construction in Progress |           | Total |   | Accumulated Depreciation(c) |  | Date of Construction |        | Date Acquired
|SOUTHCHASE BOULEVARD(a) |  | None         |  | $            | 330,000   |                                              | $ | 4,791,827                                     |      | $ | 272,138                    |  | $                        | 343,750   |       | $ | 5,006,489                   |  | $                    | 43,726 |               | $ | 5,393,965  |  | $ | 1,327,188 |  | 1998 |  | 05/18/99
|THE 20/20 BUILDING(b)   |  | None         |  |              | 1,696,000 |                                              |   | 7,850,210                                     |      |   | 441,756                    |  |                          | 1,766,667 |       |   | 8,221,299                   |  |                      | 0      |               |   | 9,987,966  |  |   | 2,105,725 |  | 1998 |  | 07/02/99
|                        |  |              |  |              |           |                                              |   |                                               |      |   |                            |  |                          |           |       |   |                             |  |                      |        |               |   |            |  |   |           |  |      |  |         
|Total                   |  |              |  | $            | 2,026,000 |                                              | $ | 12,642,037                                    |      | $ | 713,894                    |  | $                        | 2,110,417 |       | $ | 13,227,788                  |  | $                    | 43,726 |               | $ | 15,381,931 |  | $ | 3,432,913 |  |      |  |         
|                        |  |              |  |              |           |                                              |   |                                               |      |   |                            |  |                          |           |       |   |                             |  |                      |        |               |   |            |  |   |           |  |      |  |         



| | (a) | 111 Southchase Boulevard is a
two-story manufacturing and office building located in Fountain Inn, South Carolina.
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (b) | The 20/20 Building is a
three-story office building located in Leawood, Kansas.
| | --- | -------------------------------------------------------------------------------



| | (c) | Buildings, land improvements,
building improvements, and tenant improvements are depreciated using the straight-line method over 40 years, 20 years, 5 to 25 years, and the shorter of the economic life or corresponding lease terms, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Includes acquisition and advisory fees and acquisition expense reimbursements applied at
acquisition.
| | --- | -----------------------------------------------------------------------------------------------------



Page F-69



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SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                             |  |      |            |   |                          |   |            |  
|---------------------------- |  | ---- | ---------- | - | ------------------------ | - | ---------- | -
|                             |  | Cost |            |   | Accumulated Depreciation |  
|BALANCE AT DECEMBER 31, 2003 |  | $    | 32,382,248 |   |                          | $ | 4,880,004  |  
|                             |  |     
|Additions                    |  |      | 481,469    |   |                          |   | 832,061    |  
|Dispositions                 |  |      | (8,392,077 | ) |                          |   | (1,285,373 | )
|                             |  |      |            |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2004 |  |      | 24,471,640 |   |                          |   | 4,426,692  |  
|                             |  |     
|Additions                    |  |      | 16,437     |   |                          |   | 340,970    |  
|Dispositions                 |  |      | (9,176,850 | ) |                          |   | (1,640,016 | )
|                             |  |      |            |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2005 |  |      | 15,311,227 |   |                          |   | 3,127,646  |  
|                             |  |     
|Additions                    |  |      | 70,704     |   |                          |   | 305,267    |  
|                             |  |      |            |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2006 |  | $    | 15,381,931 |   |                          | $ | 3,432,913  |  
|                             |  |      |            |   |                          |   |            |  



Page F-70



---

EXHIBIT INDEX

TO

2006 FORM 10-K

OF

WELLS REAL ESTATE FUND XI, L.P.

The following documents are filed as exhibits to this report. Those exhibits previously filed and incorporated herein by reference are identified below by an asterisk.
For each such asterisked exhibit, there is shown below the description of the previous filing. Exhibits which are not required for this report are omitted.



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|*3(a)         |  | Amended and Restated Agreement of Limited Partnership of Wells Real Estate Fund XI, L.P. (Exhibit 3(a) to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)                                                                                                                                        
|              | 
|*3(b)         |  | Certificate of Limited Partnership of Wells Real Estate Fund XI, L.P. (Exhibit 3(c) to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P.,
as amended to date, Commission File No. 333-7979)                                                                                                                                                           
|              | 
|*10(a)        |  | Leasing and Tenant Coordinating Agreement with Wells Management Company, Inc. (Exhibit 10(d) to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate
Fund XI, L.P., as amended to date, Commission File No. 333-7979)                                                                                                                                                  
|              | 
|*10(b)        |  | Management Agreement with Wells Management Company, Inc. (Exhibit 10(e) to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended
to date, Commission File No. 333-7979)                                                                                                                                                                       
|              | 
|*10(c)        |  | Custodial Agency Agreement with The Bank of New York (Exhibit 10(f) to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended to
date, Commission File No. 333-7979)                                                                                                                                                                           
|              | 
|*10(d)        |  | Joint Venture Agreement of Fund IX and Fund X Associates dated March 20, 1997 (Exhibit 10(g) to Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund X,
L.P. and Wells Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)                                                                                                                
|              | 
|*10(e)        |  | Lease Agreement for the ABB Building dated December 10, 1996, between Wells Real Estate Fund IX, L.P. and ABB Flakt, Inc. (Exhibit 10(kk) to Post-Effective Amendment No. 13 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., as amended to date, Commission File No. 33-83852)                                                               
|              | 
|*10(f)        |  | Development Agreement relating to the ABB Building dated December 10, 1996, between Wells Real Estate Fund IX, L.P. and ADEVCO Corporation (Exhibit 10(ll) to Post-Effective Amendment No. 13
to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., as amended to date, Commission File No. 33-83852)                                              
|              | 
|*10(g)        |  | Owner-Contractor Agreement relating to the ABB Building dated November 1, 1996, between Wells Real Estate Fund IX, L.P. and Integra Construction, Inc. (Exhibit 10(mm) to Post-Effective
Amendment No. 13 to Form S-11 Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., as amended to date, Commission File No. 33-83852)                                  
|              | 
|*10(h)        |  | Agreement for the Purchase and Sale of Real Property relating to the Lucent Technologies Building dated May 30, 1997, between Fund IX and Fund X Associates and Wells Development
Corporation (Exhibit 10(k) to Post-Effective Amendment No. 2 to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)
|              | 
|*10(i)        |  | Net Lease Agreement for the Lucent Technologies Building dated May 30, 1997 (Exhibit 10(l) to Post-Effective Amendment No. 2 to Form S-11 Registration Statement of Wells Real Estate Fund X,
L.P. and Wells Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)                                                                                                                  



---

|              |  |                                                                                                                                                                                                                                                                                                                                                                  
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                                                                                                          
|              | 
|*10(j)        |  | Development Agreement relating to the Lucent Technologies Building dated May 30, 1997, between Wells Development Corporation and ADEVCO Corporation (Exhibit 10(m) to Post-Effective Amendment
No. 2 to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)
|              | 
|*10(k)        |  | First Amendment to Net Lease Agreement for the Lucent Technologies Building dated March 30, 1998 (Exhibit 10.10(a) to Form S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)                                                                                                           
|              | 
|*10(l)        |  | Amended and Restated Joint Venture Agreement of The Fund IX, Fund X, Fund XI and REIT Joint Venture (the IX-X-XI-REIT Joint Venture) dated July 11, 1998 (Exhibit 10.4 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                     
|              | 
|*10(m)        |  | Agreement for the Purchase and Sale of Real Property relating to the Ohmeda Building dated November 14, 1997 between Lincor Centennial, Ltd. and Wells Real Estate Fund X, L.P.
(Exhibit 10.6 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                
|              | 
|*10(n)        |  | Agreement for the Purchase and Sale of Property relating to the 360 Interlocken Building dated February 11, 1998 between Orix Prime West Broomfield Venture and Wells Development Corporation
(Exhibit 10.7 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                  
|              | 
|*10(o)        |  | Purchase and Sale Agreement relating to the Iomega Building dated February 4, 1998 with SCI Development Services Incorporated (Exhibit 10.11 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                                                 
|              | 
|*10(p)        |  | Lease Agreement for the Iomega Building dated April 9, 1996 (Exhibit 10.12 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)                                                                                                                                                   
|              | 
|*10(q)        |  | Agreement for the Purchase and Sale of Property relating to the Fairchild Building dated June 8, 1998 (Exhibit 10.13 to Form S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)                                                                                                         
|              | 
|*10(r)        |  | Restatement of and First Amendment to Agreement for the Purchase and Sale of Property relating to the Fairchild Building dated July 1, 1998 (Exhibit 10.14 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                                   
|              | 
|*10(s)        |  | Joint Venture Agreement of Wells/Fremont Associates (the Fremont Joint Venture) dated July 15, 1998 between Wells Development Corporation and Wells Operating Partnership,
L.P. (Exhibit 10.17 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                             
|              | 
|*10(t)        |  | Joint Venture Agreement of Fund X and Fund XI Associates dated July 15, 1998 (Exhibit 10.18 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)                                                                                                                                  
|              | 
|*10(u)        |  | Agreement for the Purchase and Sale of Joint Venture Interest relating to the Fremont Joint Venture dated July 17, 1998 between Wells Development Corporation and Fund X and Fund XI Associates
(Exhibit 10.19 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)               
|              | 
|*10(v)        |  | Lease Agreement for the Fairchild Building dated September 19, 1997 between the Fremont Joint Venture (as successor in interest by assignment) and Fairchild Technologies USA, Inc.
(Exhibit 10.20 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                           



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|*10(w)        |  | First Amendment to Joint Venture Agreement of Wells/Fremont Associates dated October 8, 1998 (Exhibit 10(w) to Form 10-K of Wells Real Estate Fund X, L.P. for the fiscal year ended
December 31, 1998, Commission File No. 0-23719)                                                                                                                                                                          
|              | 
|*10(x)        |  | Purchase and Sale Agreement and Joint Escrow Instructions relating to the Cort Furniture Building dated June 12, 1998 between the Cort Joint Venture (as successor in interest by assignment)
and Spencer Fountain Valley Holdings, Inc. (Exhibit 10.21 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                   
|              | 
|*10(y)        |  | First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions relating to the Cort Furniture Building dated July 16, 1998 between the Cort Joint Venture (as successor in
interest by assignment) and Spencer Fountain Valley Holdings, Inc. (Exhibit 10.22 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)
|              | 
|*10(z)        |  | Joint Venture Agreement of Wells/Orange County Associates (the Cort Joint Venture) dated July 27, 1998 between Wells Development Corporation and Wells Operating Partnership,
L.P. (Exhibit 10.25 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                                       
|              | 
|*10(aa)       |  | Agreement for the Purchase and Sale of Joint Venture Interest relating to the Cort Joint Venture dated July 30, 1998 between Wells Development Corporation and Fund X and Fund XI Associates
(Exhibit 10.26 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                               
|              | 
|*10(bb)       |  | First Amendment to Joint Venture Agreement of Wells/Orange County Associates dated September 1, 1998 (Exhibit 10(dd) to Form 10-K of Wells Real Estate Fund X, L.P. for the fiscal year ended
December 31, 1998, Commission File No. 0-23719)                                                                                                                                                                 
|              | 
|*10(cc)       |  | Temporary Lease Agreement for remainder of the ABB Building dated September 10, 1998 between the IX-X-XI-REIT Joint Venture and Associates Housing Finance, LLC (Exhibit 10.35 to Form
S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No. 333-32099)                                                                                            
|              | 
|*10(dd)       |  | Amended and Restated Joint Venture Partnership Agreement of The Wells Fund XIFund XIIREIT Joint Venture (Exhibit 10.29 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-83933)                                                                                                                                                  
|              | 
|*10(ee)       |  | Agreement of Sale and Purchase relating to the EYBL CarTex Building (Exhibit 10.54 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)                                                                                                                                                                                        
|              | 
|*10(ff)       |  | Agreement of Purchase and Sale for the Sprint Building (Exhibit 10.5 to Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P., as amended to date, Commission File No.
33-66657)                                                                                                                                                                                                               
|              | 
|*10(gg)       |  | Agreement of Sale and Purchase for the Johnson Matthey Building (Exhibit 10.6 to Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P., as amended to date, Commission File No.
33-66657)                                                                                                                                                                                                      
|              | 
|*10(hh)       |  | Fifth Amendment to Lease for the Johnson Matthey Building (Exhibit 10.7 to Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P., as amended to date, Commission File No.
33-66657)                                                                                                                                                                                                            
|              | 
|*10(ii)       |  | Agreement of Purchase and Sale relating to the Gartner Building (Exhibit 10.63 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-32009)                                                                                                                                                                                            



---

|              |  |                                                                                                                                                                                                                                    
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                            
|              | 
|*10(jj)       |  | Lease Agreement for the Gartner Building (Exhibit 10.64 to Form S-11 Registration Statement of Wells Real Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)                                        
|              | 
|*10(kk)       |  | Purchase and Sale Agreement relating to the sale of the Cort Building (Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund X, L.P. for the quarter ended September 30, 2003, Commission
File No. 0-23719)                      
|              | 
|*10(ll)       |  | Lease Agreement with Alstom Power, Inc. for the Alstom Power  Knoxville Building (Exhibit 10.2 to the Form 10-Q of Wells Real Estate Fund IX, L.P. for the quarter ended September 30,
2004, Commission File No. 0-22039)         
|              | 
|*10(mm)       |  | Purchase and Sale Agreement for the Johnson Matthey Building (Exhibit 10.2 to the Form 10-Q of Wells Real Estate Fund XI, L.P. for the quarter ended September 30, 2004, Commission
File No. 0-25731)                              
|              | 
|*10(nn)       |  | First Amendment to Lease Agreement with Gartner, Inc. for the Gartner Building (Exhibit 10.3 to the Form 10-Q of Wells Real Estate Fund XI, L.P. for the quarter ended September 30, 2004,
Commission File No. 0-25731)            
|              | 
|*10(oo)       |  | Purchase and Sale Agreement for the Alstom PowerKnoxville Building (Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund IX, L.P. for the quarter ended March 31, 2005, Commission
File No. 0-22039)                           
|              | 
|*10(pp)       |  | Purchase and Sale Agreement for the Gartner Building (Exhibit 10.70 to the Form 10-Q of Wells Real Estate Investment Trust, Inc. for the quarter ended March 31, 2005, Commission
File No. 0-25739)                                
|              | 
|*10(qq)       |  | Lease Agreement with Caterpillar, Inc. for the 111 Southchase Boulevard Building (Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund XI, L.P. for the quarter ended September 30, 2006,
Commission File No. 0-25731)          
|              | 
|*10(rr)       |  | Purchase and Sale Agreement for the sale of the 1315 West Century Drive Building (Exhibit 10(uu) to Form 10-K of Wells Real Estate Fund IX, L.P. for the year ended December 31, 2006,
Commission File No. 0-22039)                
|              | 
|*10(ss)       |  | Purchase and Sale Agreement for the sale of the Iomega Building (Exhibit 10(vv) to Form 10-K of Wells Real Estate Fund IX, L.P. for the year ended December 31, 2006, Commission
File No. 0-22039)                                 
|              | 
|10(tt)        |  | Lease Agreement with The EPOCH Group, L.C. for a portion of the 20/20 Building                                                                                                                                                     
|              | 
|10(uu)        |  | Lease Agreement with Blue Cross and Blue Shield of Kansas City for a portion of the 20/20 Building                                                                                                                                 
|              | 
|10(vv)        |  | Guaranty Agreement by Blue Cross and Blue Shield of Kansas City relating to the lease agreement with The EPOCH Group, L.C. for a portion of the 20/20 Building                                                                     
|              | 
|*16           |  | Letter from Ernst & Young LLP dated September 27, 2006 regarding change in accountants (Exhibit 16.1 to the Current Report on Form 8-K of Wells Real Estate Fund XI, L.P. filed on
September 27, 2006, Commission File No. 0-25731)
|              | 
|31.1          |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                             
|              | 
|31.2          |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                             
|              | 
|32.1          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002