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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark one)



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

For the quarterly period ended March 31, 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 0-14463



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WELLS REAL ESTATE FUND I

(Exact name of registrant as specified in its
charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                        |  | 58-1565512                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy., Norcross, Georgia                      |  | 30092-3365                             
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         

N/A

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

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

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund I (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-Q, and we do not intend to publicly update or revise any
forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to
unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to
predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders, and
maintain the value of our real estate properties, may be significantly hindered. See Item 1A in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005 for a discussion of some of the risks and uncertainties,
although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                         |  |         
|-------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                                         |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Consolidated Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Consolidated Balance SheetsMarch 31, 2006 (unaudited) and December 31, 2005                                                            |  | 5       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Partners Capital for the Year Ended December 31, 2005 and the Three Months Ended March 31, 2006 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Consolidated Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                   |  | 17      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                              |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                                 |  | 22      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                                       |  | 23      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                                            |  | 24      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                             |  | 24      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                                         |  | 24      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                                     |  | 25      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                                       |  | 25      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                                |  | 25      



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PART I.    FINANCIAL STATEMENTS

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

The accompanying financial statements should be read in conjunction with the notes to the Partnerships financial statements and Managements
Discussion and Analysis of Financial Condition and Results of Operations included both in this report on Form 10-Q and in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005. The Partnerships results of
operations for the three months ended March 31, 2006 are not necessarily indicative of the operating results expected for the full year.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS



|                                                                                                                                               |  |                |            |                  |   |           
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- | - | ----------
|                                                                                                                                               |  | (Unaudited)    |            |                 
|                                                                                                                                               |  | March 31, 2006 |            | December 31,2005
|Real Estate, at Cost:                                                                                                                          |  |                |            |                  |   |           
|Land                                                                                                                                           |  | $              | 1,238,819  |                  | $ | 1,238,819 
|Building and improvements, less accumulated depreciation of $7,090,391 and $7,020,755 as of March 31, 2006 and December 31, 2005,
respectively |  |                | 3,744,056  |                  |   | 3,813,692 
|                                                                                                                                               |  |                |            |                  |   |           
|Total real estate assets                                                                                                                       |  |                | 4,982,875  |                  |   | 5,052,511 
|                                                                                                                                               |  |               
|Investment in joint ventures                                                                                                                   |  |                | 2,089,946  |                  |   | 2,515,508 
|Cash and cash equivalents                                                                                                                      |  |                | 3,762,054  |                  |   | 3,942,166 
|Accounts receivable, net                                                                                                                       |  |                | 147,504    |                  |   | 142,791   
|Due from Fund I and Fund II Tucker                                                                                                             |  |                | 8,927      |                  |   | 0         
|Deferred leasing costs, net                                                                                                                    |  |                | 91,992     |                  |   | 98,069    
|Other assets                                                                                                                                   |  |                | 110,352    |                  |   | 91,846    
|                                                                                                                                               |  |                |            |                  |   |           
|Total assets                                                                                                                                   |  | $              | 11,193,650 |                  | $ | 11,842,891
|                                                                                                                                               |  |                |            |                  |   |           

LIABILITIES AND PARTNERS CAPITAL



|                                                                     |  |   |            |  |   |           
|-------------------------------------------------------------------- |  | - | ---------- |  | - | ----------
|Liabilities:                                                         |  |   |            |  |   |           
|Accounts payable, accrued expenses, and refundable security deposits |  | $ | 185,458    |  | $ | 298,543   
|Accrued capital expenditures                                         |  |   | 5,021      |  |   | 87,286    
|Due to affiliates                                                    |  |   | 13,144     |  |   | 18,089    
|Deferred income                                                      |  |   | 11,693     |  |   | 3,822     
|                                                                     |  |   |            |  |   |           
|Total liabilities                                                    |  |   | 215,316    |  |   | 407,740   
|                                                                     |  |  
|Partners capital:                                                   |  |   |            |  |   |           
|Limited partners:                                                    |  |   |            |  |   |           
|Class A  98,716 units issued and outstanding                        |  |   | 10,978,334 |  |   | 11,435,151
|Class B  42,568 units issued and outstanding                        |  |   | 0          |  |   | 0         
|General partners                                                     |  |   | 0          |  |   | 0         
|                                                                     |  |   |            |  |   |           
|Total partners capital                                              |  |   | 10,978,334 |  |   | 11,435,151
|                                                                     |  |   |            |  |   |           
|Total liabilities and partners capital                              |  | $ | 11,193,650 |  | $ | 11,842,891
|                                                                     |  |   |            |  |   |           

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                     |  |                                          |          |   |      |   |         |  
|---------------------------------------------------- |  | ---------------------------------------- | -------- | - | ---- | - | ------- | -
|                                                     |  | (Unaudited) Three Months Ended March 31, |         
|                                                     |  | 2006                                     |          |   | 2005 |  
|REVENUES:                                            |  |                                          |          |   |      |   |         |  
|Rental income                                        |  | $                                        | 259,078  |   |      | $ | 262,958 |  
|Reimbursement income                                 |  |                                          | 44,161   |   |      |   | 39,502  |  
|Interest and other income                            |  |                                          | 40,440   |   |      |   | 32,884  |  
|                                                     |  |                                          |          |   |      |   |         |  
|Total revenues                                       |  |                                          | 343,679  |   |      |   | 335,344 |  
|                                                     |  |                                         
|EXPENSES:                                            |  |                                          |          |   |      |   |         |  
|Legal and accounting                                 |  |                                          | 121,883  |   |      |   | 79,069  |  
|Property operating costs                             |  |                                          | 112,914  |   |      |   | 120,661 |  
|Depreciation                                         |  |                                          | 69,636   |   |      |   | 66,927  |  
|Partnership administration                           |  |                                          | 45,573   |   |      |   | 46,521  |  
|Management and leasing fees                          |  |                                          | 24,329   |   |      |   | 25,274  |  
|Bad debt expense                                     |  |                                          | 9,526    |   |      |   | 0       |  
|                                                     |  |                                          |          |   |      |   |         |  
|Total expenses                                       |  |                                          | 383,861  |   |      |   | 338,452 |  
|                                                     |  |                                          |          |   |      |   |         |  
|                                                     |  |                                         
|LOSS FROM REAL ESTATE OPERATIONS                     |  |                                          | (40,182  | ) |      |   | (3,108  | )
|                                                     |  |                                         
|EQUITY IN INCOME (LOSS) OF JOINT VENTURES            |  |                                          | (416,635 | ) |      |   | 5,166   |  
|                                                     |  |                                          |          |   |      |   |         |  
|INCOME (LOSS) BEFORE MINORITY INTEREST               |  |                                          | (456,817 | ) |      |   | 2,058   |  
|                                                     |  |                                         
|MINORITY INTEREST IN LOSS OF CONSOLIDATED SUBSIDIARY |  |                                          | 0        |   |      |   | 496     |  
|                                                     |  |                                          |          |   |      |   |         |  
|NET INCOME (LOSS)                                    |  | $                                        | (456,817 | ) |      | $ | 2,554   |  
|                                                     |  |                                          |          |   |      |   |         |  
|                                                     |  |                                         
|NET INCOME (LOSS) ALLOCATED TO:                      |  |                                          |          |   |      |   |         |  
|CLASS A LIMITED PARTNERS                             |  | $                                        | (456,817 | ) |      | $ | 2,554   |  
|                                                     |  |                                          |          |   |      |   |         |  
|CLASS B LIMITED PARTNERS                             |  | $                                        | 0        |   |      | $ | 0       |  
|                                                     |  |                                          |          |   |      |   |         |  
|                                                     |  |                                         
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:          |  |                                          |          |   |      |   |         |  
|CLASS A                                              |  | $                                        | (4.63    | ) |      | $ | 0.03    |  
|                                                     |  |                                          |          |   |      |   |         |  
|CLASS B                                              |  | $                                        | 0.00     |   |      | $ | 0.00    |  
|                                                     |  |                                          |          |   |      |   |         |  

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2005

AND THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)



|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  
|----------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ------ | ------ | - | -------- | - |  | - | - |  | - | ---------- | -
|                                                                                                      |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |       
|                                                                                                      |  | Class A          |  |        | Class B          |   |                         |       
|                                                                                                      |  | Units            |  | Amount |                  |   | Units                   |        | Amount |   |          |  
|BALANCE, DECEMBER 31, 2004                                                                            |  | 98,716           |  | $      | 17,466,584       |   |                         | 42,568 |        | $ | 0        |   |  | $ | 0 |  | $ | 17,466,584 |  
|                                                                                                      |  |                  |  |        |                  |  
|Net income (loss)                                                                                     |  | 0                |  |        | (137,569         | ) |                         | 0      |        |   | 106,136  |   |  |   | 0 |  |   | (31,433    | )
|Distributions of net sale proceeds ($59.71 and $2.49 per Class A Unit and Class B Unit, respectively) |  | 0                |  |        | (5,893,864       | ) |                         | 0      |        |   | (106,136 | ) |  |   | 0 |  |   | (6,000,000 | )
|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  
|BALANCE, DECEMBER 31, 2005                                                                            |  | 98,716           |  |        | 11,435,151       |   |                         | 42,568 |        |   | 0        |   |  |   | 0 |  |   | 11,435,151 |  
|                                                                                                      |  |                  |  |        |                  |  
|Net loss                                                                                              |  | 0                |  |        | (456,817         | ) |                         | 0      |        |   | 0        |   |  |   | 0 |  |   | (456,817   | )
|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  
|BALANCE, MARCH 31, 2006                                                                               |  | 98,716           |  | $      | 10,978,334       |   |                         | 42,568 |        | $ | 0        |   |  | $ | 0 |  | $ | 10,978,334 |  
|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                     |  |                                         |           |   |      |   |            |  
|------------------------------------------------------------------------------------ |  | --------------------------------------- | --------- | - | ---- | - | ---------- | -
|                                                                                     |  | (Unaudited) Three Months EndedMarch 31, |          
|                                                                                     |  | 2006                                    |           |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                                         |           |   |      |   |            |  
|Net income (loss)                                                                    |  | $                                       | (456,817  | ) |      | $ | 2,554      |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                                         |           |   |      |   |            |  
|Depreciation                                                                         |  |                                         | 69,636    |   |      |   | 66,927     |  
|Amortization of deferred leasing costs                                               |  |                                         | 7,191     |   |      |   | 7,537      |  
|Equity in (income) loss of joint ventures                                            |  |                                         | 416,635   |   |      |   | (5,166     | )
|Minority interest                                                                    |  |                                         | 0         |   |      |   | (496       | )
|Operating changes in assets and liabilities:                                         |  |                                         |           |   |      |   |            |  
|Increase in accounts receivable, net                                                 |  |                                         | (4,713    | ) |      |   | (25,422    | )
|Increase in other assets                                                             |  |                                         | (18,506   | ) |      |   | (9,041     | )
|Decrease in accounts payable, accrued expenses, and refundable security deposits     |  |                                         | (113,085  | ) |      |   | (17,595    | )
|Increase (decrease) in deferred income                                               |  |                                         | 7,871     |   |      |   | (500       | )
|Decrease in due to affiliates                                                        |  |                                         | (4,945    | ) |      |   | (2,259,390 | )
|                                                                                     |  |                                         |           |   |      |   |            |  
|Net cash used in operating activities                                                |  |                                         | (96,733   | ) |      |   | (2,240,592 | )
|                                                                                     |  |                                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                                         |           |   |      |   |            |  
|Investment in real estate assets                                                     |  |                                         | (82,265   | ) |      |   | 0          |  
|Investment in deferred leasing costs                                                 |  |                                         | (1,114    | ) |      |   | (103       | )
|Investment in joint ventures                                                         |  |                                         | 0         |   |      |   | (406,188   | )
|                                                                                     |  |                                         |           |   |      |   |            |  
|Net cash used in investing activities                                                |  |                                         | (83,379   | ) |      |   | (406,291   | )
|                                                                                     |  |                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                                         |           |   |      |   |            |  
|Contributions from minority interest partner                                         |  |                                         | 0         |   |      |   | 1,005      |  
|                                                                                     |  |                                         |           |   |      |   |            |  
|Net cash provided by financing activities                                            |  |                                         | 0         |   |      |   | 1,005      |  
|                                                                                     |  |                                         |           |   |      |   |            |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                            |  |                                         | (180,112  | ) |      |   | (2,645,878 | )
|                                                                                     |  |                                        
|CASH AND CASH EQUIVALENTS, beginning of period                                       |  |                                         | 3,942,166 |   |      |   | 12,304,254 |  
|                                                                                     |  |                                         |           |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                             |  | $                                       | 3,762,054 |   |      | $ | 9,658,376  |  
|                                                                                     |  |                                         |           |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:              |  |                                         |           |   |      |   |            |  
|Accrued capital expenditures                                                         |  | $                                       | 5,021     |   |      | $ | 0          |  
|                                                                                     |  |                                         |           |   |      |   |            |  
|Write-off of fully amortized deferred leasing costs                                  |  | $                                       | 486       |   |      | $ | 0          |  
|                                                                                     |  |                                         |           |   |      |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2006 (unaudited)



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

Wells Real Estate Fund I (the
Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, Inc. (Wells Capital), a Georgia corporation, serving as its general partners (collectively, the General
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 April 26, 1984 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing income-producing commercial properties for investment purposes. The Partnership has two classes
of limited partnership interests, Class A and Class B Units. 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 September 6, 1984, the Partnership commenced an offering of up to $50,000,000 of Class A or Class B
limited partnership units ($250.00 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 5,000 units on
February 15, 1985. The offering was terminated on September 5, 1986, at which time the Partnership had sold approximately 98,716 Class A Units and 42,568 Class B Units representing capital contributions of $35,321,000.

During the periods presented, the Partnership owned direct interests in the following properties:



|                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.      Paces Pavilion A medical office building located in Atlanta, Georgia in which the Partnership owns a condominium interest of approximately 27% of the
property.
|2.      Black Oak Plaza A retail shopping center located in
Knoxville, Tennessee.                                                                                      

During the periods presented, the Partnership owned interests in the following properties through the affiliated
joint ventures (the Joint Ventures) listed below:



|                          |  |                                                            |  |                                                                            
|------------------------- |  | ---------------------------------------------------------- |  | ---------------------------------------------------------------------------
|Joint Ventures            |  | Joint Venture Partners                                     |  | Properties                                                                 
|Wells-Baker Associates    |  |   Wells Real Estate Fund I   Wells & Associates, Inc.(1) |  | No properties owned during the periods presented.                          
|Fund I and Fund II Tucker |  |   Wells Real Estate Fund I   Fund II and Fund II-OW(2)   |  | 1. Heritage Place(3) A commercial office complex located in
Tucker, Georgia



| | (1) | Wells & Associates, Inc. is an affiliate of the General Partners.
| | --- | -----------------------------------------------------------------



| | (2) | Fund II and Fund II-OW is a joint venture between Wells Real Estate Fund II and Wells Real
Estate Fund II-OW.
| | --- | -------------------------------------------------------------------------------------------------------------



| | (3) | The retail portion of this property (approximately 30%) was sold in April 2003, and the
remaining office component of this property was sold in May 2006.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



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Wells Real Estate Fund II and Wells Real Estate Fund II-OW are affiliated with the Partnership through common general
partners. Each of the properties described above was acquired on an all-cash basis. For further information regarding the Joint Ventures and foregoing properties, refer to the Partnerships Form 10-K for the year ended December 31, 2005.



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

Basis of
Presentation

The consolidated financial statements include the accounts of the Partnership and Wells-Baker Associates. All significant intercompany
balances have been eliminated in consolidation. Minority interest represents Wells & Associates, Inc.s interest in Wells-Baker Associates of approximately 10% for each of the periods presented.

The consolidated financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission,
including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles
(GAAP) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and
consistently present the results for those periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the consolidated financial statements and footnotes included in the
Partnerships Form 10-K for the year ended December 31, 2005.

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 No. (FIN) 46(R), Consolidation of Variable Interest Entities, which supersedes FIN 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements.
The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major decision or any
action that would materially affect the Joint Ventures, or their real property investments. Accordingly, upon applying the provisions of Statement of Financial Accounting Standard (SFAS) No. 94, Consolidation of All
Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in the Joint Ventures using the equity method of
accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income (loss)
and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

Other Assets

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



|                             |  |                |         |                   |   |       
|---------------------------- |  | -------------- | ------- | ----------------- | - | ------
|                             |  | March 31, 2006 |         | December 31, 2005
|Refundable security deposits |  | $              | 75,093  |                   | $ | 87,215
|Interest receivable          |  |                | 14,262  |                   |   | 0     
|Prepaid association dues     |  |                | 12,578  |                   |   | 0     
|Prepaid insurance            |  |                | 8,419   |                   |   | 4,631 
|                             |  |                |         |                   |   |       
|Total                        |  | $              | 110,352 |                   | $ | 91,846
|                             |  |                |         |                   |   |       



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Refundable security deposits represent cash deposits received from tenants. Pursuant to the respective leases, the
Partnership 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 insurance and
prepaid association dues are recognized over the periods to which the respective contract or membership relates. 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.

Distribution of Net Cash from Operations

As more fully described in the partnership agreement, net cash from operations, if available, is generally distributed quarterly to the limited partners as follows:



| |  |  | First, to the Class A limited partners until such limited partners have received distributions equal to a 9% per annum return on their respective adjusted capital
contributions, as defined.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, to the Class B limited partners until such limited partners have received distributions equal to a 9% per annum return on their respective adjusted capital
contributions, as defined.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, to the General Partners until they have received 10% of total distributions for such year.
| | - |  | -------------------------------------------------------------------------------------------------



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

Distribution of Net Sale Proceeds

As more fully described in the
partnership agreement, after satisfying all debts and liabilities and establishing reserves deemed reasonably necessary in the sole discretion of the General Partners, and net proceeds from the sale of the Partnerships properties are to be
distributed to partners in accordance with their respective positive capital account balances after the allocation of any gain on sale.

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 and amortization and cost recovery and the gain on the sale of assets. Net income, as defined, of the Partnership is generally allocated each year in the same proportion that net
cash from operations is distributed to the partners.

As more fully described in the partnership agreement, net loss, depreciation, and amortization
deductions for each fiscal year will be allocated as follows: (a) 99% to the Class B limited partners 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.

As more fully described in the
partnership agreement, gain on the sale or exchange of the Partnerships properties is generally allocated as follows: (a) first, to partners having negative capital accounts, if any, until all negative capital accounts have been restored
to zero; (b) then to the limited partners, in proportion to and to the extent of, the amount by which (i) the excess of each limited partners capital contribution over all prior distributions to such limited partner under certain
partnership agreement provisions, plus an amount equal to such limited partners cumulative distribution, less the sum of all prior distributions of cash available for distribution previously made to such limited partner, exceeds (ii) such
limited partners adjusted capital account balance as of the sale date; (c) then to the General Partners, in proportion to and to the extent of, the amount by which (i) the excess of each of the General Partners adjusted capital
contribution over all prior distributions to such General Partner under certain partnership agreement provisions, exceeds (ii) such General Partners adjusted capital account balance as of the sale date; and (d) thereafter 85% to the
limited partners and 15% to the General Partners.



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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, either directly or through the Partnerships investment in
Fund I and Fund II Tucker, 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.

Reclassifications

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

Recent Accounting Pronouncements

In June 2005, the Financial
Accounting Standards Board (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 statement is not expected to have a material effect on the Partnerships financial
statements.



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

Impairment of Real Estate Assets

Fund I and Fund II Tucker considers real estate assets to be held for sale, as defined by SFAS No. 144, at the point at which a sale contract is
executed. During first quarter 2006, Fund I and Fund II Tucker executed a contract to sell the office component of Heritage Place for a gross sale price of $4,215,000. Upon entering into this contract, Fund I and Fund II Tucker determined that the
carrying value of the related real estate assets was not recoverable as compared to the gross sale price, less estimated costs to sell. Accordingly, Fund I and Fund II Tucker reduced the carrying value of such real estate assets to the estimated
fair value by recognizing an impairment loss of approximately $795,000 during the three months ended March 31, 2006, of which approximately $413,000 is allocable to the Partnership. This impairment loss is included in income (loss) from
discontinued operations in the table below.



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Summary of Financial Information

Condensed financial information for Fund I and Fund II Tucker for the three months ended March 31, 2006 and 2005, respectively, is presented below:



|                          |  |                             |     |                                |   |      |                                           |   |                             |   |  |      |      |   |      |   |          |   |  |      |        |  |   |          |   |  |   |      
|------------------------- |  | --------------------------- | --- | ------------------------------ | - | ---- | ----------------------------------------- | - | --------------------------- | - |  | ---- | ---- | - | ---- | - | -------- | - |  | ---- | ------ |  | - | -------- | - |  | - | -----
|                          |  | Total Revenues              |     | Loss FromContinuing Operations |   |      | Income (Loss) FromDiscontinued Operations |   | Net Income (Loss)          
|                          |  | Three Months EndedMarch 31, |     | Three Months EndedMarch 31,    |   |      | Three Months EndedMarch 31,               |   | Three Months EndedMarch 31,
|                          |  | 2006                        |     | 2005                           |   | 2006 |                                           |   | 2005                        |   |  | 2006 |      |   | 2005 |   | 2006     |   |  | 2005
|Fund I and Fund II Tucker |  | $                           | 929 |                                | $ | 0    |                                           | $ | (2,267                      | ) |  | $    | (523 | ) |      | $ | (800,343 | ) |  | $    | 10,474 |  | $ | (802,610 | ) |  | $ | 9,951
|                          |  |                             |     |                                |   |      |                                           |   |                             |   |  |      |      |   |      |   |          |   |  |      |        |  |   |          |   |  |   |      

The Partnership allocates operating income (loss) and gain (loss) on sale of properties generated by the Joint
Ventures to its Class A and Class B limited partners pursuant to the respective partnership agreement provisions outlined in Note 2. The components of income (loss) from discontinued operations recognized by the Joint Ventures results are
provided below:



|                          |  |                |        |   |                 |   |          |             |  |       |   |  |                 |          |                 |  |             |        |       |   |   |  |   |   |  |   |       
|------------------------- |  | -------------- | ------ | - | --------------- | - | -------- | ----------- |  | ----- | - |  | --------------- | -------- | --------------- |  | ----------- | ------ | ----- | - | - |  | - | - |  | - | ------
|                          |  | March 31, 2006 |        |   | March 31, 2005 
|                          |  | OperatingLoss  |        |   | Impairment Loss |   |          | Gainon Sale |  | Total |   |  | OperatingIncome |          | Impairment Loss |  | Gainon Sale |        | Total
|Fund I and Fund II Tucker |  | $              | (5,531 | ) |                 | $ | (794,812 | )           |  | $     | 0 |  | $               | (800,343 | )               |  | $           | 10,474 |       | $ | 0 |  | $ | 0 |  | $ | 10,474
|                          |  |                |        |   |                 |   |          |             |  |       |   |  |                 |          |                 |  |             |        |       |   |   |  |   |   |  |   |       

Due from Fund I and Fund II Tucker

As presented in the accompanying balance sheets, due from Fund I and Fund II Tucker as of March 31, 2006 and December 31, 2005 represents operating cash flow generated by Fund I and Fund II Tucker for the
three months ended March 31, 2006 and December 31, 2005, respectively, which is attributable to the Partnership.



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

Management and Leasing Fees

Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the
management and leasing of the Partnerships properties, owned directly or through the Joint Ventures, equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the
one-time lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties, or (b) in the
case of commercial properties leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term.

From March 1987 through December 2004, Wells Management elected to defer the receipt of management and leasing fees and initial lease-up costs due from the Partnership
with respect to the properties owned by the Partnership directly and through its interest in the Joint Ventures. Accordingly, as of December 31, 2004, the Partnership owed aggregate management and leasing fees to Wells Management of $3,032,773,
of which $2,254,037 was recorded as due to affiliates; the remaining $778,736 was due from Fund I and Fund II Tucker and, accordingly, included in investment in Joint Ventures in the accompanying consolidated balance sheet. In March 2005, these
amounts due were paid to Wells Management. The Partnership began paying management and leasing fees to Wells Management from current operating cash flow in the first quarter of 2005. The Partnerships share of management and leasing fees and
lease acquisition costs incurred from properties owned directly and through Fund I and Fund II Tucker is $18,282 and $18,516 for the three months ended March 31, 2006 and 2005, respectively.

Administration Reimbursements

Wells Capital 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



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among other entities affiliated with the General Partners based on estimates of the amount of time spent on the respective entities by individual 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 $26,510 and $40,140 for the three months ended
March 31, 2006 and 2005.

Due to Affiliates

As of
March 31, 2006 and December 31, 2005, due to affiliates was comprised of the following amounts:



|                                                                           |  |                |        |                   |   |       
|-------------------------------------------------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                                                           |  | March 31, 2006 |        | December 31, 2005
|Management and leasing fees due to Wells Management                        |  | $              | 234    |                   | $ | 439   
|Administrative reimbursements due to Wells Management and/or Wells Capital |  |                | 12,910 |                   |   | 17,650
|                                                                           |  |                |        |                   |   |       
|                                                                           |  | $              | 13,144 |                   | $ | 18,089
|                                                                           |  |                |        |                   |   |       

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 and 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 Wells Real Estate Funds, Inc. (WREF). The
operations of Wells Capital and Wells Management represent substantially all of the business of WREF. Accordingly, we focus on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event
that WREF 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 March 31, 2006, the General Partners believe that WREF generates adequate cash flow from operations and has adequate liquidity
available in the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.



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

Johnston Action

On January 17, 2003, the Partnership was served with a putative class action (Roy Johnston v. Wells Real Estate Fund I,Superior Court of Gwinnett County,
Georgia, Civil Action No. 03-A00525-6, the Johnston Action) by a limited partner holding Class B Units on behalf of all limited partners holding Class B Units as of January 15, 2003. The plaintiff alleged that the terms of the
partnership agreement were inconsistent with the original intent of the parties thereto such that the alleged original intent would have provided the limited partners holding Class B Units with a priority in the allocation and payment of net
property sale proceeds. On May 7, 2004, the Court granted summary judgment in favor of the Partnership on grounds of statutes of limitation and laches. By an order entered on December 14, 2004, the court granted the plaintiffs motion
to withdraw the notice of appeal, which had previously been filed by the plaintiff. On March 31, 2005, the Court entered an Order Denying Intervenors Counsels Motion for Award of Attorney Fees and Reimbursement of Expenses.
Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.



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As of this date, the only contested matter remaining in this action is the Partnerships motion to recover its
attorneys fees and expenses of litigation from plaintiff and his counsel. On April 20, 2006, the Court held a hearing addressing only the liability aspects of the Partnerships motion for attorneys fees and expenses. The Court
has not yet ruled on the Partnerships motion.

Hendry Action

As a matter of background, on or about March 12, 2004, a putative class action complaint (the Original Complaint) was filed by four individuals (the plaintiffs) against the Partnership,
and Wells Capital and Leo F. Wells, III, the General Partners of the Partnership, as well as Wells Management and Wells Investment Securities, Inc. (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia,
Civil Action No. 04-A-2791-2). The plaintiffs filed the Original Complaint purportedly on behalf of all limited partners holding Class B Units of the Partnership as of January 15, 2003. On June 3, 2004, the Court granted the
plaintiffs motion to permit voluntary dismissal, and the Original Complaint was dismissed without prejudice. On June 18, 2004, the defendants filed a motion to recover their attorneys fees and costs from the plaintiffs and their
counsel. The Court held a hearing on part, but not all, of the issues raised in that motion on August 3, 2004, and took the matter under advisement without ruling on any part of the motion. On June 24, 2005, the Court held another hearing
on the defendants motion to recover their attorneys fees. The Court took the matter under advisement, and has not yet ruled on the motion.

On
or about November 24, 2004, the plaintiffs filed a second putative class action complaint (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04A-13051-6, the Hendry
Action) against the Partnership, the General Partners, and Wells Management. The Hendry Action states that the Partnership is named only as an allegedly necessary party defendant and that the plaintiffs seek no money from or relief at the
expense of the Partnership. As of March 31, 2006, Wells Capital had incurred approximately $692,000 in legal fees, costs, and expenses related to defending against the Hendry Action. The indemnification provisions of the partnership agreement
require the Partnership to indemnify the General Partners for their costs of defending the Hendry Action under certain circumstances upon the conclusion of this litigation. At this time, management is unable to determine whether the likelihood of an
unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.

The plaintiffs filed the Hendry Action purportedly on behalf of all limited partners of the Partnership holding Class B Units as of January 9, 2002. The Hendry Action alleges, among other things, that the General Partners breached
their fiduciary duties to the limited partners by, among other things: (a) failing to timely disclose alleged inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale proceeds;
(b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale proceeds; and (c) not accepting a settlement offer proposed by a
holder of Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant (Johnston), in which the Court subsequently granted summary judgment in favor of the Partnership. The Hendry
Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be materially misleading. In addition, the Hendry Action alleges that the General Partners
and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to an alleged waiver of deferred management fees. The plaintiffs seek, among other remedies, the following: judgment
against the General Partners of the Partnership, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by the General Partners directly or through their affiliates; a declaration that the consent
obtained as a result of an April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of the June 2000 consent solicitation to allegedly waive Wells Managements deferred management fees; and an award to
the plaintiffs of their attorneys fees, costs, and expenses.

On January 28, 2005, the defendants filed motions for summary judgment and motions
to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed briefs in opposition to the defendants motions. Pursuant to orders



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entered July 1, 2005, the Court granted the defendants motions to dismiss and for summary judgment on all counts in the complaint. Thus, this
action has now been dismissed, subject to plaintiffs right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the
plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal. After both sides had filed briefs in support of their respective positions, on February 15, 2006, the Court heard argument on plaintiffs motion to
vacate and to re-enter the judgments previously entered on July 1, 2005. Following the argument, the Court stated orally from the bench that he would grant the motion, so the judgments could be re-entered to allow plaintiffs
thirty days within which to file a notice of appeal. The Court has not yet entered an order granting this motion.

On or about August 8, 2005, the
defendants filed a motion for attorneys fees and expenses of litigation. On or about August 12, 2005, the plaintiffs filed a motion for attorneys fees and expenses of litigation as to one defense asserted by defendants. On
April 20, 2006, the Court held a hearing addressing only the liability aspects on the Partnerships and plaintiffs motions for attorneys fees and expenses. The Court has not yet ruled on either motion.



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

On May 10, 2006, Fund I and Fund II Tucker
sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a result of the sale, Fund I and Fund II Tucker received net sale proceeds of approximately $4,031,000, of which approximately
$2,092,000 is allocable to the Partnership. Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000 in order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell, during the three
months ended March 31, 2006, and additionally recognized a gain on sale of approximately $10,000 upon closing the transaction. Approximately $(413,000) and $5,000 of the impairment loss and gain on sale are allocable to the Partnership,
respectively. The gain on sale may be adjusted as additional information becomes available in subsequent periods.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto. See also Cautionary Note Regarding Forward-Looking Statements
preceding Part I, as well as the notes to our consolidated financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended
December 31, 2005.

Overview

Management believes
that the Partnership typically operates through the following five key life cycle phases. 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



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

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

Portfolio Overview

We are currently in the disposition-and-liquidation phase of our life cycle. We have sold four assets including the
office component of Heritage Place, which closed in May 2006. We are continuing the disposition process, having signed a lease extension with Eye Consultants of Atlanta/Piedmont System Ambulatory Surgery Center, LLC at Paces Pavilion extending their
lease term from December 31, 2006 through August 31, 2014. In addition, we have selected a broker to market the remaining two properties, Paces Pavilion and Black Oak Plaza, for sale. We continue to aggressively pursue leasing
opportunities that will increase occupancy at the remaining properties that we believe will result in the best disposition pricing for our limited partners.

The General Partners are currently reserving operating cash flows to limited partners in order to fund any additional legal costs in connection with the litigation discussed herein, future operating costs, and lease-up costs anticipated
with attempts to increase occupancy at Paces Pavilion and Black Oak Plaza.

Property Summary

As we move further into the disposition-and-liquidation phase, we 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 seek to maximize



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##### Table of Contents

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 the remaining properties are positioned for sale, our attention will shift to locating suitable buyers and negotiating purchase-sale contracts that will attempt to maximize the total return to
the limited partners and minimize contingencies and our post-closing involvement with the buyer.

Information relating to the properties owned or
previously owned by the Partnership or joint ventures is provided below:



| |  |  | Crowes Crossing was sold on January 11, 2001.
| | - |  | ----------------------------------------------



| |  |  | Cherokee Commons was sold on October 1, 2001.
| | - |  | ---------------------------------------------



| |  |  | Heritage Place originally included both an office component and a retail shopping center. The retail center, which represented approximately 30% of the premises, was sold on
April 7, 2003. The remaining office component was sold on May 10, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Peachtree Place originally included two buildings. One building was sold on August 31, 2000, and the remaining building sold on June 18, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Paces Pavilion continues to operate at an approximate 90% occupancy level.
| | - |  | --------------------------------------------------------------------------



| |  |  | Black Oak Plaza is approximately 73% leased, and leasing efforts at the center continue.
| | - |  | ----------------------------------------------------------------------------------------

Liquidity and Capital Resources

Overview

Our operating strategy entails funding expenses related to the recurring operations of the properties owned by the Partnership, directly and through the Joint Ventures, with operating cash flows, and assessing the
amount of remaining cash flows that will be required to fund known re-leasing costs, other capital improvements, and portfolio expenses. Any residual operating cash flows are generally considered available for distribution to the Class A
limited partners. Unless distributions of operating cash flows are reserved, distributions are generally paid to the limited partners quarterly. As a result, the ongoing monitoring of our cash position is critical to ensure that adequate liquidity
and capital resources are available. Economic downturns in one or more of our core markets could adversely impact the ability of 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

Cash used in operating activities was approximately $97,000 and $2,241,000 for the three months ended March 31,
2006 and 2005, respectively. The 2006 decrease in use of cash is primarily due to the payment of deferred management and leasing fees to Wells Management in March 2005 of approximately $2,254,000 (See Note 4 of the accompanying consolidated
financial statements).

We do not expect to receive operating distributions from Fund I and Fund II Tucker in the near-term, as the remaining office
component of Heritage Place was sold in May 2006. Future operating distributions paid to limited partners will be largely dependent upon the amount of cash generated from the directly owned properties, 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 directly by the Partnership.

We
believe that the cash on hand, including net proceeds from the sale of properties, is sufficient to cover our working capital needs, including liabilities of approximately $215,000 as of March 31, 2006. We anticipate that we will be able to
fund our proportionate share of the anticipated capital expenditures noted above using current and future operating cash flow and net sale proceeds currently being reserved.



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##### Table of Contents

Long-Term Liquidity

We expect that our future sources of capital will be primarily derived from net proceeds generated from the sale of properties and operating cash flows generated from Black Oak Plaza and Paces Pavilion. 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 directly.

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, or interest therein, on an all-cash basis that are pre-leased to creditworthy tenants.

We fund capital expenditures primarily related to tenant improvements for the purpose of readying properties for re-leasing, and building improvements for
the purpose of maintaining the quality of our properties and readying properties for sale. As leases expire, we attempt to re-lease space to existing tenants 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 out of operating cash flows will be required to be funded by the Partnership and the respective joint venture partners in proportion to their respective ownership interests.

Our cash management policy typically includes first utilizing current period operating cash flows 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 March 31, 2006, we had received, used, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



|                                            |  |                   |           |                                      |      |         |                                               |   |                          |  |                                                              |           |                                                                              |                                       |  |   |           |  |   |          
|------------------------------------------- |  | ----------------- | --------- | ------------------------------------ | ---- | ------- | --------------------------------------------- | - | ------------------------ |  | ------------------------------------------------------------ | --------- | ---------------------------------------------------------------------------- | ------------------------------------- |  | - | --------- |  | - | ---------
|Property Sold                               |  | Net Sale Proceeds |           | PartnershipsApproximate Ownership % |      |         | Net SaleProceeds Allocated to the Partnership |   | Use of Net Sale Proceeds |  | Net Sale ProceedsDistributed
toPartners as of March 31, 2006 |           | Undistributed NetSale
Proceeds Currently Being Reserved as of March 31, 2006
|                                            |  |                   |           | Amount                               |      | Purpose |                                               |  
|                                            |  |                   |           |                                      |      |         |                                              
|Peachtree Place(partial sale in 2000)       |  | $                 | 704,496   |                                      | 90.0 | %       |                                               | $ | 633,695                  |  | $                                                            | 633,695   |                                                                              |   Payment of deferred management fee |  | $ | 0         |  | $ | 0        
|                                            |  |                   |           |                                      |      |         |                                              
|Crowes Crossing(sold in 2001)              |  |                   | 6,486,652 |                                      | 100  | %       |                                               |   | 6,486,652                |  |                                                              | 1,481,087 |                                                                              |   Payment of deferred management fee |  |   | 5,005,565 |  |   | 0        
|                                            |  |                   |           |                                      |      |         |                                              
|Cherokee Commons(sold in 2001)              |  |                   | 8,414,089 |                                      | 25.3 | %       |                                               |   | 2,126,109                |  |                                                              | 23,331    |                                                                              |   Payment of deferred management fee |  |   | 994,435   |  |   | 1,108,343
|                                            |  |                   |           |                                      |      |         |                                              
|Heritage Place retail portion(sold in 2003) |  |                   | 3,207,708 |                                      | 51.9 | %       |                                               |   | 1,665,121                |  |                                                              | 266,967   |                                                                              |   Payment of deferred management fee |  |   | 0         |  |   | 1,398,154
|                                            |  |                   |           |                                      |      |         |                                              
|Peachtree Place(remainder sold in 2004)     |  |                   | 953,670   |                                      | 90.0 | %       |                                               |   | 857,826                  |  |                                                              | 253,200   |                                                                              |   Payment of deferred management fee |  |   | 0         |  |   | 604,626  
|                                            |  |                   |           |                                      |      |         |                                               |   |                          |  |                                                              |           |                                                                              |                                       |  |   |           |  |   |          
|                                            |  |                   |           |                                      |      |         |                                              
|Total                                       |  |                   |           |                                      |      |         |                                               | $ | 11,769,403               |  | $                                                            | 2,658,280 |                                                                              |                                       |  | $ | 6,000,000 |  | $ | 3,111,123
|                                            |  |                   |           |                                      |      |         |                                               |   |                          |  |                                                              |           |                                                                              |                                       |  |   |           |  |   |          

Upon evaluating the capital needs of the properties in which we currently hold an interest, our General Partners
have estimated that reserves of substantially all of the undistributed net sale proceeds above will be required to fund our share of anticipated re-leasing costs and capital improvements at Paces Pavilion and Black Oak Plaza.



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Results of Operations

Rental income and reimbursement income of $262,958 and $39,502, respectively, for the three months ended March 31, 2005 was relatively stable compared to $259,078 and $44,161, respectively, for the three months ended March 31,
2006. Until Black Oak Plaza or Paces Pavilion are sold, future rental income and reimbursement income are expected to remain relatively consistent with the three months ended March 31, 2006.

Interest and other income increased from $32,884 for the three months ended March 31, 2005 to $40,440 for the three months ended March 31, 2006, primarily as a
result of an increase in the daily interest yield. Future levels of interest income will be largely dependent upon the timing of utilizing net sale proceeds for anticipated re-leasing costs and capital improvements at Paces Pavilion and Black Oak
Plaza and the fluctuation in future interest rate yields.

Property operating costs decreased from $120,661 for the three months ended March 31, 2005
to $112,914 for the three months ended March 31, 2006, primarily as a result of a reduction in property administrative costs. Until Black Oak Plaza or Paces Pavilion are sold, future property operating costs are expected to remain relatively
consistent with the three months ended March 31, 2006.

Depreciation expense increased from $66,927 for the three months ended March 31, 2005 to
$69,636 for the three months ended March 31, 2006, primarily due to the additional capital expenditures placed in service in December 2005 at Black Oak Plaza. Future depreciation expense is expected to be comparable to the amount recognized for
the three months ended March 31, 2006.

Legal and accounting increased from $79,069 for the three months ended March 31, 2005 to $121,883 for the
three months ended March 31, 2006, primarily due to attempts to resolve certain aspects of the litigation discussed in Part II, Item 1, during the first quarter of 2006. Legal and accounting costs are expected to increase in future
periods as a result of implementing and complying with additional reporting and regulatory requirements.

Bad debt expense increased from $0 for the three
months ended March 31, 2005 to $9,526 for the three months ended March 31, 2006, primarily as a result of reserving receivables that are deemed uncollectible at Black Oak Plaza.

Equity in income (loss) of Joint Ventures decreased from $5,166 for the three months ended March 31, 2005 to $(416,635) for the three months ended March 31,
2006, primarily as a result of (i) recognizing an impairment loss at Heritage Place, (ii) a decrease in rental income as a result of the decrease in occupancy at Heritage Place, and (iii) an increase in bad debt expense recorded at
Heritage Place for receivables deemed uncollectible. Future equity in income (loss) of Joint Ventures is expected to decrease as a result of the sale of the remaining office component of Heritage Place in May 2006.

Inflation

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

Application of Critical Accounting Policies

Summary

Our accounting policies have been
established to conform with generally accepted accounting principles in the United States (GAAP). The preparation of financial statements in conformity with GAAP requires



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

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

Investment in Real Estate Assets

We will
be required to make subjective assessments as to the useful lives of our depreciable assets. We will consider the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income.
The estimated useful lives of the Partnerships and Fund I and Fund II Tucker assets by class are as follows:



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

In the event that we use inappropriate useful lives or methods for 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, either directly or through investments in Fund I and Fund II Tucker, may not be
recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the
carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not
exceed the carrying value, management adjusts the real estate assets to the fair value, as defined by SFAS No. 144, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon
availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. As of March 31,
2006, Fund I and Fund II Tucker recorded an impairment loss for the office component of Heritage Place of approximately $795,000, of which approximately $413,000 was allocated to the Partnership.

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

Related-Party Transactions

We have
entered into agreements with Wells Capital, Wells Management, an affiliate of our General Partners, and their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells



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Management, and their affiliates for asset management; the management and leasing of our properties; administrative services relating to accounting, property
management, and other partnership administration; and incur the related expenses. See Note 4 to our financial statements included in this report for a description of these fees and expense reimbursements we have incurred.

Potential Tax Impact on 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 certain limitations on the utilization of losses by investors
that are 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, which announced that
the IRS 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 issued IRS Notice 2006-2 extending the period for
transitional relief through the 2005 tax year; however, it is important to note that IRS Notices 2005-29 and 2006-2 provide relief for partnerships only for tax years 2004 and 2005. Although the IRS has indicated that it is continuing to study the
application of Section 470 to partnerships, such as the Partnership, unless further legislation is enacted to address this issue, or some other form of relief from the provisions of Section 470 of the American Jobs Creation Act of 2004 is
granted, beginning in tax year 2006, and thereafter, passive losses allocable to limited partners holding Class B Units may only be used to offset passive income generated from the same property or within the same fund.

Subsequent Event

On May 10, 2006, Fund I and Fund II Tucker
sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a result of the sale, Fund I and Fund II Tucker received net sale proceeds of approximately $4,031,000, of which approximately
$2,092,000 is allocable to the Partnership. Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000 in order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell, during the three
months ended March 31, 2006, and additionally recognized a gain on sale of approximately $10,000 upon closing the transaction. Approximately $(413,000) and $5,000 of the impairment loss and gain on sale are allocable to the Partnership,
respectively. The gain on sale may be adjusted as additional information becomes available in subsequent periods.



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

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



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

We carried out an evaluation, under the
supervision and with the participation of management of Wells Capital, our corporate General Partner, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the
Partnerships disclosure controls and procedures as defined in rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal
Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that
information required to be disclosed by us in such reports is accumulated and communicated to our management, including 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 March 31, 2006 that have
materially affected, or are likely to materially affect, our internal control over financial reporting.



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PART II.    OTHER INFORMATION



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

Johnston Action

On January 17, 2003, the Partnership was served with a putative class action (Roy Johnston v. Wells Real Estate Fund I,Superior Court of Gwinnett County,
Georgia, Civil Action No. 03-A00525-6, the Johnston Action) by a limited partner holding Class B Units on behalf of all limited partners holding Class B Units as of January 15, 2003. The plaintiff alleged that the terms of the
partnership agreement were inconsistent with the original intent of the parties thereto such that the alleged original intent would have provided the limited partners holding Class B Units with a priority in the allocation and payment of net
property sale proceeds. On May 7, 2004, the Court granted summary judgment in favor of the Partnership on grounds of statutes of limitation and laches. By an order entered on December 14, 2004, the court granted the plaintiffs motion
to withdraw the notice of appeal, which had previously been filed by the plaintiff. On March 31, 2005, the Court entered an Order Denying Intervenors Counsels Motion for Award of Attorney Fees and Reimbursement of Expenses.
Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.

As of this date, the only contested matter
remaining in this action is the Partnerships motion to recover its attorneys fees and expenses of litigation from plaintiff and his counsel. On April 20, 2006, the Court held a hearing addressing only the liability aspects of the
Partnerships motion for attorneys fees and expenses. The Court has not yet ruled on the Partnerships motion.

Hendry Action

As a matter of background, on or about March 12, 2004, a putative class action complaint (the Original Complaint) was filed by four
individuals (the plaintiffs) against the Partnership, and Wells Capital and Leo F. Wells, III, the General Partners of the Partnership, as well as Wells Management and Wells Investment Securities, Inc. (Hendry et al. v. Leo F.
Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791-2). The plaintiffs filed the Original Complaint purportedly on behalf of all limited partners holding Class B Units of the Partnership as of
January 15, 2003. On June 3, 2004, the Court granted the plaintiffs motion to permit voluntary dismissal, and the Original Complaint was dismissed without prejudice. On June 18, 2004, the defendants filed a motion to recover
their attorneys fees and costs from the plaintiffs and their counsel. The Court held a hearing on part, but not all, of the issues raised in that motion on August 3, 2004, and took the matter under advisement without ruling on any part of
the motion. On June 24, 2005, the Court held another hearing on the defendants motion to recover their attorneys fees. The Court took the matter under advisement, and has not yet ruled on the motion.

On or about November 24, 2004, the plaintiffs filed a second putative class action complaint (Hendry et al. v. Leo F. Wells, III et al., Superior Court of
Gwinnett County, Georgia, Civil Action No. 04A-13051-6, the Hendry Action) against the Partnership, the General Partners, and Wells Management. The Hendry Action states that the Partnership is named only as an allegedly necessary
party defendant and that the plaintiffs seek no money from or relief at the expense of the Partnership. As of March 31, 2006, Wells Capital had incurred approximately $692,000 in legal fees, costs, and expenses related to defending against the
Hendry Action. The indemnification provisions of the partnership agreement require the Partnership to indemnify the General Partners for their costs of defending the Hendry Action under certain circumstances upon the conclusion of this litigation.
At this time, management is unable to determine whether the likelihood of an unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.

The plaintiffs filed the Hendry Action purportedly on behalf of all limited partners of the Partnership holding Class B Units as of January 9, 2002. The Hendry
Action alleges, among other things, that the General Partners breached their fiduciary duties to the limited partners by, among other things: (a) failing to timely disclose alleged inconsistencies between sales literature and the partnership
agreement relating to the distribution of net



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sale proceeds; (b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement relating
to the distribution of net sale proceeds; and (c) not accepting a settlement offer proposed by a holder of Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant
(Johnston), in which the Court subsequently granted summary judgment in favor of the Partnership. The Hendry Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that
consent solicitation to be materially misleading. In addition, the Hendry Action alleges that the General Partners and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to
an alleged waiver of deferred management fees. The plaintiffs seek, among other remedies, the following: judgment against the General Partners of the Partnership, jointly and severally, in an amount to be proven at trial; punitive damages;
disgorgement of fees earned by the General Partners directly or through their affiliates; a declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of
the June 2000 consent solicitation to allegedly waive Wells Managements deferred management fees; and an award to the plaintiffs of their attorneys fees, costs, and expenses.

On January 28, 2005, the defendants filed motions for summary judgment and motions to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed briefs in opposition to the defendants
motions. Pursuant to orders entered July 1, 2005, the Court granted the defendants motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action has now been dismissed, subject to plaintiffs right to
file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or
notice of appeal. After both sides had filed briefs in support of their respective positions, on February 15, 2006, the Court heard argument on plaintiffs motion to vacate and to re-enter the judgments previously entered on July 1,
2005. Following the argument, the Court stated orally from the bench that he would grant the motion, so the judgments could be re-entered to allow plaintiffs thirty days within which to file a notice of appeal. The Court has not yet
entered an order granting this motion.

On or about August 8, 2005, the defendants filed a motion for attorneys fees and expenses of litigation.
On or about August 12, 2005, the plaintiffs filed a motion for attorneys fees and expenses of litigation as to one defense asserted by defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects on
the Partnerships and plaintiffs motions for attorneys fees and expenses. The Court has not yet ruled on either motion.



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

There have been no material changes from the risk
factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005.



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



|(a) | We did not sell any equity securities that were not registered under the Securities Act of 1933 during the quarter ended March 31, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended March 31, 2006.
|--- | -------------------------------------------------------------------------



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



|(a) | We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended March 31, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



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



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##### Table of Contents

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

No matters
were submitted to a vote of our limited partners during the quarter ended March 31, 2006.



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



|(a) | During the quarter ended March 31, 2006, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

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



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##### Table of Contents

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 I (Registrant)                                                             
|             |  |  | 
|             |  |  |  | By:                                                                                                |  | WELLS CAPITAL, INC. (Corporate General Partner)
|             |  | 
|May 11, 2006 |  |  |  | /S/    LEO F. WELLS,
III                                                                          
|             |  |  |  | Leo F. Wells, III President, Principal
Executive Officer, and Sole Director of Wells Capital, Inc.
|             |  | 
|May 11, 2006 |  |  |  | /S/    DOUGLAS P.
WILLIAMS                                                                        
|             |  |  |  | Douglas P. Williams Principal Financial
Officer of Wells Capital, Inc.                            



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EXHIBIT INDEX

TO

FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND I



|            |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                   
|            | 
|10.1        |  | First Amendment to Lease Agreement for a portion of Paces Pavilion                                                            
|            | 
|10.2        |  | First Amendment to Lease Agreement for a portion of Paces Pavilion                                                            
|            | 
|10.3        |  | Purchase and Sale Agreement for office portion of Heritage Place                                                              
|            | 
|10.4        |  | First Amendment to Purchase and Sale Agreement for office portion of Heritage Place                                           
|            | 
|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