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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



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

For the quarterly period ended March 31, 2007 or



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

For the transition period from
 to

Commission file number 0-14463



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

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



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                            |  |         
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                            |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Balance Sheets  March 31, 2007 (unaudited) and December 31, 2006                                                          |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2006 and the Three Months Ended March 31, 2007 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 17      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |  | 23      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                    |  | 23      
|         |  |                      
|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                                                                                            |  | 25      
|         |  |                       | 
|         |  | 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 INFORMATION
|------- | ---------------------



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

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

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



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



BALANCE SHEETS

ASSETS



|                            |  |                          |            |                  |   |          
|--------------------------- |  | ------------------------ | ---------- | ---------------- | - | ---------
|                            |  | (Unaudited)March 31,2007 |            | December 31,2006
|Assets held for sale, net   |  | $                        | 0          |                  | $ | 3,014,662
|Investment in joint venture |  |                          | 1,200      |                  |   | 0        
|Cash and cash equivalents   |  |                          | 10,017,143 |                  |   | 6,438,572
|Tenant receivables, net     |  |                          | 9,051      |                  |   | 93,005   
|Other assets                |  |                          | 45,181     |                  |   | 51,610   
|                            |  |                          |            |                  |   |          
|Total assets                |  | $                        | 10,072,575 |                  | $ | 9,597,849
|                            |  |                          |            |                  |   |          

LIABILITIES AND PARTNERS CAPITAL



|                                                                     |  |   |            |  |   |          
|-------------------------------------------------------------------- |  | - | ---------- |  | - | ---------
|LIABILITIES:                                                         |  |   |            |  |   |          
|Accounts payable, accrued expenses, and accrued capital expenditures |  | $ | 30,168     |  | $ | 70,545   
|Deferred income                                                      |  |   | 0          |  |   | 35,640   
|Due to affiliates                                                    |  |   | 27,474     |  |   | 17,406   
|Due to joint venture                                                 |  |   | 0          |  |   | 2,211    
|                                                                     |  |   |            |  |   |          
|Total liabilities                                                    |  |   | 57,642     |  |   | 125,802  
|                                                                     |  |  
|PARTNERS CAPITAL:                                                   |  |   |            |  |   |          
|Limited partners:                                                    |  |   |            |  |   |          
|Class A  98,716 units issued and outstanding                        |  |   | 9,137,655  |  |   | 8,781,994
|Class B  42,568 units issued and outstanding                        |  |   | 875,576    |  |   | 689,109  
|General partners                                                     |  |   | 1,702      |  |   | 944      
|                                                                     |  |   |            |  |   |          
|Total partners capital                                              |  |   | 10,014,933 |  |   | 9,472,047
|                                                                     |  |   |            |  |   |          
|Total liabilities and partners capital                              |  | $ | 10,072,575 |  | $ | 9,597,849
|                                                                     |  |   |            |  |   |          

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



STATEMENTS OF OPERATIONS



|                                                        |  |                                          |         |      |   |          |  
|------------------------------------------------------- |  | ---------------------------------------- | ------- | ---- | - | -------- | -
|                                                        |  | (Unaudited) Three Months Ended March 31, |        
|                                                        |  | 2007                                     |         | 2006 |  
|                                                        |  |                                         
|REVENUES:                                               |  |                                          |         |      |   |          |  
|Interest and other income                               |  | $                                        | 113,554 |      | $ | 40,455   |  
|                                                        |  |                                         
|EXPENSES:                                               |  |                                          |         |      |   |          |  
|General and administrative                              |  |                                          | 64,926  |      |   | 158,420  |  
|Equity in loss of joint venture                         |  |                                          | 1,779   |      |   | 416,635  |  
|                                                        |  |                                          |         |      |   |          |  
|Total expenses                                          |  |                                          | 66,705  |      |   | 575,055  |  
|                                                        |  |                                          |         |      |   |          |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                |  |                                          | 46,849  |      |   | (534,600 | )
|                                                        |  |                                         
|DISCONTINUED OPERATIONS:                                |  |                                          |         |      |   |          |  
|Operating income                                        |  |                                          | 28,998  |      |   | 77,783   |  
|Gain on sale of real estate assets                      |  |                                          | 467,039 |      |   | 0        |  
|                                                        |  |                                          |         |      |   |          |  
|INCOME FROM DISCONTINUED OPERATIONS                     |  |                                          | 496,037 |      |   | 77,783   |  
|                                                        |  |                                          |         |      |   |          |  
|NET INCOME (LOSS)                                       |  | $                                        | 542,886 |      | $ | (456,817 | )
|                                                        |  |                                          |         |      |   |          |  
|                                                        |  |                                         
|NET INCOME (LOSS) ALLOCATED TO:                         |  |                                          |         |      |   |          |  
|Class A limited partners:                               |  |                                          |         |      |   |          |  
|Income (loss) from continuing operations                |  | $                                        | 46,381  |      | $ | (534,600 | )
|Income from discontinued operations                     |  |                                          | 309,280 |      |   | 77,783   |  
|                                                        |  |                                          |         |      |   |          |  
|Net income (loss) allocated to Class A limited partners |  | $                                        | 355,661 |      | $ | (456,817 | )
|                                                        |  |                                          |         |      |   |          |  
|Class B limited partners:                               |  |                                          |         |      |   |          |  
|Income from continuing operations                       |  | $                                        | 0       |      | $ | 0        |  
|Income from discontinued operations                     |  |                                          | 186,467 |      |   | 0        |  
|                                                        |  |                                          |         |      |   |          |  
|Net income allocated to Class B limited partners        |  | $                                        | 186,467 |      | $ | 0        |  
|                                                        |  |                                          |         |      |   |          |  
|General partners:                                       |  |                                          |         |      |   |          |  
|Income from continuing operations                       |  | $                                        | 468     |      | $ | 0        |  
|Income from discontinued operations                     |  |                                          | 290     |      |   | 0        |  
|                                                        |  |                                          |         |      |   |          |  
|Net income allocated to General partners                |  | $                                        | 758     |      | $ | 0        |  
|                                                        |  |                                          |         |      |   |          |  
|                                                        |  |                                         
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:             |  |                                          |         |      |   |          |  
|Class A units:                                          |  |                                          |         |      |   |          |  
|Income (loss) from continuing operations                |  |                                          | $0.47   |      |   | $(5.42   | )
|Income from discontinued operations                     |  |                                          | $3.13   |      |   | $ 0.79   |  
|                                                        |  |                                          |         |      |   |          |  
|Net income (loss) per Class A limited partner unit      |  |                                          | $3.60   |      |   | $(4.63   | )
|                                                        |  |                                          |         |      |   |          |  
|Class B units:                                          |  |                                          |         |      |   |          |  
|Income from continuing operations                       |  |                                          | $0.00   |      |   | $ 0.00   |  
|Income from discontinued operations                     |  |                                          | $4.38   |      |   | $ 0.00   |  
|                                                        |  |                                          |         |      |   |          |  
|Net income per Class B limited partner unit             |  |                                          | $4.38   |      |   | $ 0.00   |  
|                                                        |  |                                          |         |      |   |          |  

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2006

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



|                                                                                                |  |                  |  |        |                  |   |                         |        |        |   |         |   |  |   |       |  |   |            |  
|----------------------------------------------------------------------------------------------- |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ------ | ------ | - | ------- | - |  | - | ----- |  | - | ---------- | -
|                                                                                                |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |       
|                                                                                                |  | Class A          |  |        | Class B          |   |                         |       
|                                                                                                |  | Units            |  | Amount |                  |   | Units                   |        | Amount |   |         |  
|BALANCE, December 31, 2005                                                                      |  | 98,716           |  | $      | 11,435,151       |   |                         | 42,568 |        | $ | 0       |   |  | $ | 0     |  | $ | 11,435,151 |  
|                                                                                                |  |                  |  |        |                  |  
|Net income                                                                                      |  | 0                |  |        | 722,963          |   |                         | 0      |        |   | 712,994 |   |  |   | 944   |  |   | 1,436,901  |  
|Distributions of net sale proceeds($34.20 and $0.56 per Class A and Class B Unit, respectively) |  | 0                |  |        | (3,376,120       | ) |                         | 0      |        |   | (23,885 | ) |  |   | 0     |  |   | (3,400,005 | )
|                                                                                                |  |                  |  |        |                  |   |                         |        |        |   |         |   |  |   |       |  |   |            |  
|BALANCE, December 31, 2006                                                                      |  | 98,716           |  |        | 8,781,994        |   |                         | 42,568 |        |   | 689,109 |   |  |   | 944   |  |   | 9,472,047  |  
|                                                                                                |  |                  |  |        |                  |  
|Net income                                                                                      |  | 0                |  |        | 355,661          |   |                         | 0      |        |   | 186,467 |   |  |   | 758   |  |   | 542,886    |  
|                                                                                                |  |                  |  |        |                  |   |                         |        |        |   |         |   |  |   |       |  |   |            |  
|BALANCE, March 31, 2007                                                                         |  | 98,716           |  | $      | 9,137,655        |   |                         | 42,568 |        | $ | 875,576 |   |  | $ | 1,702 |  | $ | 10,014,933 |  
|                                                                                                |  |                  |  |        |                  |   |                         |        |        |   |         |   |  |   |       |  |   |            |  

See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



STATEMENTS OF CASH FLOWS



|                                                                                                   |  |                                          |            |   |      |   |           |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------- | - | ---- | - | --------- | -
|                                                                                                   |  | (Unaudited) Three Months Ended March 31, |           
|                                                                                                   |  | 2007                                     |            |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                          |            |   |      |   |           |  
|Net income (loss)                                                                                  |  | $                                        | 542,886    |   |      | $ | (456,817  | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                                          |            |   |      |   |           |  
|Gain on sale of real estate assets                                                                 |  |                                          | (467,039   | ) |      |   | 0         |  
|Depreciation                                                                                       |  |                                          | 0          |   |      |   | 69,636    |  
|Amortization                                                                                       |  |                                          | 2,061      |   |      |   | 7,191     |  
|Equity in loss of joint venture                                                                    |  |                                          | 1,779      |   |      |   | 416,635   |  
|Changes in assets and liabilities:                                                                 |  |                                          |            |   |      |   |           |  
|Decrease (increase) in tenant receivables, net                                                     |  |                                          | 84,280     |   |      |   | (4,713    | )
|Increase in other assets                                                                           |  |                                          | (13,434    | ) |      |   | (30,629   | )
|Decrease in accounts payable and accrued expenses                                                  |  |                                          | (16,607    | ) |      |   | (100,962  | )
|(Decrease) increase in deferred income                                                             |  |                                          | (35,640    | ) |      |   | 7,871     |  
|Increase (decrease) in due to affiliates                                                           |  |                                          | 10,068     |   |      |   | (4,945    | )
|                                                                                                   |  |                                          |            |   |      |   |           |  
|Net cash provided by (used in) operating activities                                                |  |                                          | 108,354    |   |      |   | (96,733   | )
|                                                                                                   |  |                                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                                          |            |   |      |   |           |  
|Net proceeds from the sale of real estate assets                                                   |  |                                          | 3,475,407  |   |      |   | 0         |  
|Investment in real estate assets                                                                   |  |                                          | 0          |   |      |   | (82,265   | )
|Deferred leasing costs paid                                                                        |  |                                          | 0          |   |      |   | (1,114    | )
|Investment in joint venture                                                                        |  |                                          | (5,190     | ) |      |   | 0         |  
|                                                                                                   |  |                                          |            |   |      |   |           |  
|Net cash provided by (used in) investing activities                                                |  |                                          | 3,470,217  |   |      |   | (83,379   | )
|                                                                                                   |  |                                         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               |  |                                          | 3,578,571  |   |      |   | (180,112  | )
|                                                                                                   |  |                                         
|CASH AND CASH EQUIVALENTS, beginning of period                                                     |  |                                          | 6,438,572  |   |      |   | 3,942,166 |  
|                                                                                                   |  |                                          |            |   |      |   |           |  
|CASH AND CASH EQUIVALENTS, end of period                                                           |  | $                                        | 10,017,143 |   |      | $ | 3,762,054 |  
|                                                                                                   |  |                                          |            |   |      |   |           |  
|                                                                                                   |  |                                         
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:                            |  |                                          |            |   |      |   |           |  
|Accrued capital expenditures                                                                       |  | $                                        | 0          |   |      | $ | 5,021     |  
|                                                                                                   |  |                                          |            |   |      |   |           |  
|Write-off of fully amortized deferred leasing costs                                                |  | $                                        | 0          |   |      | $ | 486       |  
|                                                                                                   |  |                                          |            |   |      |   |           |  

See accompanying notes.



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##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONDENSED NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2007 (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(1)
|-- | -----------------

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(2)
|-- | ------------------

A retail shopping center located in Knoxville, Tennessee.



---

| | (1) | This property was sold in November 2006.
| | --- | ----------------------------------------



| | (2) | This property was sold in
January 2007.
| | --- | ---------------------------------------

During the periods presented, the Partnership owned interests in the following joint venture and property:



|                          |  |                                                          |  |                                                                            
|------------------------- |  | -------------------------------------------------------- |  | ---------------------------------------------------------------------------
|Joint Venture             |  | Joint Venture Partners                                   |  | Properties                                                                 
|Fund I and Fund II Tucker |  |   Wells Real Estate Fund I   Fund II and Fund II-OW(1) |  | 1. Heritage Place(2) A commercial office complex located in
Tucker, Georgia



| | (1) | Fund II and Fund II-OW is a joint venture between Wells Real Estate Fund II and Wells Real Estate
Fund II-OW.
| | --- | -------------------------------------------------------------------------------------------------------------



| | (2) | 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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------

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 Fund I and Fund II Tucker and foregoing properties, refer to the Partnerships
Annual Report on Form 10-K for the year ended December 31, 2006.



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##### Table of Contents

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, excluding closing costs. As a result of the sale, Fund I and Fund II Tucker received net sale proceeds of approximately $4,028,000, of which approximately $2,091,000 was distributed to the Partnership. As of
March 31, 2006, 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, and recognized an additional loss on sale
of approximately $10,000. Approximately $413,000 and $5,000 of the impairment loss and loss on sale were allocable to the Partnership, respectively.

On
November 6, 2006, the Partnership sold Paces Pavilion to an unrelated third party for a gross sale price of $4,300,000, excluding closing costs. As a result of the sale, the Partnership received net sale proceeds of approximately $4,066,000 and
recognized a gain of approximately $1,817,000.

On January 25, 2007, the Partnership sold Black Oak Plaza to an unrelated third party for a gross sale
price of $3,700,000, excluding closing costs. As a result of the sale, the Partnership received net sale proceeds of approximately $3,475,000 and recognized a gain of approximately $463,000.



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

Basis of
Presentation

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission (SEC), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted
accounting principles (GAAP) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and
necessary to fairly and consistently present the results for 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 Annual Report on Form 10-K for the year ended December 31, 2006.

The Partnerships policy is to adopt the
liquidation basis of accounting once the liquidation of the Partnership is imminent, which the Partnership has defined as beginning on the first day of the quarter following the completion of the sale of all real estate assets. On January 25,
2007, the Partnership sold the remaining property in the portfolio, Black Oak Plaza. Accordingly, the Partnership is planning to adopt the liquidation basis of accounting effective April 1, 2007. Under the liquidation basis of accounting,
assets and liabilities will be stated at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and statements of cash flows will no longer be presented.

Investment in Joint Venture

The Partnership has evaluated its
investment in Fund I and Fund II Tucker and concluded that it is not a variable-interest entity under the provisions of Financial Accounting Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest
Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements. The Partnership does not have control over the operations of Fund I and
Fund II Tucker; 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 Fund I and Fund II Tucker, or its
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 Fund I and Fund II Tucker using the equity method of accounting, whereby original investments are recorded at cost and
subsequently adjusted for contributions,



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##### Table of Contents

distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreement, all income (loss) and
distributions are allocated to joint venture partners in accordance with their respective ownership interests. The Partnership is obligated to fund its pro rata share of Fund I and Fund II Tuckers deficit balances, and these amounts are
included in due to joint venture in the accompanying balance sheets. 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, 2007 and December 31, 2006,
other assets is comprised of the following items:



|                             |  |                |        |                   |   |       
|---------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                             |  | March 31, 2007 |        | December 31, 2006
|Interest receivable          |  | $              | 43,446 |                   | $ | 28,051
|Prepaid property insurance   |  |                | 1,735  |                   |   | 2,878 
|Refundable security deposits |  |                | 0      |                   |   | 19,863
|Other                        |  |                | 0      |                   |   | 818   
|                             |  |                |        |                   |   |       
|Total                        |  | $              | 45,181 |                   | $ | 51,610
|                             |  |                |        |                   |   |       

Interest receivable represents interest earned during the period presented, which will be received in the
following month. Prepaid property insurance is recognized in the period in which the coverage is provided. Refundable security deposits represent cash deposits received from tenants. Pursuant to the respective leases, the Partnership may apply such
balances towards unpaid receivable balances or property damages, where applicable, or is obligated to refund the remaining balances to the tenants upon the expiration of their related lease term. 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, net proceeds from the sale of the Partnerships properties are to be
distributed to partners in accordance with their respective positive tax 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, amortization, cost recovery, and the gain



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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.

Reclassifications

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

Recent Accounting Pronouncements

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

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



|3. | INVESTMENT IN JOINT VENTURE
|-- | ---------------------------

Impairment of Real Estate Assets

The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned
through the Partnerships investment in Fund I and Fund II Tucker may not be recoverable pursuant to Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, and SFAS No. 144.
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



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with the estimated fair values 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, 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.

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 recognized an impairment loss of approximately $795,000, of which approximately $413,000 is
allocable to the Partnership, to reduce the carrying value of Heritage Place to its fair value, less costs to sell. This impairment was prompted by a change in managements intended holding period for this asset. This impairment loss is
included in loss from discontinued operations for the three months ended March 31, 2006 in the Summary of Financial Information table below.

Summary of Financial Information

Effective July 1, 2006, the first day of the quarter following the completion of the sale of all real
estate assets, Fund I and Fund II Tucker adopted the liquidation basis of accounting, under which assets and liabilities are stated at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and
statements of cash flows are no longer presented. Accordingly, condensed financial information for Fund I and Fund II Tucker for the three months ended March 31, 2006 is presented below:



|                          |  |                                  |  |                                  |  |                                  |  |                                 
|------------------------- |  | -------------------------------- |  | -------------------------------- |  | -------------------------------- |  | --------------------------------
|                          |  | Total Revenues                   |  | Loss FromContinuing Operations   |  | Loss FromDiscontinued Operations |  | Net Loss                        
|                          |  | Three Months EndedMarch 31, 2006 |  | Three Months EndedMarch 31, 2006 |  | Three Months EndedMarch 31, 2006 |  | Three Months EndedMarch 31, 2006
|Fund I and Fund II Tucker |  | $929                             |  | $(2,267)                         |  | $(800,343)                       |  | $(802,610)                      
|                          |  |                                  |  |                                  |  |                                  |  |                                 

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



|                          |  |                                   |  |                 |  |              |  |           
|------------------------- |  | --------------------------------- |  | --------------- |  | ------------ |  | ----------
|                          |  | Three Months Ended March 31, 2006
|                          |  | Operating Loss                    |  | Impairment Loss |  | Gain on Sale |  | Total     
|Fund I and Fund II Tucker |  | $(5,531)                          |  | $(794,812)      |  | $0           |  | $(800,343)
|                          |  |                                   |  |                 |  |              |  |           



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

On December 22, 2006, the Partnership
entered into a contract to sell Black Oak Plaza to an unrelated third party. The sale closed on January 25, 2007 for a gross sale price of $3.7 million, exclusive of closing costs. Accordingly, the assets related to Black Oak Plaza are
classified as held for sale as of December 31, 2006. The details comprising assets held for sale are provided below:



|                                                                                               |  |                  |          
|---------------------------------------------------------------------------------------------- |  | ---------------- | ---------
|                                                                                               |  | December 31,2006
|Real estate assets held for sale, net:                                                         |  |                  |          
|Land                                                                                           |  | $                | 737,770  
|Building and improvements, less accumulated depreciation of $3,520,444 as of December 31, 2006 |  |                  | 2,114,775
|                                                                                               |  |                  |          
|Total real estate assets held for sale, net                                                    |  | $                | 2,852,545
|                                                                                               |  |                  |          



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##### Table of Contents

|                                                                                         |  |                  |        
|---------------------------------------------------------------------------------------- |  | ---------------- | -------
|                                                                                         |  | December 31,2006
|Other assets held for sale, net:                                                         |  |                  |        
|Tenant receivables, net                                                                  |  | $                | 35,774 
|Deferred leasing costs, less accumulated amortization of $41,220 as of December 31, 2006 |  |                  | 126,343
|                                                                                         |  |                  |        
|Total other assets held for sale, net                                                    |  | $                | 162,117
|                                                                                         |  |                  |        

In accordance with SFAS No. 144, the Partnership has classified the results of operations related to Black
Oak Plaza which was sold on January 25, 2007 and Paces Pavilion which was sold on November 6, 2006, as discontinued operations in the accompanying statements of operations. The details comprising income from discontinued operations are
presented below:



|                                    |  |                                          |         |      |   |        
|----------------------------------- |  | ---------------------------------------- | ------- | ---- | - | -------
|                                    |  | (Unaudited) Three Months Ended March 31,
|                                    |  | 2007                                     |         | 2006
|REVENUES:                           |  |                                          |         |      |   |        
|Rental income                       |  | $                                        | 43,749  |      | $ | 259,078
|Reimbursement income                |  |                                          | 12,966  |      |   | 44,161 
|Interest and other income           |  |                                          | 60      |      |   | 0      
|                                    |  |                                          |         |      |   |        
|Total revenues                      |  |                                          | 56,775  |      |   | 303,239
|                                    |  |                                         
|EXPENSES:                           |  |                                          |         |      |   |        
|Property operating costs            |  |                                          | 2,680   |      |   | 99,537 
|Management and leasing fees         |  |                                          | 3,497   |      |   | 17,138 
|Depreciation                        |  |                                          | 0       |      |   | 69,636 
|Amortization                        |  |                                          | 2,061   |      |   | 7,191  
|Bad debt expense                    |  |                                          | 14,395  |      |   | 9,526  
|General and administrative          |  |                                          | 5,144   |      |   | 22,428 
|                                    |  |                                          |         |      |   |        
|Total expenses                      |  |                                          | 27,777  |      |   | 225,456
|                                    |  |                                          |         |      |   |        
|Real estate operating income        |  |                                          | 28,998  |      |   | 77,783 
|                                    |  |                                         
|GAIN ON SALE OF REAL ESTATE ASSETS  |  |                                          | 467,039 |      |   | 0      
|                                    |  |                                          |         |      |   |        
|INCOME FROM DISCONTINUED OPERATIONS |  | $                                        | 496,037 |      | $ | 77,783 
|                                    |  |                                          |         |      |   |        



|5. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

The Partnership entered into a property management and leasing agreement with Wells Management Company, Inc. (Wells Management), an
affiliate of the General Partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Partnerships properties, owned directly or through Fund I and
Fund II Tucker, equal to (a) 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, which is assessed periodically based on market studies, or (b) in the case of commercial properties
leased on a long-term net basis (ten or more years), 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. 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 $3,038 and $19,495 for the three months ended March 31, 2007 and 2006, respectively.



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Administrative 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
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 $42,244 and $39,553 for the three months ended March 31, 2007 and 2006, respectively. In addition, Wells Capital pays for certain operating
expenses of the Partnership (bill-backs) directly and invoices the Partnership for the reimbursement thereof. As of March 31, 2007 and December 31, 2006, the due to affiliates balances represent administrative reimbursements
and bill-backs due to Wells Management and/or Wells Capital.

Due to Affiliates

As of March 31, 2007 and December 31, 2006, due to affiliates was comprised of the following amounts due to Wells Management and/or Wells Capital:



|                              |  |                |        |                   |   |       
|----------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                              |  | March 31, 2007 |        | December 31, 2006
|Administrative reimbursements |  | $              | 27,194 |                   | $ | 15,719
|Management and leasing fees   |  |                | 280    |                   |   | 1,687 
|                              |  |                |        |                   |   |       
|                              |  | $              | 27,474 |                   | $ | 17,406
|                              |  |                |        |                   |   |       

Economic Dependency

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

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

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

Assertion of Legal Action Against Related-Parties

On March 12, 2007, a stockholder of Wells Real Estate Investment Trust, Inc.
(Wells REIT) filed a purported class action and derivative complaint, Washtenaw County Employees Retirement System v. Wells Real Estate Investment Trust, Inc., et al., in the United States District Court for the District of
Maryland against, among others, Wells REIT, Leo. F. Wells, III and Wells Capital, our General Partners, certain affiliates of WREF, the directors of Wells REIT, and certain individuals who formerly served as officers and directors of Wells REIT



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##### Table of Contents

prior to the closing of the internalization transaction on April 16, 2007. The complaint alleges violations of the federal proxy rules based on
allegations that the proxy statement of Wells REIT filed with the SEC on February 26, 2007 contains false and misleading statements and omits to state material facts and breaches of fiduciary duty arising from the Wells REIT internalization
transaction and the related proxy statement. The complaint seeks, among other things, unspecified monetary damages. On April 9, 2007, the District Court denied the plaintiffs motion for an order enjoining the internalization transaction.
On April 17, 2007, the Court granted the defendants motion to transfer venue to the United States District Court for the Northern District of Georgia, and the case was docketed in the Northern District of Georgia on April 24, 2007.
Our General Partners intend to vigorously defend this action. Any financial loss incurred by Wells Capital or its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.



|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

On or about November 24, 2004,
four individuals (the plaintiffs) filed a 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, 2007, Wells Capital had incurred approximately $883,000 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 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, 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 was at the time 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.



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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 attorneys fees and expenses of litigation as to one of the defenses asserted by defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects on
the defendants and plaintiffs motions for attorneys fees and expenses. By Orders entered May 24, 2006, the Court denied the plaintiffs and the defendants motions to recover attorneys fees and expenses of
litigation. Also by Orders entered May 24, 2006, the Court re-entered its July 1, 2005 judgments granting the Wells defendants motions to dismiss and for summary judgment on all counts in the complaint, so as to allow the plaintiffs
30 days within which to file a notice of appeal. On or about June 21, 2006, the plaintiffs filed a notice of appeal with respect to the Courts Order granting the defendants motions to dismiss and for summary judgment. On
July 5, 2006, the defendants filed a notice of cross appeal with respect to the Courts Order denying the defendants motion for attorneys fees and expenses of litigation. On August 18, 2006, the appeal and cross appeal
were docketed in the Georgia Court of Appeals. It is not known when the Court of Appeals will rule on the appeal and cross appeal.



|7. | SUBSEQUENT EVENT
|-- | ----------------

The sales of the office component of Heritage
Place, Paces Pavilion, and Black Oak Plaza generated aggregate net sale proceeds to the Partnership of approximately $9,632,000, of which approximately $289,000 has previously been distributed to the limited partners through March 31, 2007. The
General Partners have determined that reserves of approximately $2,143,000 will be required to fund any additional operating costs or indemnification obligations in connection with the litigation discussed herein. In accordance with the terms of the
partnership agreement, the General Partners distributed the residual net sale proceeds in May 2007 of approximately $7,200,000 to the limited partners of record as of March 31, 2007, which, under the terms of the partnership agreement, does not
include limited partners acquiring units after December 31, 2006.



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

The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto. See also Cautionary Note Regarding Forward-Looking Statements preceding
Part I, as well as the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2006.

Overview

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



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##### Table of Contents

| |  |  | 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 in the disposition-and-liquidation phase of our life cycle. We have now sold all of our
properties with the sale of Black Oak Plaza in January 2007. This marks the conclusion of this investment program, originally launched in 1984. As a result of the sale of all of the properties, we will focus resources on concluding all of the
Partnerships activities and dissolving the Partnership upon resolution of certain litigation related to partnership matters (See Part II, Item 1, Legal Proceedings).

We distributed net sale proceeds from the sales of the office component of Heritage Place, Paces Pavilion, and Black Oak Plaza of approximately $7,200,000 to limited partners in May 2007. Our General Partners are
currently reserving the remaining net sale proceeds and operating cash flows to limited partners in order to fund any additional legal costs or indemnification obligations in connection with the litigation discussed herein, and any remaining
expenses and obligations of the Partnership associated with its final dissolution. The dissolution expenses include, but are not limited to, legal fees, audit and tax fees, printing and postage costs, potential liabilities under the final purchase
and sale agreements, and other administrative expenses. We expect that a final distribution of any unused reserves will be made to limited partners as soon as practical.

Property Summary

As we move further into the disposition-and-liquidation phase, we will focus resources on
concluding all of the Partnerships activities and dissolving the Partnership as soon as practical.

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



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



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



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



| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Paces Pavilion was sold on November 6, 2006.
| | - |  | --------------------------------------------



| |  |  | Black Oak Plaza was sold on January 25, 2007.
| | - |  | ---------------------------------------------

Liquidity and Capital Resources

Overview

Our operating strategy entailed funding expenses related to the recurring operations of the properties owned by the Partnership, directly and through Fund I and Fund II Tucker, with operating cash flows and assessing the amount of remaining
cash flows that would have been required to fund known re-leasing costs, other capital improvements, and portfolio expenses. Any residual operating cash flows were generally considered available for distribution to the Class A limited partners.
Unless distributions of operating cash flows were reserved, distributions were 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.



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##### Table of Contents

Short-Term Liquidity

We generated net cash flows from operating activities of approximately $108,000 for the three months ended March 31, 2007. We are holding such net operating cash flows in reserve to fund future legal costs or indemnification
obligations, that may arise from the litigation discussed in Part II, Item 1 herein, and expenses anticipated in connection with the final dissolution of the Partnership. We do not expect to receive future operating distributions from Fund I
and Fund II Tucker, as the remaining portion of Heritage Place was sold in May 2006, or to pay any additional operating distributions to the limited partners. During 2007, our primary source of cash flow was net proceeds of approximately $9.3
million received from the sale of properties owned directly and through Fund I and Fund II Tucker, of which approximately $3.5 million was received in the first quarter of 2007 from the sale of Black Oak Plaza.

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 $58,000 as of March 31, 2007. We anticipate that we will be able to fund any additional legal costs or indemnification obligations arising in connection with the litigation discussed in Part II, Item I herein with net sale
proceeds currently held in reserve.

Long-Term Liquidity

We have sold all of the real estate assets in which we owned interests and do not anticipate acquiring additional properties. Accordingly, we expect that our future source of capital will primarily include net proceeds that have been
previously generated from the sale of our properties as previously described.



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Capital Resources

The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties, or investing in joint ventures formed for the same purpose, and has invested all of the partners
original net offering proceeds available for investment. We anticipate using net property sale proceeds in order to fund any additional legal costs or indemnification obligations in connection with the litigation discussed herein, and any remaining
expenses and obligations of the partnership associated with its final dissolution. As of March 31, 2007, we had received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



|                                             |  |                   |  |                                      |        |  |                                               |            |                          |   |                                                              |  |                                                                  |  |   |           |  |   |          
|-------------------------------------------- |  | ----------------- |  | ------------------------------------ | ------ |  | --------------------------------------------- | ---------- | ------------------------ | - | ------------------------------------------------------------ |  | ---------------------------------------------------------------- |  | - | --------- |  | - | ---------
|                                             |  | Net Sale Proceeds |  | PartnershipsApproximate Ownership % |        |  | Net Sale Proceeds Allocated
tothe Partnership |            | Use of Net Sale Proceeds |   | Net Sale ProceedsDistributed
toPartners as of March 31, 2007 |  | UndistributedNet
SaleProceeds BeingReserved as of March 31, 2007
|Property Sold                                |  |                   |  |                                      | 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                            |  |   | 2,102,778 |  |   | 0        
|                                             |  |                   |  |                                      |        |  |                                              
|Heritage Placeretail portion (sold in 2003)  |  | $3,207,708        |  | 51.9                                 | %      |  |                                               | 1,665,121  |                          |   | 266,967                                                      |  |   Payment of deferred management fee                            |  |   | 1,398,154 |  |   | 0        
|                                             |  |                   |  |                                      |        |  |                                              
|Peachtree Place (remainder sold in 2004)     |  | $953,670          |  | 90.0                                 | %      |  |                                               | 857,826    |                          |   | 253,200                                                      |  |   Payment of deferred management fee                            |  |   | 604,626   |  |   | 0        
|                                             |  |                   |  |                                      |        |  |                                              
|Heritage Place office portion (sold in 2006) |  | $4,028,043        |  | 51.9                                 | %      |  |                                               | 2,090,957  |                          |   | 0                                                            |  |                                                                  |  |   | 288,880   |  |   | 1,802,077
|                                             |  |                   |  |                                      |        |  |                                              
|Paces Pavilion(sold in 2006)                 |  | $4,065,700        |  | 100                                  | %      |  |                                               | 4,065,700  |                          |   | 0                                                            |  |                                                                  |  |   | 0         |  |   | 4,065,700
|                                             |  |                   |  |                                      |        |  |                                              
|Black Oak Plaza(sold in 2007)                |  | $3,475,407        |  | 100                                  | %      |  |                                               | 3,475,407  |                          |   | 0                                                            |  |                                                                  |  |   | 0         |  |   | 3,475,407
|                                             |  |                   |  |                                      |        |  |                                               |            |                          |   |                                                              |  |                                                                  |  |   |           |  |   |          
|                                             |  |                   |  |                                      |        |  |                                              
|Total                                        |  |                   |  |                                      |        |  | $                                             | 21,401,467 |                          | $ | 2,658,280                                                    |  |                                                                  |  | $ | 9,400,003 |  | $ | 9,343,184
|                                             |  |                   |  |                                      |        |  |                                               |            |                          |   |                                                              |  |                                                                  |  |   |           |  |   |          

Our General Partners have reserved net sale proceeds of approximately $2.1 million to fund any additional legal
costs or indemnification obligations in connection with the litigation discussed herein, and any remaining expenses and obligations of the Partnership associated with its final dissolution. Accordingly, in May 2007, net sale proceeds of
approximately $7.2 million from the sales of the office component of Heritage Place, Paces Pavilion, and Black Oak Plaza were distributed to the limited partners of record as of March 31, 2007, which, under the terms of the partnership
agreement, does not include limited partners acquiring units after December 31, 2006.

Results of Operations

Comparison of the three months ended March 31, 2006 versus the three months ended March 31, 2007

Continuing Operations

Interest and other
income increased from $40,455 for the three months ended March 31, 2006 to $113,554 for the three months ended March 31, 2007, primarily as a result of (i) an increase in the average net proceeds held during the respective periods as
a result of the May 2006 sale of the office portion of Heritage Place, the



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November 2006 sale of Paces Pavilion, and the January 2007 sale of Black Oak Plaza, and (ii) an increase in the daily interest yield. Future levels of
interest income are expected to decrease as a result of the May 2007 distribution of net sale proceeds.

General and administrative costs decreased from
$158,420 for the three months ended March 31, 2006 to $64,926 for the three months ended March 31, 2007, primarily as a result of a decline in legal fees due to resolving certain litigation involving the Partnership and a decline in other
administrative costs due to the decrease in size of the Partnerships portfolio. General and administrative costs are expected to decrease in future periods relative to the reduction in the size of the portfolio.

Equity in loss of joint venture decreased from $416,635 for the three months ended March 31, 2006 to $1,779 for the three months ended March 31, 2007,
primarily as a result of recognizing an impairment loss on Heritage Place in the first quarter of 2006. We expect equity in loss of joint venture to cease in the near-term as a result of selling all of the real estate assets owned through Fund I and
Fund II Tucker.

Discontinued Operations

In accordance with SFAS No. 144, we have classified the operations of real estate assets as discontinued operations for all periods presented. Income from discontinued operations increased from $77,783 for the
three months ended March 31, 2006 to $496,037 for the three months ended March 31, 2007, primarily as a result of recognizing the gain on the sale of Black Oak Plaza in January 2007. We expect future income from discontinued operations to
decline as a result of selling all of the real estate assets owned directly by the Partnership.

Application of Critical Accounting Policies

Summary

Our accounting policies have been
established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affected 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 have utilized different estimates that may have impacted 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 were considered to be critical in that they may have required complex judgment in their application or have
required estimates about matters that were inherently uncertain.

Investment in Real Estate Assets

We were required to make subjective assessments as to the useful lives of our depreciable assets. We considered the period of future benefit of the assets to determine
the appropriate useful lives. These assessments had a direct impact on net income. The estimated useful lives of the Partnerships and Fund I and Fund II Tuckers assets by class were 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 used inappropriate useful lives or methods for depreciation, our net income would have been
misstated.



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Valuation of Real Estate Assets

We monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets in which we have had an ownership interest, either directly or through investments in Fund
I and Fund II Tucker, may not have been recoverable. When indicators of potential impairment were present which indicated that the carrying amounts of real estate assets may not have been recoverable, management assessed the recoverability of the
real estate assets by determining whether the carrying value of the real estate assets would been recovered through the undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that
such expected undiscounted future cash flows did not exceed the carrying value, management adjusted the real estate assets to the fair value, as defined by SFAS No. 144, and recognized an impairment loss. Estimated fair values were calculated
based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including
estimated salvage value. In the first quarter of 2006, Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000, of which approximately $413,000 was allocated to the Partnership in order to reduce the carrying value of the
office component of Heritage Place to its fair value, less costs to sell, as a result of a change in managements intended holding period for this asset.

Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it
takes to re-lease the property, and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would have resulted in an incorrect assessment of the propertys future cash
flows and fair value, and could have resulted 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 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 for certain
limitations on the utilization of losses by investors that are attributable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. If Section 470 were deemed to apply to the Partnership,
passive losses allocable to limited partners holding Class B Units could only be utilized to offset passive income generated from the same property or potentially from properties owned by the same partnership. In March 2005, the IRS announced that
it would not apply Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS extended the period for transitional relief through the
2005 tax year, and in December 2006, the IRS again extended the period for transitional relief through all tax years beginning prior to January 1, 2007. In addition, pursuant to Section 403(ff) of the Gulf Opportunity Zone Act of 2005, the
effective date provisions regarding the applicability of Section 470 were amended to provide that, in the case of leased property treated as tax-exempt use property by reason of its being owned by a partnership having both taxable and
tax-exempt partners, Section 470 will apply only to property acquired after March 12, 2004. Since the Partnership acquired all of its properties prior to March 12, 2004, and is not expected to acquire interests in any additional
properties in the future, we do not believe that the provisions of Section 470 should apply to limit the utilization of losses attributable to the properties owned by the Partnership; however, due to the uncertainties and lack of guidance
relating to this provision, it is unclear as to whether the acquisition of a limited partnership



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interest in the Partnership after the March 12, 2004 effective date may be deemed to be an acquisition of property within the meaning of the effective
date provisions of Section 470.

Subsequent Event

The sales of the office component of Heritage Place, Paces Pavilion, and Black Oak Plaza generated aggregate net sale proceeds to the Partnership of approximately $9,632,000, of which approximately $289,000 had previously been distributed
to the limited partners through March 31, 2007. The General Partners have determined that reserves of approximately $2,143,000 will be required to fund any additional operating costs or indemnification obligations in connection with the
litigation discussed herein. In accordance with the terms of the partnership agreement, the General Partners distributed the residual net sale proceeds in May 2007 of approximately $7,200,000 to the limited partners of record as of March 31,
2007, which, under the terms of the partnership agreement, does not include limited partners acquiring units after December 31, 2006.



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

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



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

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

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



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



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

On or about November 24, 2004, four
individuals (the plaintiffs) filed a 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, 2007, Wells Capital had incurred approximately $883,000 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 financial statements.



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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, 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 was at the time 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.

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 attorneys fees and expenses of litigation as to one of the defenses asserted by defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects on the
defendants and plaintiffs motions for attorneys fees and expenses. By Orders entered May 24, 2006, the Court denied the plaintiffs and the defendants motions to recover attorneys fees and expenses of
litigation. Also by Orders entered May 24, 2006, the Court re-entered its July 1, 2005 judgments granting the Wells defendants motions to dismiss and for summary judgment on all counts in the complaint, so as to allow the plaintiffs
30 days within which to file a notice of appeal. On or about June 21, 2006, the plaintiffs filed a notice of appeal with respect to the Courts Order granting the defendants motions to dismiss and for summary judgment. On
July 5, 2006, the defendants filed a notice of cross appeal with respect to the Courts Order denying the defendants motion for attorneys fees and expenses of litigation. On August 18, 2006, the appeal and cross appeal
were docketed in the Georgia Court of Appeals. It is not known when the Court of Appeals will rule on the appeal and cross appeal.



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

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



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



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



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



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



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##### Table of Contents

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



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



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



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

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



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



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



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



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

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



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SIGNATURES

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



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







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EXHIBIT INDEX

TO FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND I



|            |  |                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                          
|            | 
|*10.1       |  | Purchase and Sale Agreement for sale of Black Oak Plaza (Exhibit 10(y) to Form 10-K of Wells Real Estate Fund I for the year ended December 31, 2006, Commission File No.
0-14463)                   
|            | 
|*10.2       |  | First Amendment to Purchase and Sale Agreement for sale of Black Oak Plaza (Exhibit 10(z) to Form 10-K of Wells Real Estate Fund I for the year ended December 31, 2006, Commission File
No. 0-14463)
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                               
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                               
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                       



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