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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 June 30, 2005 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                         



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(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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund I (the
Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in
particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will,
expect, intend, anticipate, estimate, believe, continue, or other similar words. Specifically, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners and discussion of the outcome of current, pending, and future litigation 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 that this report is filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of
any such forward-looking statements. Actual results could differ materially from any 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 known and 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 limited partners; and maintain the value of our real estate properties, may be significantly hindered. Following are some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to
differ materially from those presented in certain forward-looking statements:



General economic risks



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



| |  |  | Adverse economic conditions affecting the particular industry of one or more tenants in properties owned directly or through a joint venture.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



Enterprise risks



| |  |  | Our dependency on Wells Capital, Inc. (Wells Capital) and its affiliates and their key personnel for various administrative services; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wells Capitals ability to attract and retain high quality personnel who can provide acceptable service levels and generate economies of scale over time.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



Real estate risks



| |  |  | Ability to achieve appropriate occupancy levels resulting in rental amounts sufficient to cover operating costs;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Supply of or demand for similar or competing rentable space, which may adversely impact retaining or obtaining new tenants upon lease expiration at acceptable rental amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tenant ability or willingness to satisfy obligations relating to our existing lease agreements;
| | - |  | -----------------------------------------------------------------------------------------------



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| |  |  | Increases in property operating expenses, including property taxes, insurance, and other costs not recoverable from tenants;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to secure adequate insurance at reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to fund foreseen and unforeseen capital expenditures, including those related to tenant build-out projects, tenant improvements, and lease-up costs, out of operating cash
flow or net property sale proceeds; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any and all closing conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



Other operational risks



| |  |  | Our reliance on Wells Management Company, Inc. (Wells Management) or third parties to manage our properties;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Increases in our administrative operating expenses, including increased expenses associated with operating as a public company in the current regulatory environment;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to comply with governmental, tax, real estate, environmental, and zoning laws or regulations and funding the related costs of compliance; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Actions of our joint venture partners including potential bankruptcy, business interests differing from ours, or other actions that may adversely impact the operations of joint
ventures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                      |  |         
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | --------
|         |  |                       |  |                                                                                                                                      |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                     
|         |  |                       | 
|         |  | Item 1.               |  | Consolidated Financial Statements                                                                                                    |  |         
|         |  |                       | 
|         |  |                       |  | Consolidated Balance SheetsJune 30, 2005 (unaudited) and December 31, 2004                                                          |  | 6       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2005 (unaudited) and 2004 (unaudited)       |  | 7       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Partners Capital for the Year Ended December 31, 2004 and the Six Months Ended June 30, 2005 (unaudited) |  | 8       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 (unaudited) and 2004 (unaudited)                        |  | 9       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Consolidated Financial Statements (unaudited)                                                                     |  | 10      
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                |  | 16      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                           |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                              |  | 22      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                                     
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                                    |  | 23      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                          |  | 24      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                                      |  | 24      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                                  |  | 24      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                                    |  | 24      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                             |  | 24      



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



PART I.    FINANCIAL STATEMENTS



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



The financial
statements should be read in conjunction with the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations included in this report on Form 10-Q and with our Annual Report on
Form 10-K for the year ended December 31, 2004. Our results of operations for the three months and six months ended June 30, 2005 are not necessarily indicative of the operating results expected for the full year.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONSOLIDATED BALANCE SHEETS



ASSETS



|                                                                                                                                              |  |                          |            |                  |   |           
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---------------- | - | ----------
|                                                                                                                                              |  | June 30, 2005(unaudited) |            | December 31,2004
|REAL ESTATE, AT COST:                                                                                                                         |  |                          |            |                  |   |           
|Land                                                                                                                                          |  | $                        | 1,238,819  |                  | $ | 1,238,819 
|Building and improvements, less accumulated depreciation of $6,887,381 and $6,753,824 as of June 30, 2005 and December 31, 2004,
respectively |  |                          | 3,692,276  |                  |   | 3,825,833 
|                                                                                                                                              |  |                          |            |                  |   |           
|Total real estate assets                                                                                                                      |  |                          | 4,931,095  |                  |   | 5,064,652 
|                                                                                                                                              |  |                         
|Investment in joint venture                                                                                                                   |  |                          | 2,565,063  |                  |   | 2,210,305 
|Cash and cash equivalents                                                                                                                     |  |                          | 9,710,075  |                  |   | 12,304,254
|Accounts receivable, net                                                                                                                      |  |                          | 152,867    |                  |   | 122,833   
|Due from joint venture                                                                                                                        |  |                          | 57,843     |                  |   | 0         
|Prepaid expenses and other assets, net                                                                                                        |  |                          | 127,744    |                  |   | 153,496   
|Deferred leasing costs, net                                                                                                                   |  |                          | 99,339     |                  |   | 112,421   
|                                                                                                                                              |  |                          |            |                  |   |           
|Total assets                                                                                                                                  |  | $                        | 17,644,026 |                  | $ | 19,967,961
|                                                                                                                                              |  |                          |            |                  |   |           
|                                                                                                                                             
|LIABILITIES AND PARTNERS CAPITAL                                                                                                            
|                                                                                                                                              |  |                         
|LIABILITIES:                                                                                                                                  |  |                          |            |                  |   |           
|Accounts payable, accrued expenses, and refundable security deposits                                                                          |  | $                        | 196,622    |                  | $ | 211,052   
|Deferred income                                                                                                                               |  |                          | 2,227      |                  |   | 12,168    
|Due to affiliates                                                                                                                             |  |                          | 12,247     |                  |   | 2,277,941 
|Minority interest                                                                                                                             |  |                          | 679        |                  |   | 216       
|                                                                                                                                              |  |                          |            |                  |   |           
|Total liabilities                                                                                                                             |  |                          | 211,775    |                  |   | 2,501,377 
|                                                                                                                                              |  |                         
|PARTNERS CAPITAL:                                                                                                                            |  |                          |            |                  |   |           
|Limited partners:                                                                                                                             |  |                          |            |                  |   |           
|Class A 98,716 units issued and outstanding                                                                                                  |  |                          | 17,432,251 |                  |   | 17,466,584
|Class B42,568 units issued and outstanding                                                                                                   |  |                          | 0          |                  |   | 0         
|General partners                                                                                                                              |  |                          | 0          |                  |   | 0         
|                                                                                                                                              |  |                          |            |                  |   |           
|Total partners capital                                                                                                                       |  |                          | 17,432,251 |                  |   | 17,466,584
|                                                                                                                                              |  |                          |            |                  |   |           
|Total liabilities and partners capital                                                                                                       |  | $                        | 17,644,026 |                  | $ | 19,967,961
|                                                                                                                                              |  |                          |            |                  |   |           



See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|-------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------- | - | -------- | ---- |  | - | ------- | - |  | - | --------- | -
|                                                         |  | Three Months EndedJune 30, |         |   | Six Months Ended June 30, |  
|                                                         |  | 2005                       |         |   | 2004                      |   |          | 2005 |  |   | 2004    |  
|REVENUES:                                                |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Rental income                                            |  | $                          | 252,724 |   |                           | $ | 252,820  |      |  | $ | 515,090 |   |  | $ | 501,478   |  
|Tenant reimbursements                                    |  |                            | 32,733  |   |                           |   | 38,768   |      |  |   | 72,234  |   |  |   | 66,917    |  
|Interest and other income                                |  |                            | 36,252  |   |                           |   | 18,998   |      |  |   | 69,137  |   |  |   | 40,784    |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Total revenues                                           |  |                            | 321,709 |   |                           |   | 310,586  |      |  |   | 656,461 |   |  |   | 609,179   |  
|                                                         |  |                            |         |  
|EXPENSES:                                                |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Legal and accounting                                     |  |                            | 56,786  |   |                           |   | 211,913  |      |  |   | 123,892 |   |  |   | 531,312   |  
|Operating costsrental properties                        |  |                            | 145,463 |   |                           |   | 148,429  |      |  |   | 277,494 |   |  |   | 267,581   |  
|Depreciation                                             |  |                            | 66,630  |   |                           |   | 136,462  |      |  |   | 133,557 |   |  |   | 273,331   |  
|Partnership administration                               |  |                            | 64,788  |   |                           |   | 70,674   |      |  |   | 110,180 |   |  |   | 97,755    |  
|Management and leasing fees                              |  |                            | 21,902  |   |                           |   | 24,855   |      |  |   | 47,176  |   |  |   | 51,897    |  
|Other general and administrative                         |  |                            | 6,266   |   |                           |   | 1,149    |      |  |   | 7,396   |   |  |   | 2,052     |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Total expenses                                           |  |                            | 361,835 |   |                           |   | 593,482  |      |  |   | 699,695 |   |  |   | 1,223,928 |  
|                                                         |  |                            |         |  
|EQUITY IN INCOME (LOSS) OF JOINT VENTURE                 |  |                            | 3,193   |   |                           |   | (13,158  | )    |  |   | 8,359   |   |  |   | (27,963   | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST |  |                            | (36,933 | ) |                           |   | (296,054 | )    |  |   | (34,875 | ) |  |   | (642,712  | )
|Minority interest income                                 |  |                            | 46      |   |                           |   | 0        |      |  |   | 542     |   |  |   | 0         |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|LOSS FROM CONTINUING OPERATIONS                          |  |                            | (36,887 | ) |                           |   | (296,054 | )    |  |   | (34,333 | ) |  |   | (642,712  | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|DISCONTINUED OPERATIONS:                                 |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Operating income                                         |  |                            | 0       |   |                           |   | 17,312   |      |  |   | 0       |   |  |   | 19,746    |  
|Gain on sale                                             |  |                            | 0       |   |                           |   | 349,361  |      |  |   | 0       |   |  |   | 349,361   |  
|Minority interest expense                                |  |                            | 0       |   |                           |   | (36,851  | )    |  |   | 0       |   |  |   | (37,095   | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|INCOME FROM DISCONTINUED OPERATIONS                      |  |                            | 0       |   |                           |   | 329,822  |      |  |   | 0       |   |  |   | 332,012   |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|NET INCOME (LOSS)                                        |  | $                          | (36,887 | ) |                           | $ | 33,768   |      |  | $ | (34,333 | ) |  | $ | (310,700  | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Loss from continuing operations                          |  |                            | (36,887 | ) |                           |   | (256,030 | )    |  |   | (34,333 | ) |  |   | (602,688  | )
|Income from discontinued operations                      |  |                            | 0       |   |                           |   | 196,827  |      |  |   | 0       |   |  |   | 199,017   |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Net loss allocated to Class A limited partners           |  | $                          | (36,887 | ) |                           | $ | (59,203  | )    |  | $ | (34,333 | ) |  | $ | (403,671  | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Loss from continuing operations                          |  |                            | 0       |   |                           |   | (40,024  | )    |  |   | 0       |   |  |   | (40,024   | )
|Income from discontinued operations                      |  |                            | 0       |   |                           |   | 132,995  |      |  |   | 0       |   |  |   | 132,995   |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Net income allocated to Class B limited partners         |  | $                          | 0       |   |                           | $ | 92,971   |      |  | $ | 0       |   |  | $ | 92,971    |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:              |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Loss from continuing operations                          |  | $                          | (0.37   | ) |                           | $ | (2.59    | )    |  | $ | (0.35   | ) |  | $ | (6.11     | )
|Income from discontinued operations                      |  | $                          | 0.00    |   |                           | $ | 1.99     |      |  | $ | 0.00    |   |  | $ | 2.02      |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Net loss per Class A limited partner unit                |  | $                          | (0.37   | ) |                           | $ | (0.60    | )    |  | $ | (0.35   | ) |  | $ | (4.09     | )
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Loss from continuing operations                          |  | $                          | 0.00    |   |                           | $ | (0.94    | )    |  | $ | 0.00    |   |  | $ | (0.94     | )
|Income from discontinued operations                      |  | $                          | 0.00    |   |                           | $ | 3.12     |      |  | $ | 0.00    |   |  | $ | 3.12      |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  
|Net income per Class B limited partner unit              |  | $                          | 0.00    |   |                           | $ | 2.18     |      |  | $ | 0.00    |   |  | $ | 2.18      |  
|                                                         |  |                            |         |   |                           |   |          |      |  |   |         |   |  |   |           |  



See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND THE SIX MONTHS ENDED JUNE 30, 2005 (unaudited)



|                           |  |                  |  |                  |            |                         |       |        |        |   |   |  |   |   |  |   |            |  
|-------------------------- |  | ---------------- |  | ---------------- | ---------- | ----------------------- | ----- | ------ | ------ | - | - |  | - | - |  | - | ---------- | -
|                           |  | Limited Partners |  | General Partners |            | Total Partners Capital |      
|                           |  | Class A          |  |                  | Class B    |                         |      
|                           |  | Units            |  | Amount           |            |                         | Units |        | Amount |   |  
|BALANCE, December 31, 2003 |  | 98,716           |  | $                | 17,877,194 |                         |       | 42,568 |        | $ | 0 |  | $ | 0 |  | $ | 17,877,194 |  
|                           |  |                  |  |                  |            |                        
|Net loss                   |  | 0                |  |                  | (410,610   | )                       |       | 0      |        |   | 0 |  |   | 0 |  |   | (410,610   | )
|                           |  |                  |  |                  |            |                         |       |        |        |   |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2004 |  | 98,716           |  |                  | 17,466,584 |                         |       | 42,568 |        |   | 0 |  |   | 0 |  |   | 17,466,584 |  
|                           |  |                  |  |                  |            |                        
|Net loss                   |  | 0                |  |                  | (34,333    | )                       |       | 0      |        |   | 0 |  |   | 0 |  |   | (34,333    | )
|                           |  |                  |  |                  |            |                         |       |        |        |   |   |  |   |   |  |   |            |  
|BALANCE, June 30, 2005     |  | 98,716           |  | $                | 17,432,251 |                         |       | 42,568 |        | $ | 0 |  | $ | 0 |  | $ | 17,432,251 |  
|                           |  |                  |  |                  |            |                         |       |        |        |   |   |  |   |   |  |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                 |  |                           |            |   |      |   |            |  
|-------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                 |  | Six Months Ended June 30, |           
|                                                                                 |  | 2005                      |            |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            |  |                           |            |   |      |   |            |  
|Net loss                                                                         |  | $                         | (34,333    | ) |      | $ | (310,700   | )
|Adjustments to reconcile net loss to net cash used in operating activities:      |  |                           |            |   |      |   |            |  
|Gain on sale of real estate assets                                               |  |                           | 0          |   |      |   | (349,361   | )
|Depreciation                                                                     |  |                           | 133,557    |   |      |   | 284,219    |  
|Amortization of deferred leasing costs                                           |  |                           | 14,323     |   |      |   | 16,033     |  
|Equity in (income) loss of joint venture                                         |  |                           | (8,359     | ) |      |   | 27,963     |  
|Minority interest expense                                                        |  |                           | (542       | ) |      |   | 37,095     |  
|Operating distributions received from joint ventures                             |  |                           | 0          |   |      |   | 64,282     |  
|Operating changes in assets and liabilities:                                     |  |                           |            |   |      |   |            |  
|Increase in accounts receivable, net                                             |  |                           | (30,034    | ) |      |   | (59,793    | )
|Decrease (increase) in prepaid expenses and other assets, net                    |  |                           | 25,752     |   |      |   | (43,598    | )
|Increase in deferred leasing costs, net                                          |  |                           | (1,241     | ) |      |   | 0          |  
|Decrease in accounts payable, accrued expenses, and refundable security deposits |  |                           | (14,430    | ) |      |   | (6,476     | )
|(Decrease) increase in deferred income                                           |  |                           | (9,941     | ) |      |   | 10,059     |  
|(Decrease) increase in due to affiliate                                          |  |                           | (2,265,694 | ) |      |   | 29,233     |  
|                                                                                 |  |                           |            |   |      |   |            |  
|Total adjustments                                                                |  |                           | (2,156,609 | ) |      |   | 9,656      |  
|                                                                                 |  |                           |            |   |      |   |            |  
|Net cash used in operating activities                                            |  |                           | (2,190,942 | ) |      |   | (301,044   | )
|                                                                                 |  |                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |                           |            |   |      |   |            |  
|Investment in real estate assets                                                 |  |                           | 0          |   |      |   | (5,459     | )
|Net proceeds from sale of real estate assets                                     |  |                           | 0          |   |      |   | 953,670    |  
|Investment in joint venture                                                      |  |                           | (404,242   | ) |      |   | 0          |  
|                                                                                 |  |                           |            |   |      |   |            |  
|Net cash (used in) provided by investing activities                              |  |                           | (404,242   | ) |      |   | 948,211    |  
|                                                                                 |  |                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            |  |                           |            |   |      |   |            |  
|Contributions from minority interest partner                                     |  |                           | 1,005      |   |      |   | 0          |  
|                                                                                 |  |                           |            |   |      |   |            |  
|Net cash provided by financing activities                                        |  |                           | 1,005      |   |      |   | 0          |  
|                                                                                 |  |                          
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                             |  |                           | (2,594,179 | ) |      |   | 647,167    |  
|                                                                                 |  |                          
|CASH AND CASH EQUIVALENTS, beginning of period                                   |  |                           | 12,304,254 |   |      |   | 11,792,983 |  
|                                                                                 |  |                           |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                         |  | $                         | 9,710,075  |   |      | $ | 12,440,150 |  
|                                                                                 |  |                           |            |   |      |   |            |  
|                                                                                 |  |                          
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES           |  |                           |            |   |      |   |            |  
|Partnership distributions payable                                                |  | $                         | 0          |   |      | $ | 781        |  
|                                                                                 |  |                           |            |   |      |   |            |  



See accompanying notes.



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##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



JUNE 30, 2005 (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 sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on April 26, 1984 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing income-producing commercial
properties for investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B Units. Limited partners may vote to, among other things, (a) amend the partnership agreement, subject to certain limitations;
(b) change the business purpose or investment objectives of the Partnership; and (c) add or remove a general partner. A majority vote on any of the above-described matters will bind the Partnership without the concurrence of the General Partners.
Each limited partnership unit has equal voting rights regardless of class.



On
September 6, 1984, the Partnership commenced an offering of up to $50,000,000 of Class A or Class B limited partnership units ($250.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations upon receiving and accepting subscriptions for 5,000 units on February 15, 1985. The offering was terminated on September 5, 1986, at which time the Partnership had sold approximately 98,716 Class A Units and
42,568 Class B Units representing capital contributions of $35,321,000.



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



---

|1. | Paces Pavilion
|-- | --------------

A medical office building located in
Atlanta, Georgia in which the Partnership owns a condominium interest of approximately 27% of the property.

---

|2. | Black Oak Plaza
|-- | ---------------

A retail shopping center located in
Knoxville, Tennessee.

---



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



|                                                         |  |                                                                                            |  |                                                                                        
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------
|Joint Venture                                            |  | Joint Venture Partners                                                                     |  | Properties                                                                             
|Wells-Baker Associates                                   |  |    Wells Real Estate Fund I    Wells & Associates, Inc.(1)                               |  | 1. Peachtree Place(3) A commercial office building located in suburban Atlanta,
Georgia
|Fund I and Fund II Tucker(Fund I-II Tucker Associates) |  |    Wells Real Estate Fund I    Fund II and Fund II-OW(2)    (Fund II-IIOW Associates) |  | 2. Heritage Place(4) A commercial office complex located in Tucker, Georgia            



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

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



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##### Table of Contents

| | (3) | This property was sold in June 2004.
| | --- | ------------------------------------

| | (4) | The retail portion of this property (approximately 30% of the total square feet of the
original property) was sold in April 2003.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



Wells Real Estate
Fund II and Wells Real Estate Fund II-OW are affiliated with the Partnership through common general partners. Each of the properties described above was acquired on an all-cash basis. For further information regarding the Joint Ventures and
foregoing properties, refer to the Partnerships Form 10-K for the year ended December 31, 2004.



On June 18, 2004, Wells-Baker Associates sold Peachtree Place to an unrelated third party for a gross selling price of $1,030,000. As a result of this sale, the Partnership received net sale proceeds of approximately
$858,000 and was allocated a gain of approximately $314,000.



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



Basis of Presentation



The consolidated financial statements include the accounts of the Partnership and Wells-Baker Associates. The Partnership owned a limited partner interest of approximately 90% in Wells-Baker Associates for each of the
periods presented. Leo F. Wells, III serves as one of the general partners of Wells-Baker Associates. All significant intercompany balances have been eliminated in consolidation. Minority interest represents Wells & Associates, Inc.s
interest in Wells-Baker Associates of approximately 10% for each of the periods presented.



The consolidated financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the instructions to Form 10-Q and Article
10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. In the
opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and consistently present the results for those periods. Results for
interim periods are not necessarily indicative of full-year results. For further information, refer to the consolidated financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2004.



Investment in Joint Venture



The Partnership does not have control over the operations of the Joint Ventures; however, it
does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments.
Accordingly, the Partnerships investments in the Joint Ventures are recorded using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income
(loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash
from operations are distributed to the joint venture partners on a quarterly basis.



The Partnership adopted FIN 46(R) effective March 31, 2004. The Partnership owns interests in certain unconsolidated joint venture partnerships (see Note 5). The joint venture partners of the Partnerships unconsolidated joint ventures
in which the Partnership owns an interest have disproportionate voting rights for certain major decisions relative to their obligations to absorb expected losses and rights to receive residual returns of such ventures. However, management has
evaluated such joint ventures and has determined that they are not variable interest entities under the provisions of FIN 46(R) because not substantially all of the activities of the joint ventures are conducted on behalf of a joint venture partner
with disproportionately fewer voting rights. Accordingly, the adoption of FIN 46(R) did not result in the consolidation of any previously unconsolidated entities.



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##### Table of Contents

Distribution of Net Cash from Operations



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



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



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



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



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



Distribution of Net Sale Proceeds



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



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



For the purpose of determining
allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation and amortization and cost recovery and the gain on the sale of assets. Net income, as defined, of the
Partnership is generally allocated each year in the same proportions 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.



Change in Accounting Estimate



In the third quarter of 2004, the Partnership completed a review of its real estate related
depreciation by performing an analysis of the components of each property type in an effort to determine the weighted-average composite useful lives of its real estate assets. As a result of this review, effective July 1, 2004, the Partnership
extended the weighted-average composite useful life from 25 years to 40 years for all building assets. This change resulted in a decrease to net loss of approximately $60,000, or $0.61 per unit, and $140,000, or $1.42 per unit, for Class A
Units for the three months and six months ended June 30, 2005, respectively, as compared



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##### Table of Contents

to the three months and six months ended June 30, 2004, respectively. This change had no effect on net income allocated to Class B Units. The Partnership
believes that this change more accurately reflects the estimated useful lives of the respective assets and is consistent with prevailing industry practice.



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



Management and Leasing Fees



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the management and leasing of the
Partnerships properties, owned directly or through joint ventures, equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time lease-up of newly constructed
properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties, or (b) in the case of commercial properties which are 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.



Through December 31, 2004, Wells Management elected to defer the receipt of management and leasing fees and initial lease-up costs due from
the Partnership with respect to the properties owned by the Partnership directly and through its interest in joint ventures. Accordingly, as of December 31, 2004, the Partnership owed aggregate management and leasing fees to Wells Management of
$3,032,773, of which $2,254,037 was recorded as due to affiliates and $778,736 was due from Fund I-II Tucker Associates and, accordingly, included in investment in joint venture in the accompanying consolidated balance sheet. In March 2005, these
amounts due were paid to Wells Management. The Partnership began paying management and leasing fees to Wells Management from current operating cash flow in the first quarter of 2005. The Partnerships share of management and leasing fees and
lease acquisition costs incurred from properties owned directly and through its joint ventures is $18,923 and $20,177 for the three months ended June 30, 2005 and 2004, respectively, and $37,542 and $42,724 for the six months ended June 30, 2005 and
2004, respectively.



Administration Reimbursements



Wells Capital and Wells Management perform certain administrative services for the
Partnership, relating to accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated 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 $37,506 and $44,478 for the three months ended June 30, 2005, and 2004, respectively, and $77,646 and $69,476 for the six months ended June 30, 2005 and 2004, respectively. As of June 30, 2005 and December 31, 2004, administrative
reimbursements of $12,247 and $16,058 are included in due to affiliates in the accompanying consolidated balance sheets, respectively. In addition, Wells Capital pays for certain operating expenses of the Partnership (bill-backs)
directly and invoices the Partnership for the reimbursement thereof on a monthly basis. As of December 31, 2004, bill-backs due to Wells Capital of $1,486 are included in due to affiliates in the accompanying consolidated balance sheet.



Due to Affiliates



As of June 30, 2005 and December 31, 2004, the Partnership recorded due to affiliates as presented below:



|                                                                       |  |               |        |                   |   |          
|---------------------------------------------------------------------- |  | ------------- | ------ | ----------------- | - | ---------
|                                                                       |  | June 30, 2005 |        | December 31, 2004
|Property management fees due to Wells Management                       |  | $             | 0      |                   | $ | 2,254,037
|Administrative reimbursements due toWells Management and Wells Capital |  |               | 12,247 |                   |   | 16,058   
|Due to Fund I-II Tucker Associates                                     |  |               | 0      |                   |   | 6,360    
|Bill-backs due to Wells Capital                                        |  |               | 0      |                   |   | 1,486    
|                                                                       |  |               |        |                   |   |          
|                                                                       |  | $             | 12,247 |                   | $ | 2,277,941
|                                                                       |  |               |        |                   |   |          



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##### Table of Contents

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



The Partnership sold Peachtree Place on June 18, 2004. The results of operations of Peachtree Place, which are included as discontinued operations in the accompanying
consolidated statements of operations, are presented below:



|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  
|------------------------------------------------------------ |  | --------------------------- | - | ---- | ------------------------ | ------- | ---- |  | ---- | - |  | - | ------- | -
|                                                             |  | Three Months Ended June 30, |   |      | Six Months EndedJune 30, |        
|                                                             |  | 2005                        |   | 2004 |                          |         | 2005 |  | 2004 |  
|Total property revenues                                      |  | $                           | 0 |      | $                        | 48,003  |      |  | $    | 0 |  | $ | 95,604  |  
|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  
|Operating costsrental property                              |  |                             | 0 |      |                          | 28,278  |      |  |      | 0 |  |   | 60,204  |  
|Depreciation                                                 |  |                             | 0 |      |                          | 0       |      |  |      | 0 |  |   | 10,888  |  
|Management and leasing fees                                  |  |                             | 0 |      |                          | 2,064   |      |  |      | 0 |  |   | 3,948   |  
|Amortization of deferred acquisition costs                   |  |                             | 0 |      |                          | 349     |      |  |      | 0 |  |   | 818     |  
|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  
|Total expenses                                               |  |                             | 0 |      |                          | 30,691  |      |  |      | 0 |  |   | 75,858  |  
|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  
|Income from discontinued operations before minority interest |  |                             | 0 |      |                          | 17,312  |      |  |      | 0 |  |   | 19,746  |  
|Gain on sale                                                 |  |                             | 0 |      |                          | 349,361 |      |  |      | 0 |  |   | 349,361 |  
|Minority interest expense                                    |  |                             | 0 |      |                          | (36,851 | )    |  |      | 0 |  |   | (37,095 | )
|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  
|Income from discontinued operations                          |  | $                           | 0 |      | $                        | 329,822 |      |  | $    | 0 |  | $ | 332,012 |  
|                                                             |  |                             |   |      |                          |         |      |  |      |   |  |   |         |  



|5. | INVESTMENT IN JOINT VENTURE
|-- | ---------------------------



Summary of Operations



Condensed financial information for Fund I-II Tucker Associates for the three months and six months ended June 30, 2005 and 2004, respectively, is presented below:



|                            |  |                             |  |                           |  |                           |  |          |  |          |  |         |  |          
|--------------------------- |  | --------------------------- |  | ------------------------- |  | ------------------------- |  | -------- |  | -------- |  | ------- |  | ---------
|Total
Revenues              |  | Net Income (Loss)           |  | Total Revenues            |  | Net Income (Loss)        
|Three Months Ended June 30, |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  | Six Months Ended June 30,
|2005                        |  | 2004                        |  | 2005                      |  | 2004                      |  | 2005     |  | 2004     |  | 2005    |  | 2004     
|$188,801                    |  | $175,353                    |  | $6,151                    |  | $(25,348)                 |  | $362,587 |  | $353,573 |  | $16,103 |  | $(53,868)
|                            |  |                             |  |                           |  |                           |  |          |  |          |  |         |  |          



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



Johnston Action



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



Dismissal of Hendry Action



As a matter of background, on or about March 12, 2004, a putative
class action complaint (the Original Complaint) was filed by four individuals (the plaintiffs) against the Partnership, and Wells Capital and



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##### Table of Contents

Leo F. Wells, III, the General Partners of the Partnership, as well as Wells Management and Wells Investment Securities, Inc. (Hendry et al. v.
Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2). The plaintiffs filed the Original Complaint purportedly on behalf of all limited partners holding B units of the Partnership as of January 15,
2003. The Original Complaint alleged, among other things, that (a) the General Partners of the Partnership, WIS, and the Partnership negligently and fraudulently made false statements and material omissions in connection with the initial sale
(September 6, 1984  September 5, 1986) of the B units to investors of the Partnership by making false statements and omissions in sales literature relating to the distribution of net sale proceeds to holders of B units, among other things; (b)
the General Partners of the Partnership and the Partnership negligently and fraudulently misrepresented and concealed disclosure of, among other things, alleged discrepancies between such statements and provisions in the partnership agreement for a
period of time in order to delay such investors from taking any legal, equitable, or other action to protect their investments in the Partnership, among other reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of a
June 2000 consent solicitation to the limited partners; and (d) the General Partners of the Partnership and the Partnership breached fiduciary duties to the limited partners. On June 3, 2004, the Court granted the plaintiffs motion to permit
voluntary dismissal, and the Original Complaint was dismissed without prejudice.



On or about November 24, 2004, the plaintiffs filed a second putative class action complaint (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04A-13051 6, the Hendry
Action) against the Partnership, the General Partners, and Wells Management. The plaintiffs filed the Hendry Action purportedly on behalf of all limited partners of the Partnership holding B Units as of January 9, 2002. The Hendry Action
alleges, among other things, that the General Partners breached their fiduciary duties to the limited partners by, among other things: (a) failing to timely disclose alleged inconsistencies between sales literature and the partnership agreement
relating to the distribution of net sale proceeds; (b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale proceeds; and (c) not
accepting a settlement offer proposed by a holder of Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant (Johnston), in which the court subsequently granted summary judgment in
favor of the Partnership. The Hendry Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be materially misleading. In addition, the Hendry Action
alleges that the General Partners and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to an alleged waiver of deferred management fees. The plaintiffs seek, among other
remedies, the following: judgment against the General Partners of the Partnership, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by the General Partners directly or through their affiliates;
a declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of the June 2000 consent solicitation to allegedly waive Wells Managements deferred
management fees; and an award to the plaintiffs of their attorneys fees, costs, and expenses.



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 June 30, 2005, Wells
Capital had incurred approximately $471,000 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.



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 Wells defendants motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action has now been dismissed, subject to plaintiffs right to file a
notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal.



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##### Table of Contents

This motion is currently pending before the Court. At this time, management is unable to determine whether the likelihood of an unfavorable outcome is either
probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.



Paces Pavilion



The Partnership is the owner of a condominium interest in an office project known as Paces Pavilion in Atlanta, Georgia. Paces Pavilion was converted to the condominium form of ownership in 1987. Since 1989, the
condominium association has paid ad valorem taxes on the property, and assessed the unit owners, including the Partnership, for their respective shares of those taxes. The Partnership was recently advised that the unit owned by them was omitted from
the county tax rolls. The amount of the ad valorem property tax liability attributable to the condominium unit owned by the Partnership for the years prior to 2005 is unknown at this time. At this time, management is unable to determine whether the
likelihood of an unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.



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



On August 1, 2005, the Partnership distributed net sale proceeds of approximately $6,000,000 to limited partners of record as of June 30, 2005, which under the partnership agreement did not include limited partners
acquiring units after March 31, 2005.



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



The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto. See also Cautionary
Note Regarding Forward-Looking Statements preceding Part I, as well as the notes to our consolidated financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual
Report on Form 10-K for the year ended December 31, 2004.



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 real estate
assets are owned and operated by the Partnership during the initial lease terms of the tenants. Strategic dispositions could occur during this phase in order to capitalize on market conditions;



| |  |  | Positioning-for-sale phase
| | - |  | --------------------------

The period during which
the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the
real estate assets, evaluate various options for disposition, and market the real estate assets for sale; and



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

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



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##### Table of Contents

Portfolio Overview



We are currently in the disposition-and-liquidation phase of our life cycle. We have now sold three assets and a portion of another. Our focus on the remaining assets
involves leasing and marketing efforts that we believe will result in the best disposition pricing for our investors.



We are continuing the disposition process for the Partnership, having selected a broker to market Paces Pavilion for sale. We continue to aggressively pursue leasing
opportunities that will increase occupancy at the remaining properties.



The
General Partners are currently reserving operating cash flows in order to fund any additional legal costs in connection with the litigation discussed herein and lease-up costs anticipated with attempts to increase occupancy at Black Oak Plaza and
the remaining office portion of Heritage Place. The Partnership made its first distribution of net sale proceeds totaling approximately $6,000,000 after the payment of all Partnership debts and liabilities and any reserves deemed necessary in the
third quarter of 2005.



Property Summary



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



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



| |  |  | Black Oak Plaza is approximately 70% leased, and leasing efforts at the center continue.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Peachtree Place originally included two buildings. One building was sold in 2000, and the remaining building sold in June 2004 for total gains of approximately $617,000, of which
approximately $555,000 was allocated to the Partnership.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 in 2003
for a total gain of approximately $293,000, of which approximately $152,000 was allocated to the Partnership.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cherokee Commons was sold in 2001 for a total gain of approximately $1,725,000, of which approximately $436,000 was allocated to the Partnership.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Crowes Crossing was sold in 2001 for a total gain of approximately $1,139,000.
| | - |  | -------------------------------------------------------------------------------



| |  |  | As of June 30, 2005, the property sales described above generated approximately $11,769,000 in net sales proceeds allocated to the Partnership, of which approximately $2,658,000 has
been utilized to pay a portion of the deferred management and leasing fees owed to Wells Management, approximately $3,111,000 is currently being reserved to fund future operating costs of the Partnership and the anticipated re-leasing costs at Paces
Pavilion and Black Oak Plaza, and approximately $6,000,000 was distributed to limited partners in the third quarter of 2005 as a distribution of net sale proceeds (see Liquidity and Capital Resources below).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we move further into the disposition-and-liquidation phase, our attention will shift to
locating suitable buyers and negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners and minimize contingencies and our post-closing involvement with the buyer.



Results of Operations



Revenues



Our gross revenues were $321,709 and $310,586 for the three months ended June 30, 2005 and 2004, respectively, and $656,461 and $609,179 for the six months ended June 30,
2005 and 2004, respectively. The 2005 increase, as compared to 2004, resulted primarily from (i) an increase in interest income due to holding net proceeds from the June 2004 sale of Peachtree Place, (ii) an increase in rental income and tenant
reimbursements as a result of the increase in occupancy at Black Oak Plaza and Heritage Place, partially offset by (iii) forgone rental income resulting from the sale of Peachtree Place in June 2004.



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Equity in Income (Loss) of Joint Venture



Equity in income (loss) of Joint Venture was $3,193 and $(13,158) for the three months ended June 30, 2005 and 2004, respectively, and
$8,359 and $(27,963) for the six months ended June 30, 2005 and 2004, respectively. The 2005 increase, as compared to 2004, is primarily attributable to (i) a decline in depreciation expense for building assets resulting from a change in the
estimated weighted-average composite useful life from 25 years to 40 years effective July 1, 2004, and (ii) an increase in rental income and tenant reimbursements as a result of the increase in occupancy at Heritage Place.



Expenses



Our expenses were $361,835 and $593,482 for the three months ended June 30, 2005 and 2004, respectively, and $699,695 and $1,223,928 for the
six months ended June 30, 2005 and 2004, respectively. The 2005 decreases, as compared to 2004, are primarily attributable to (i) a decrease in legal fees related to resolving aspects of the litigation discussed in Part II, Item 1, of this report
during the second half of 2004; (ii) a decline in depreciation expense due to changing the useful life of buildings from 25 to 40 years effective July 1, 2004, partially offset by (iii) an increase in property operating costs due to the increase in
occupancy at Black Oak Plaza during 2005; and (iv) additional partnership administrative salaries and accounting fees associated with additional reporting and regulatory requirements. We expect administrative salaries and accounting fees to continue
to increase in the future as a result of implementing and adhering to increased reporting and regulatory requirements. In addition, we expect expenses of the Partnership to increase as a result of the Partnerships obligation to indemnify the
General Partners for their costs of defending the litigation discussed in Part II, Item 1 of this report at the conclusion of the litigation.



Liquidity and Capital Resources



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



Short-Term Liquidity



Cash used in operating activities was approximately $2,190,000 for the six months ended June 30, 2005, as compared to approximately $301,000 for the six months ended June
30, 2004. Cash flows used in operating activities increased in 2005, as compared to 2004, primarily due to (i) the payment of deferred management and leasing fees to Wells Management in March 2005 (See Note 3 of the accompanying consolidated
financial statements), and (ii) an increase in administrative salaries and accounting fees associated with increased reporting and regulatory requirements described above.



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 $212,000 as of June 30, 2005.



Long-Term Liquidity



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



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future long-term liquidity requirements will include, but not be limited to, tenant improvements, renovations, expansions, and other significant capital
improvements necessary for properties owned directly and through Fund I-II Tucker Associates.



Capital Resources



The Partnership is
an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties, or investing in joint ventures formed for the same purpose, and has invested all of the partners original capital contributions.
Thus, it is unlikely that we will acquire interests in any additional properties or Joint Ventures. Historically, our investment strategy has generally involved acquiring properties, or interest therein, on an all-cash basis that are pre-leased to
creditworthy tenants.



We fund capital expenditures primarily related to tenant
improvements for the purpose of readying properties for re-leasing, and building improvements for the purpose of maintaining the quality of our properties and readying properties for sale. As leases expire, we attempt to re-lease space to existing
tenants or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those funded in connection with new leases. However, external conditions, such as the supply of
and demand for comparable space available within a given market, drive capital costs as well as rental rates. Any capital or other expenditures required for Heritage Place and not provided for out of operating cash flows will be funded by the
Partnership and Fund I-II Tucker Associates other partners in proportion to their respective ownership interests.



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



As of June 30, 2005, we had received, used, and held net proceeds from the sale of properties as presented below:



|                                             |  |             |           |                                     |      |         |                                            |   |                                  |  |                                            |           |                                               |                                       |  |   |   |  |   |          
|-------------------------------------------- |  | ----------- | --------- | ----------------------------------- | ---- | ------- | ------------------------------------------ | - | -------------------------------- |  | ------------------------------------------ | --------- | --------------------------------------------- | ------------------------------------- |  | - | - |  | - | ---------
|Property Sold                                |  | NetProceeds |           | PartnershipsApproximateOwnership % |      |         | Net ProceedsAttributable to thePartnership |   | Cumulative Net Proceeds Invested |  | Distributed toPartners as of June 30, 2005 |           | Undistributed NetProceeds as of June 30, 2005
|                                             |  |             |           | Amount                              |      | Purpose |                                            |  
|Crowes Crossing (sold in 2001)              |  | $           | 6,486,652 |                                     | 100  | %       |                                            | $ | 6,486,652                        |  | $                                          | 1,481,087 |                                               |     Payment ofdeferred managementfee |  | $ | 0 |  | $ | 5,005,565
|Heritage Place retail portion (sold in 2003) |  |             | 3,207,708 |                                     | 51.9 | %       |                                            |   | 1,665,121                        |  |                                            | 266,967   |                                               |     Payment ofdeferred managementfee |  |   | 0 |  |   | 1,398,154
|Cherokee Commons (sold in 2001)              |  |             | 8,414,089 |                                     | 25.3 | %       |                                            |   | 2,126,109                        |  |                                            | 23,331    |                                               |     Payment ofdeferred managementfee |  |   | 0 |  |   | 2,102,778
|Peachtree Place (partial sale in 2000)       |  |             | 704,496   |                                     | 90.0 | %       |                                            |   | 633,695                          |  |                                            | 633,695   |                                               |     Payment ofdeferred managementfee |  |   | 0 |  |   | 0        
|Peachtree Place (remainder sold in 2004)     |  |             | 953,670   |                                     | 90.0 | %       |                                            |   | 857,826                          |  |                                            | 253,200   |                                               |     Payment ofdeferred managementfee |  |   | 0 |  |   | 604,626  
|                                             |  |             |           |                                     |      |         |                                            |   |                                  |  |                                            |           |                                               |                                       |  |   |   |  |   |          
|Total                                        |  |             |           |                                     |      |         |                                            | $ | 11,769,403                       |  | $                                          | 2,658,280 |                                               |                                       |  | $ | 0 |  | $ | 9,111,123
|                                             |  |             |           |                                     |      |         |                                            |   |                                  |  |                                            |           |                                               |                                       |  |   |   |  |   |          



In accordance with Section 9.3 of the
partnership agreement, except for reinvestment of net sale proceeds as provided in Section 11.3(g) (as amended), and after the payment of reserves allowed for Partnership debts and liabilities, and after the establishment of reserves which our
General Partners, in their sole discretion, deem



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reasonably necessary, as of June 30, 2005, there were net sale proceeds in the amount of approximately $6,000,000 available for distribution to limited
partners, which were distributed to limited partners in the third quarter of 2005. As more fully set forth therein, Section 9.3 of the partnership agreement provides that the net sale proceeds are to be distributed to each Partner in
accordance with the positive balance in his Capital Account as of the date of distribution under this Section 9.3 (after allocation of the Gain on Sale as provided in Section 10.4 hereof).



Contractual Obligations and Commitments



Distribution of Net Sale Proceeds



The Partnership distributed net sale proceeds of approximately $6,000,000 in the third
quarter of 2005 to limited partners of record as of June 30, 2005, which, under the terms of the partnership agreement, did not include limited partners acquiring units after March 31, 2005, and is retaining the residual balance of approximately
$3,111,000 in reserve to fund future operating costs of the Partnership.



Related-Party Transactions



Related-Party Fees and
Reimbursements



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 3 to our financial statements included in this report for a description of these fees and
expense reimbursements we have incurred.



Economic Dependency



We have engaged Wells Capital, our corporate General Partner, and its
affiliates, including Wells Management, to provide certain services that are essential to the Partnership, including asset management services, supervision of the management and leasing of properties owned directly by the Partnership and through the
Joint Ventures, asset acquisition and disposition services, as well as other administrative responsibilities for the Partnership including accounting services, shareholder communications, and investor relations. These agreements are terminable by
either party on 60 days written notice. As a result of these relationships, the Partnership is dependent upon Wells Capital and Wells Management.



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



WREFs net income was approximately $14.4 million for the six months ended June 30, 2005. 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 of Wells Real Estate Investment Trust II, Inc., an affiliated real estate investment trust
for which Wells Capital serves as the advisor, and the volume of future acquisitions and dispositions of real estate assets by Wells-sponsored programs. As of June 30, 2005 and December 31, 2004, WREF held cash balances of approximately $32.2
million and $6.3 million, respectively. WREF believes that it has adequate liquidity available in the form of cash on hand and current receivables necessary to meet its obligations as they become due.



Inflation



The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate.
However, there are provisions in the majority of tenant leases which should protect us from the



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impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax, and insurance
reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. There is no assurance, however, that we would be able to replace existing leases with new leases at
higher base rental rates.



Application of Critical Accounting Policies



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



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



Investment in Real Estate Assets



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



|                      |  |            
|--------------------- |  | -----------
|Buildings             |  | 40 years   
|Building improvements |  | 10-25 years
|Land improvements     |  | 20 years   
|Tenant improvements   |  | Lease term 



In the third quarter of 2004, we
completed a review of our real estate related depreciation by performing an analysis of the components of each property type in an effort to determine the weighted-average composite useful lives of its real estate assets. As a result of this review,
effective July 1, 2004, we extended the weighted-average composite useful life from 25 years to 40 years for all building assets. This change resulted in a decrease to our net loss of approximately $140,000, or $1.42 per unit, for Class A Units.
This change had no effect on net income allocated to Class B Units. Fund I-II Tucker Associates also extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to equity in
income of joint venture for the three months and six months ended June 30, 2005. We believe that this change more accurately reflects the estimated useful lives of the respective assets and is consistent with prevailing industry practice. In the
event that we use inappropriate useful lives or methods for depreciation, our net income would be misstated.



Valuation of Real Estate Assets



We
continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest, either directly or through investments in the Joint Ventures, may not be
recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the
carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the



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event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and
recognizes an impairment loss. We have determined that there has been no impairment in the carrying value of any of the real estate assets held as of June 30, 2005.



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



Potential Tax Impact on Limited Partners Holding Class B
UnitsAmerican Jobs Creation Act of 2004



The American Jobs Creation
Act of 2004 (the Act) added Section 470 to the Internal Revenue Code, which provides certain limitations on the utilization of losses allocable to leased property owned by a partnership having both taxable and tax-exempt partners such as
the Partnership. Currently, it is unclear as to how the transition rules and effective dates set forth in the Act are intended to apply to entities such as the Partnership. However, on March 11, 2005, the Internal Revenue Service issued IRS Notice
2005-29 announcing that the IRS will not apply Section 470 to partnerships for taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. It is important to note that IRS Notice 2005-29 provided relief
for partnerships for taxable year 2004 only. Accordingly, unless Congress passes corrective legislation which addresses this issue or some other form of relief from the provisions of Section 470 of the Act is granted, beginning in 2005 and
thereafter, future passive losses allocable to Class B limited partners may only be used to offset passive income generated from the same property or within the same fund.



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



The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, our corporate General Partner, including the Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of the Partnerships disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities Exchange Act of 1934. Based upon that evaluation, the Principal
Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were effective.



There were no significant changes in the Partnerships internal control over financial reporting during the quarter ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.



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PART II.    OTHER INFORMATION



ITEM 1.    LEGAL PROCEEDINGS



Johnston Action



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



Dismissal of Hendry Action



As a matter of background, on or about March 12, 2004, a putative class action complaint
(the Original Complaint) was filed by four individuals (the plaintiffs) against the Partnership, and Wells Capital and Leo F. Wells, III, the General Partners of the Partnership, as well as Wells Management and Wells
Investment Securities, Inc. (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2). The plaintiffs filed the Original Complaint purportedly on behalf of all limited partners
holding B units of the Partnership as of January 15, 2003. The Original Complaint alleged, among other things, that (a) the General Partners of the Partnership, WIS, and the Partnership negligently and fraudulently made false statements and material
omissions in connection with the initial sale (September 6, 1984  September 5, 1986) of the B units to investors of the Partnership by making false statements and omissions in sales literature relating to the distribution of net sale proceeds
to holders of B units, among other things; (b) the General Partners of the Partnership and the Partnership negligently and fraudulently misrepresented and concealed disclosure of, among other things, alleged discrepancies between such statements and
provisions in the partnership agreement for a period of time in order to delay such investors from taking any legal, equitable, or other action to protect their investments in the Partnership, among other reasons; (c) Mr. Wells and Wells Management
breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners; and (d) the General Partners of the Partnership and the Partnership breached fiduciary duties to the limited partners. On June 3, 2004, the Court
granted the plaintiffs motion to permit voluntary dismissal, and the Original Complaint was dismissed without prejudice.



On or about November 24, 2004, the plaintiffs filed a second putative class action complaint (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett
County, Georgia, Civil Action No. 04A-13051 6, the Hendry Action) against the Partnership, the General Partners, and Wells Management. The plaintiffs filed the Hendry Action purportedly on behalf of all limited partners of the
Partnership holding B Units as of January 9, 2002. The Hendry Action alleges, among other things, that the General Partners breached their fiduciary duties to the limited partners by, among other things: (a) failing to timely disclose alleged
inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale proceeds; (b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement
relating to the distribution of net sale proceeds; and (c) not accepting a settlement offer proposed by a holder of Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant (Johnston),
in which the court subsequently granted summary judgment in favor of the Partnership. The Hendry Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation
to be materially misleading. In addition, the Hendry Action alleges that the General Partners and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to an alleged waiver of
deferred management fees. The plaintiffs seek, among other remedies, the following: judgment against the General Partners of the Partnership, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by
the General



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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.



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 June 30, 2005, Wells Capital had incurred approximately $471,000 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.



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 Wells defendants motions to dismiss
and for summary judgment on all counts in the complaint. Thus, this action has now been dismissed, subject to plaintiffs right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion
requesting the Court to re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal. This motion is currently pending before the Court. At this time, management is unable to determine
whether the likelihood of an unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.



Paces Pavilion



The Partnership is the owner of a condominium interest in an office project known as Paces Pavilion in Atlanta, Georgia. Paces Pavilion was converted to the condominium
form of ownership in 1987. Since 1989, the condominium association has paid ad valorem taxes on the property, and assessed the unit owners, including the Partnership, for their respective shares of those taxes. The Partnership was recently advised
that the unit owned by them was omitted from the county tax rolls. The amount of the ad valorem property tax liability attributable to the condominium unit owned by the Partnership for the years prior to 2005 is unknown at this time. At this time,
management is unable to determine whether the likelihood of an unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying consolidated financial statements.



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 June 30, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended June 30, 2005.
|--- | ------------------------------------------------------------------------



ITEM 3.    DEFAULTS UPON SENIOR SECURITIES



We were not subject to any indebtedness, and therefore, we did not default respect to any indebtedness during the quarter ended June 30, 2005.



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 June 30, 2005.



ITEM 5.    OTHER INFORMATION



|(a) | During the quarter ended June 30, 2005, there was no information which was 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 Second Quarter Form 10-Q attached hereto.



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SIGNATURES



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



|                |  |  |  |                                                                                 
|--------------- |  |  |  | --------------------------------------------------------------------------------
|                |  |  |  | WELLS REAL ESTATE FUND I                                                        
|                |  |  |  | (Registrant)                                                                    
|                |  | 
|                |  |  |  | By: WELLS CAPITAL, INC.                                                         
|                |  |  |  | (Corporate General Partner)                                                     
|                |  | 
|August 12, 2005 |  |  |  | /s/    LEO F. WELLS, III                                                        
|                |  |  |  | Leo F. Wells, III                                                               
|                |  |  |  | President, Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|                |  | 
|August 12, 2005 |  |  |  | /s/    DOUGLAS P. WILLIAMS                                                      
|                |  |  |  | Douglas P. Williams                                                             
|                |  |  |  | Principal Financial Officer of Wells Capital, Inc.                              



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EXHIBIT INDEX



TO SECOND QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND I



|            |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                   
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002