##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



---



(Mark One)



| | x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | - |  | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 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



---



WELLS REAL ESTATE FUND I

(Exact name of registrant as specified in its
charter)



---



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



N/A

---

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



Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  x    No ̈



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



Yes ̈No  x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x



---



---

##### Table of Contents

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 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;
| | - |  | --------------------------------------------------------



| |  |  | Adverse economic conditions affecting the particular industry of one or more tenants in properties owned by us and our joint ventures;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



Enterprise risks



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



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



| |  |  | Our ability to liquidate and dissolve the Partnership in a timely manner, to fund related administrative costs, and to minimize such costs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



Real estate risks



| |  |  | Our 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page 2



---

##### Table of Contents

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



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



| |  |  | Our 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Our 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our 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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Page 3



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                            |  |         
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | --------
|         |  |                       |  |                                                                                                                                            |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Consolidated Financial Statements                                                                                                          |  |         
|         |  |                       | 
|         |  |                       |  | Consolidated Balance SheetsSeptember 30, 2005 (unaudited) and December 31, 2004                                                           |  | 6       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2005 (unaudited) and 2004 (unaudited)       |  | 7       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Partners Capital for the Year Ended December 31, 2004 and the Nine Months Ended September 30, 2005 (unaudited) |  | 8       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 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      



Page 4



---

##### Table of Contents

PART I.    FINANCIAL STATEMENTS



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



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



Page 5



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





CONSOLIDATED BALANCE SHEETS



ASSETS



|                                                                                                                                                     |  |                                |            |                  |   |           
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | ---------------- | - | ----------
|                                                                                                                                                     |  | September 30, 2005 (unaudited) |            | December 31,2004
|REAL ESTATE, AT COST:                                                                                                                                |  |                                |            |                  |   |           
|Land                                                                                                                                                 |  | $                              | 1,238,819  |                  | $ | 1,238,819 
|Building and improvements, less accumulated depreciation of $6,954,011 and $6,753,824 as of September 30, 2005 and December 31,
2004, respectively   |  |                                | 3,704,558  |                  |   | 3,825,833 
|                                                                                                                                                     |  |                                |            |                  |   |           
|Total real estate assets                                                                                                                             |  |                                | 4,943,377  |                  |   | 5,064,652 
|                                                                                                                                                     |  |                               
|Investment in joint venture                                                                                                                          |  |                                | 2,536,356  |                  |   | 2,210,305 
|Cash and cash equivalents                                                                                                                            |  |                                | 3,776,629  |                  |   | 12,304,254
|Accounts receivable, net                                                                                                                             |  |                                | 126,779    |                  |   | 122,833   
|Due from joint venture                                                                                                                               |  |                                | 9,409      |                  |   | 0         
|Prepaid expenses and other assets, net                                                                                                               |  |                                | 97,241     |                  |   | 153,496   
|Deferred lease acquisition costs, less accumulated amortization of $118,727 and $97,603 as of September 30, 2005 and December 31,
2004, respectively |  |                                | 92,538     |                  |   | 112,421   
|                                                                                                                                                     |  |                                |            |                  |   |           
|Total assets                                                                                                                                         |  | $                              | 11,582,329 |                  | $ | 19,967,961
|                                                                                                                                                     |  |                                |            |                  |   |           
|                                                                                                                                                    
|LIABILITIES AND PARTNERS CAPITAL                                                                                                                   
|LIABILITIES:                                                                                                                                         |  |                                |            |                  |   |           
|Accounts payable, accrued expenses, and refundable security deposits                                                                                 |  | $                              | 207,647    |                  | $ | 207,604   
|Deferred rent income                                                                                                                                 |  |                                | 5,649      |                  |   | 12,168    
|Due to affiliates                                                                                                                                    |  |                                | 16,646     |                  |   | 2,281,389 
|Minority interest                                                                                                                                    |  |                                | 582        |                  |   | 216       
|                                                                                                                                                     |  |                                |            |                  |   |           
|Total liabilities                                                                                                                                    |  |                                | 230,524    |                  |   | 2,501,377 
|                                                                                                                                                     |  |                               
|PARTNERS CAPITAL:                                                                                                                                   |  |                                |            |                  |   |           
|Limited partners:                                                                                                                                    |  |                                |            |                  |   |           
|Class A98,716 units issued and outstanding                                                                                                          |  |                                | 11,351,805 |                  |   | 17,466,584
|Class B42,568 units issued and outstanding                                                                                                          |  |                                | 0          |                  |   | 0         
|General partners                                                                                                                                     |  |                                | 0          |                  |   | 0         
|                                                                                                                                                     |  |                                |            |                  |   |           
|Total partners capital                                                                                                                              |  |                                | 11,351,805 |                  |   | 17,466,584
|                                                                                                                                                     |  |                                |            |                  |   |           
|Total liabilities and partners capital                                                                                                              |  | $                              | 11,582,329 |                  | $ | 19,967,961
|                                                                                                                                                     |  |                                |            |                  |   |           



See accompanying notes.



Page 6



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|-------------------------------------------------------- |  | ------------------------------- | -------- | - | ------------------------------ | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                         |  | Three Months EndedSeptember 30, |          |   | Nine Months EndedSeptember 30, |  
|                                                         |  | 2005                            |          |   | 2004                           |   |         | 2005 |  |   | 2004      |  
|REVENUES:                                                |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Rental income                                            |  | $                               | 251,863  |   |                                | $ | 247,874 |      |  | $ | 766,953   |   |  | $ | 749,351   |  
|Tenant reimbursements                                    |  |                                 | 26,059   |   |                                |   | 33,239  |      |  |   | 98,293    |   |  |   | 100,156   |  
|Interest and other income                                |  |                                 | 20,844   |   |                                |   | 19,760  |      |  |   | 89,980    |   |  |   | 60,543    |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Total revenues                                           |  |                                 | 298,766  |   |                                |   | 300,873 |      |  |   | 955,226   |   |  |   | 910,050   |  
|EXPENSES:                                                |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Operating costsrental properties                        |  |                                 | 149,215  |   |                                |   | 92,484  |      |  |   | 410,174   |   |  |   | 345,842   |  
|Management and leasing fees                              |  |                                 | 24,751   |   |                                |   | 25,455  |      |  |   | 71,927    |   |  |   | 77,352    |  
|Depreciation                                             |  |                                 | 66,630   |   |                                |   | 63,704  |      |  |   | 200,187   |   |  |   | 337,035   |  
|Legal and accounting                                     |  |                                 | 66,675   |   |                                |   | 146,846 |      |  |   | 207,103   |   |  |   | 692,380   |  
|Partnership administration                               |  |                                 | 52,739   |   |                                |   | 33,832  |      |  |   | 170,314   |   |  |   | 133,639   |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Total expenses                                           |  |                                 | 360,010  |   |                                |   | 362,321 |      |  |   | 1,059,705 |   |  |   | 1,586,248 |  
|                                                         |  |                                 |          |  
|EQUITY IN INCOME (LOSS) OF JOINT VENTURE                 |  |                                 | (19,298  | ) |                                |   | 18,239  |      |  |   | (10,939   | ) |  |   | (9,723    | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST |  |                                 | (80,542  | ) |                                |   | (43,209 | )    |  |   | (115,418  | ) |  |   | (685,921  | )
|Minority interest                                        |  |                                 | 96       |   |                                |   | 0       |      |  |   | 639       |   |  |   | 0         |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|LOSS FROM CONTINUING OPERATIONS                          |  |                                 | (80,446  | ) |                                |   | (43,209 | )    |  |   | (114,779  | ) |  |   | (685,921  | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|DISCONTINUED OPERATIONS:                                 |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Operating loss                                           |  |                                 | 0        |   |                                |   | (25,431 | )    |  |   | 0         |   |  |   | (5,685    | )
|Gain on sale                                             |  |                                 | 0        |   |                                |   | 0       |      |  |   | 0         |   |  |   | 349,361   |  
|Minority interest                                        |  |                                 | 0        |   |                                |   | 1,433   |      |  |   | 0         |   |  |   | (35,662   | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|INCOME (LOSS) FROM DISCONTINUED OPERATIONS               |  |                                 | 0        |   |                                |   | (23,998 | )    |  |   | 0         |   |  |   | 308,014   |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|NET LOSS                                                 |  | $                               | (80,446  | ) |                                | $ | (67,207 | )    |  | $ | (114,779  | ) |  | $ | (377,907  | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Loss from continuing operations                          |  | $                               | (186,582 | ) |                                | $ | (43,209 | )    |  | $ | (220,915  | ) |  | $ | (685,921  | )
|Income (loss) from discontinued operations               |  |                                 | 0        |   |                                |   | (23,998 | )    |  |   | 0         |   |  |   | 308,014   |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net loss allocated to Class A limited partners           |  | $                               | (186,582 | ) |                                | $ | (67,207 | )    |  | $ | (220,915  | ) |  | $ | (377,907  | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Income from continuing operations                        |  | $                               | 106,136  |   |                                | $ | 0       |      |  | $ | 106,136   |   |  | $ | 0         |  
|Income from discontinued operations                      |  |                                 | 0        |   |                                |   | 0       |      |  |   | 0         |   |  |   | 0         |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net income allocated to Class B limited partners         |  | $                               | 106,136  |   |                                | $ | 0       |      |  | $ | 106,136   |   |  | $ | 0         |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|                                                         |  |                                 |          |  
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:              |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Loss from continuing operations                          |  | $                               | (1.89    | ) |                                | $ | (0.44   | )    |  | $ | (2.24     | ) |  | $ | (6.95     | )
|Income (loss) from discontinued operations               |  | $                               | 0.00     |   |                                | $ | (0.24   | )    |  | $ | 0.00      |   |  | $ | 3.12      |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net loss per Class A limited partner unit                |  | $                               | (1.89    | ) |                                | $ | (0.68   | )    |  | $ | (2.24     | ) |  | $ | (3.83     | )
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Income from continuing operations                        |  | $                               | 2.49     |   |                                | $ | 0.00    |      |  | $ | 2.49      |   |  | $ | 0.00      |  
|Income from discontinued operations                      |  | $                               | 0.00     |   |                                | $ | 0.00    |      |  | $ | 0.00      |   |  | $ | 0.00      |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net income per Class B limited partner unit              |  | $                               | 2.49     |   |                                | $ | 0.00    |      |  | $ | 2.49      |   |  | $ | 0.00      |  
|                                                         |  |                                 |          |   |                                |   |         |      |  |   |           |   |  |   |           |  



See accompanying notes.



Page 7



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND THE NINE MONTHS ENDED SEPTEMBER 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 income (loss)                                                                                     |  | 0                |  |        | (220,915         | ) |                         | 0      |        |   | 106,136  |   |  |   | 0 |  |   | (114,779   | )
|Distributions of net sale proceeds ($59.71 and $2.49 per Class A Unit and Class B Unit, respectively) |  | 0                |  |        | (5,893,864       | ) |                         | 0      |        |   | (106,136 | ) |  |   |   |  |   | (6,000,000 | )
|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  
|BALANCE, September 30, 2005                                                                           |  | 98,716           |  | $      | 11,351,805       |   |                         | 42,568 |        | $ | 0        |   |  | $ | 0 |  | $ | 11,351,805 |  
|                                                                                                      |  |                  |  |        |                  |   |                         |        |        |   |          |   |  |   |   |  |   |            |  



See accompanying notes.



Page 8



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                 |  |                                |            |   |      |   |            |  
|-------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                 |  | Nine Months EndedSeptember 30, |           
|                                                                                 |  | 2005                           |            |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            |  |                                |            |   |      |   |            |  
|Net loss                                                                         |  | $                              | (114,779   | ) |      | $ | (377,907   | )
|Adjustments to reconcile net loss to net cash used in operating activities:      |  |                                |            |   |      |   |            |  
|Gain on sale of real estate assets                                               |  |                                | 0          |   |      |   | (349,361   | )
|Depreciation                                                                     |  |                                | 200,187    |   |      |   | 347,923    |  
|Amortization of deferred lease acquisition costs                                 |  |                                | 21,124     |   |      |   | 23,918     |  
|Equity in loss of joint venture                                                  |  |                                | 10,939     |   |      |   | 9,723      |  
|Minority interest                                                                |  |                                | (639       | ) |      |   | 35,662     |  
|Operating changes in assets and liabilities:                                     |  |                                |            |   |      |   |            |  
|Increase in accounts receivable, net                                             |  |                                | (3,946     | ) |      |   | (36,112    | )
|Decrease (increase) in prepaid expenses and other assets, net                    |  |                                | 56,255     |   |      |   | (8,272     | )
|Decrease in accounts payable, accrued expenses, and refundable security deposits |  |                                | (3,405     | ) |      |   | (70,028    | )
|(Decrease) increase in deferred rent income                                      |  |                                | (6,519     | ) |      |   | 4,961      |  
|(Decrease) increase in due to affiliates                                         |  |                                | (2,261,295 | ) |      |   | 20,209     |  
|                                                                                 |  |                                |            |   |      |   |            |  
|Total adjustments                                                                |  |                                | (1,987,299 | ) |      |   | (21,377    | )
|Operating distributions received from joint ventures                             |  |                                | 57,843     |   |      |   | 48,709     |  
|                                                                                 |  |                                |            |   |      |   |            |  
|Net cash used in operating activities                                            |  |                                | (2,044,235 | ) |      |   | (350,575   | )
|                                                                                 |  |                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |                                |            |   |      |   |            |  
|Investment in real estate assets                                                 |  |                                | (78,912    | ) |      |   | (16,851    | )
|Net proceeds from sale of real estate assets                                     |  |                                | 0          |   |      |   | 953,670    |  
|Investment in deferred lease acquisition costs                                   |  |                                | (1,241     | ) |      |   | (3,340     | )
|Investment in joint venture                                                      |  |                                | (404,242   | ) |      |   | 0          |  
|                                                                                 |  |                                |            |   |      |   |            |  
|Net cash (used in) provided by investing activities                              |  |                                | (484,395   | ) |      |   | 933,479    |  
|                                                                                 |  |                               
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            |  |                                |            |   |      |   |            |  
|Net sale proceeds distributions paid to limited partners                         |  |                                | (6,000,000 | ) |      |   | 0          |  
|Minority interest distributions paid for discontinued operations                 |  |                                | 0          |   |      |   | (69,769    | )
|Contributions from minority interest partner                                     |  |                                | 1,005      |   |      |   | 0          |  
|                                                                                 |  |                                |            |   |      |   |            |  
|Net cash used in financing activities                                            |  |                                | (5,998,995 | ) |      |   | (69,769    | )
|                                                                                 |  |                                |            |   |      |   |            |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                             |  |                                | (8,527,625 | ) |      |   | 513,135    |  
|                                                                                 |  |                               
|CASH AND CASH EQUIVALENTS, beginning of period                                   |  |                                | 12,304,254 |   |      |   | 11,792,983 |  
|                                                                                 |  |                                |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                         |  | $                              | 3,776,629  |   |      | $ | 12,306,118 |  
|                                                                                 |  |                                |            |   |      |   |            |  



See accompanying notes.



Page 9



---

##### Table of Contents

WELLS REAL ESTATE FUND I AND SUBSIDIARY





CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



SEPTEMBER 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 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 or the Joint Venture) |  |    Wells Real Estate Fund I    Fund II and Fund II-OW(2)(Fund II-IIOW
Associates) |  | 2. Heritage Place 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.
| | --- | --------------------------------------------------------------------------------------------------------------

| | (3) | This property originally included two buildings; one building was sold in August 2000, and
the remaining building was sold in June 2004.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



Page 10



---

##### Table of Contents

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 forgoing 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. 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 Venture; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partner is required for any major decision or any action that would materially affect
the Joint Venture, or its real property investments. Accordingly, the Partnerships investment in the Joint Venture is 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 agreement, all income (loss) and distributions are allocated to joint venture partners in accordance with their
respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.



The Partnership adopted FIN 46(R) effective March 31, 2004. The Partnership owns an interest in one unconsolidated joint venture
partnership (see Note 5). The joint venture partners of the unconsolidated joint venture 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 venture. However, management has evaluated such Joint Venture and has determined that it is not a variable interest entity under the provisions of FIN 46(R) because not substantially all of the
activities of the Joint Venture are conducted on behalf of a Joint Venture partner with disproportionately fewer voting rights. Management has also determined the Partnerships joint venture partners are not related parties, as defined in FIN
46(R) and SFAS No. 57. Accordingly, the adoption of FIN 46(R) did not result in the consolidation of any previously unconsolidated entity.



Page 11



---

##### 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 proportion that net cash from operations is distributed to the partners.



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



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



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 $72,900, or $0.74 per unit for Class A Units, for the
three months and



Page 12



---

##### Table of Contents

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



Reclassifications



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



|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
leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term.



From March 1987 through December 2004, Wells Management elected to defer the receipt of
management and leasing fees and initial lease-up costs due from the Partnership with respect to the properties owned by the Partnership directly and through its interest in joint ventures. Accordingly, as of December 31, 2004, the Partnership
owed aggregate management and leasing fees to Wells Management of $3,032,773, of which $2,254,037 was recorded as due to affiliates; the remaining $778,736 was due from Fund I-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 $18,990 and $19,354 for the three months ended September 30, 2005
and 2004, respectively, and $56,532 and $62,078 for the nine months ended September 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 $30,642 and $36,697 for the three months ended September 30,
2005, and 2004, respectively, and $108,288 and $106,173 for the nine months ended September 30, 2005 and 2004, respectively.



Due to Affiliates



As of September 30, 2005 and December 31, 2004, due to affiliates was comprised of the following amounts:



|                                                                           |  |                   |        |                  |   |          
|-------------------------------------------------------------------------- |  | ----------------- | ------ | ---------------- | - | ---------
|                                                                           |  | September 30,2005 |        | December 31,2004
|Property management fees due to Wells Management                           |  | $                 | 4,739  |                  | $ | 2,254,037
|Administrative reimbursements due to Wells Management and/or Wells Capital |  |                   | 11,907 |                  |   | 19,506   
|Other                                                                      |  |                   | 0      |                  |   | 7,846    
|                                                                           |  |                   |        |                  |   |          
|                                                                           |  | $                 | 16,646 |                  | $ | 2,281,389
|                                                                           |  |                   |        |                  |   |          



Page 13



---

##### Table of Contents

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



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



|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|---------------------------------------------------------- |  | ------------------------------- | - | ---- | ------------------------------ | ------- | ---- |  | ---- | - |  | - | ------- | -
|                                                           |  | Three Months EndedSeptember 30, |   |      | Nine Months EndedSeptember 30, |        
|                                                           |  | 2005                            |   | 2004 |                                |         | 2005 |  | 2004 |  
|Rental income                                              |  | $                               | 0 |      | $                              | 0       |      |  | $    | 0 |  | $ | 74,666  |  
|Tenant reimbursements                                      |  |                                 | 0 |      |                                | 132     |      |  |      | 0 |  |   | 21,071  |  
|Gain on sale                                               |  |                                 | 0 |      |                                | 0       |      |  |      | 0 |  |   | 349,361 |  
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|Total revenues                                             |  |                                 | 0 |      |                                | 132     |      |  |      | 0 |  |   | 445,098 |  
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|Operating costsrental property                            |  |                                 | 0 |      |                                | 25,563  |      |  |      | 0 |  |   | 85,770  |  
|Depreciation                                               |  |                                 | 0 |      |                                | 0       |      |  |      | 0 |  |   | 10,888  |  
|Management and leasing fees                                |  |                                 | 0 |      |                                | 0       |      |  |      | 0 |  |   | 4,764   |  
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|Total expenses                                             |  |                                 | 0 |      |                                | 25,563  |      |  |      | 0 |  |   | 101,422 |  
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|Loss from discontinued operations before minority interest |  |                                 | 0 |      |                                | (25,431 | )    |  |      | 0 |  |   | 343,676 |  
|Minority interest                                          |  |                                 | 0 |      |                                | 1,433   |      |  |      | 0 |  |   | (35,662 | )
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  
|Income (loss) from discontinued operations                 |  | $                               | 0 |      | $                              | (23,998 | )    |  | $    | 0 |  | $ | 308,014 |  
|                                                           |  |                                 |   |      |                                |         |      |  |      |   |  |   |         |  



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



Summary of Operations



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



|                                |         |                                 |   |                                |  |                                |         |   |      |   |        |  |      |         |  |      |         |  |   |         |   |  |   |         |     
|------------------------------- | ------- | ------------------------------- | - | ------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------ |  | ---- | ------- |  | ---- | ------- |  | - | ------- | - |  | - | ------- | ----
|Total Revenues                  |         | Net Income (Loss)               |   | Total Revenues                 |  | Net Loss                       |        
|Three Months EndedSeptember 30, |         | Three Months EndedSeptember 30, |   | Nine Months EndedSeptember 30, |  | Nine Months EndedSeptember 30, |        
|2005                            |         | 2004                            |   | 2005                           |  |                                | 2004    |   | 2005 |   | 2004   |  | 2005 |         |  | 2004 |        
|$                               | 174,945 |                                 | $ | 183,593                        |  | $                              | (37,175 | ) |      | $ | 35,136 |  | $    | 537,532 |  | $    | 537,166 |  | $ | (21,073 | ) |  | $ | (18,731 | )(1)
|                                |         |                                 |   |                                |  |                                |         |   |      |   |        |  |      |         |  |      |         |  |   |         |   |  |   |         |     

| | (1) | Effective July 1, 2004, Fund I-II Tucker Associates extended the weighted-average
composite useful life for all building assets from 25 years to 40 years, which resulted in a decrease to net loss for the three months and nine months ended September 30, 2004 of $24,623. Management believes that this change more appropriately
reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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.



Page 14



---

##### Table of Contents

Dismissal of Hendry Action



As a matter of background and as described in more detail in prior Form 10-Q and Form 10-K filings, 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. 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 September 30, 2005, Wells Capital had incurred approximately $540,000 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 vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal.
Both the plaintiffs and the defendants have filed briefs supporting their respective positions, and the plaintiffs motion is still 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.



Page 15



---

##### Table of Contents

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 estimated amount of ad valorem property taxes that are attributable to the condominium unit owned by the Partnership for 2003, 2004, and 2005, as well as related legal and tax
consulting costs, is approximately $60,000. Accordingly, a reserve of approximately $60,000 has been provided for in the accompanying consolidated financial statements.



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.



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. We are continuing the disposition process, having selected a broker to market Paces
Pavilion and Heritage PlaceOffice properties for sale. We continue to aggressively pursue leasing opportunities that will increase occupancy at the remaining properties that we believe will result in the best disposition pricing for our
limited partners.



Page 16



---

##### Table of Contents

The General Partners are currently reserving operating cash flows to limited partners in order to fund any additional
legal costs in connection with the litigation discussed herein, future operating costs, and lease-up costs anticipated with attempts to increase occupancy at Paces Pavilion, Black Oak Plaza, and the remaining office portion of Heritage Place. After
paying liabilities and establishing reserves deemed necessary by the General Partners, the Partnership distributed net sale proceeds of $6,000,000 to limited partners in August 2005.



Property Summary



Information related to the properties owned or previously owned by the Partnership or its Joint Ventures is provided below:



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



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



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



| |  |  | Heritage Place originally included both an office component and a retail shopping center. The retail center, which represented approximately 30% of the premises, was sold on
April 7, 2003. The remaining office component is approximately 53% leased, and leasing efforts continue.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Black Oak Plaza is approximately 68% leased, and leasing efforts at the center continue.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | As of September 30, 2005, the property sales described above generated an aggregate of approximately $11,769,000 in net sale 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, Black Oak Plaza, and the remaining office portion of Heritage Place, and approximately $6,000,000 was distributed to limited partners in August 2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 total revenues were $298,766 and $300,873 for the three months ended September 30, 2005 and 2004, respectively, and $955,226 and $910,050 for the nine months
ended September 30, 2005 and 2004, respectively. Revenues were generated for the third quarter of 2005 at a level consistent with revenues generated for the third quarter of 2004. The increase in revenues generated for the nine months ended
September 30, 2005, as compared to the nine months ended September 30, 2004, resulted primarily from (i) an increase in interest income due to holding higher average net proceeds as a result of the June 2004 sale of Peachtree Place,
(ii) an increase in rental income as a result of the increase in occupancy at Black Oak Plaza, partially offset by (iii) forgone rental income resulting from the sale of Peachtree Place in June 2004.



Expenses



Our expenses were $360,010 and $362,321 for the three months ended September 30, 2005 and 2004, respectively, and $1,059,705 and
$1,586,248 for the nine months ended September 30, 2005 and 2004, respectively. Expenses were generated for the third quarter of 2005 at a level consistent with expenses generated for the third quarter of 2004. The decrease for the nine months
ended September 30, 2005, as compared to the



Page 17



---

##### Table of Contents

nine months ended September 30, 2004, are primarily attributable to (i) a decrease in legal fees related to resolving aspects of the litigation
discussed in Part II, Item 1, 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
expenses of the Partnership to increase in the future 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. We also anticipate additional increases in our administrative expenses in future periods related to compliance with reporting and regulatory requirements.



Equity in Income (Loss) of Joint Venture



Equity in income (loss) of Joint Venture was $(19,298) and $18,239 for the three months ended September 30, 2005 and 2004, respectively, and $(10,939) and $(9,723)
for the nine months ended September 30, 2005 and 2004, respectively. The 2005 decreases, as compared to 2004, are primarily attributable to (i) a decrease in rental income and tenant reimbursements as a result of the decrease in occupancy
at Heritage Place, and (ii) an increase in expenses at Heritage Place as a result of using building technology engineer consulting services in the third quarter of 2005, partially offset by (iii) 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.



Liquidity and Capital Resources



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



Short-Term Liquidity



Net cash used in operating activities was approximately $2,044,000 for the nine months ended September 30, 2005, as compared to approximately $351,000 for the nine months ended September 30, 2004. Cash flows
used in operating activities increased in 2005, as compared to 2004, primarily due to the payment of deferred management and leasing fees to Wells Management in March 2005 of approximately $2,254,000 (See Note 3 of the accompanying consolidated
financial statements).



We expect operating distributions from the Joint
Ventures to remain low in the near term, as we intend to maintain operating cash flow otherwise distributable to the Partnership at the joint venture level in order to fund our pro-rata share of re-leasing costs anticipated in connection with
preparing Heritage Place for sale. Future operating distributions payable to limited partners will be largely dependent upon the amount of cash generated from Heritage Place, our expectations of future cash flows, and determination of near-term cash
needs for tenant re-leasing costs and other capital improvements for the remaining property owned by the Joint Ventures.



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 $231,000 as of September 30, 2005. We anticipate that we will be able to fund our proportionate share of the anticipated capital expenditures noted above using current and future operating cash flow and net sale proceeds currently
being reserved.



Page 18



---

##### Table of Contents

Long-Term Liquidity



We expect that our future sources of capital will be primarily derived from net proceeds generated from the sale of properties and operating cash flows generated from
Black Oak Plaza, Paces Pavilion, and Heritage Place. Our future long-term liquidity requirements will include, but not be limited to, funding tenant improvements, renovations, expansions, and other significant capital improvements necessary for
properties owned directly 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 September 30, 2005,
we had received, used, and held net proceeds allocated to the Partnership from the sale of properties as presented below:



|                                             |  |              |           |                                     |      |         |                                          |   |                     |  |                                                            |           |                                                                            |                                         |  |   |           |  |   |          
|-------------------------------------------- |  | ------------ | --------- | ----------------------------------- | ---- | ------- | ---------------------------------------- | - | ------------------- |  | ---------------------------------------------------------- | --------- | -------------------------------------------------------------------------- | --------------------------------------- |  | - | --------- |  | - | ---------
|Property Sold                                |  | Net Proceeds |           | PartnershipsApproximateOwnership % |      |         | Net Proceeds Allocated to thePartnership |   | Use of Net Proceeds |  | Net ProceedsDistributed toPartners as ofSeptember 30, 2005 |           | Undistributed NetProceeds Currently Being Reserved as
ofSeptember 30, 2005
|                                             |  |              |           | Amount                              |      | Purpose |                                          |  
|Peachtree Place (partial sale in 2000)       |  | $            | 704,496   |                                     | 90.0 | %       |                                          | $ | 633,695             |  | $                                                          | 633,695   |                                                                            |     Payment of deferred management fee |  | $ | 0         |  | $ | 0        
|Crowes Crossing (sold in 2001)              |  |              | 6,486,652 |                                     | 100  | %       |                                          |   | 6,486,652           |  |                                                            | 1,481,087 |                                                                            |     Payment of deferred management fee |  |   | 5,005,565 |  |   | 0        
|Cherokee Commons (sold in 2001)              |  |              | 8,414,089 |                                     | 25.3 | %       |                                          |   | 2,126,109           |  |                                                            | 23,331    |                                                                            |     Payment of deferred management fee |  |   | 994,435   |  |   | 1,108,343
|Heritage Place retail portion (sold in 2003) |  |              | 3,207,708 |                                     | 51.9 | %       |                                          |   | 1,665,121           |  |                                                            | 266,967   |                                                                            |     Payment of deferred management fee |  |   | 0         |  |   | 1,398,154
|Peachtree Place (remainder sold in 2004)     |  |              | 953,670   |                                     | 90.0 | %       |                                          |   | 857,826             |  |                                                            | 253,200   |                                                                            |     Payment of deferred management fee |  |   | 0         |  |   | 604,626  
|                                             |  |              |           |                                     |      |         |                                          |   |                     |  |                                                            |           |                                                                            |                                         |  |   |           |  |   |          
|Total                                        |  |              |           |                                     |      |         |                                          | $ | 11,769,403          |  | $                                                          | 2,658,280 |                                                                            |                                         |  | $ | 6,000,000 |  | $ | 3,111,123
|                                             |  |              |           |                                     |      |         |                                          |   |                     |  |                                                            |           |                                                                            |                                         |  |   |           |  |   |          



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



Page 19



---

##### Table of Contents

reasonably necessary, as of September 30, 2005, there were net sale proceeds in the amount of approximately $6,000,000 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
and the anticipated re-leasing costs at Paces Pavilion, Black Oak Plaza, and the remaining office portion of Heritage Place.



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, the management and leasing of properties owned directly by the Partnership and through 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.



Future net income generated by WREF will be largely dependent upon the amount
of fees earned by Wells Capital, Wells Management, and Wells Investment Securities, Inc. based on, among other things, the level of investor proceeds raised from the sale of Wells Real Estate Investment Trust II, Inc.s common stock and the
volume of future acquisitions and dispositions of real estate assets by Wells-sponsored programs. As of September 30, 2005 and December 31, 2004, WREF believes that it generates adequate cash flow from operations and has adequate liquidity
available in the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.



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



Page 20



---

##### Table of Contents

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 $72,900, or $0.74 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
(decrease) to equity in income (loss) for the three months and nine months ended September 30, 2004 of approximately $24,623. 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



Page 21



---

##### Table of Contents

undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future
cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value 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 September 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. In March 2005, the Internal Revenue Service issued IRS Notice 2005-29 announcing that the IRS would not be
applying Section 470 to partnerships for taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners; however, it is important to note that IRS Notice 2005-29 provided relief for partnerships
for taxable year 2004 only. Although the IRS has indicated that it is continuing to study the application of Section 470 to partnerships, such as the Partnership, unless Congress passes legislation which addresses this issue or some
other form of relief from the provisions of Section 470 of the Act is granted, beginning in taxable year 2005 and thereafter, passive losses allocable to limited partners holding Class B Units may only be used to offset passive income
generated from the same property or within the same fund.



ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



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



ITEM 4.    CONTROLS AND PROCEDURES



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



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



Page 22



---

##### Table of Contents

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 and as described in more detail in
previous Form 10-Q and 10-K filings, 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. 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 September 30, 2005, Wells Capital had incurred approximately $540,000 in legal fees, costs, and expenses related to defending against the



Page 23



---

##### Table of Contents

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 vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for the
reconsideration or notice of appeal. Both the plaintiffs and the defendants have filed briefs supporting their respective positions, and the plaintiffs motion is still 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.



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



|(a) | We did not sell any equity securities that were not registered under the Securities Act of 1933 during the quarter ended September 30, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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



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



ITEM 5.    OTHER INFORMATION



|(a) | During the quarter ended September 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 Third Quarter Form 10-Q attached hereto.





Page 24



---

##### Table of Contents

SIGNATURES



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



|                  |  |                                                                                
|----------------- |  | -------------------------------------------------------------------------------
|                  |  | WELLS REAL ESTATE FUND I                                                       
|                  |  | (Registrant)                                                                   
|                  | 
|                  |  | By: WELLS CAPITAL, INC.                                                        
|                  |  | (Corporate General Partner)                                                    
|                  | 
|November 14, 2005 |  | /s/    LEO F. WELLS, III                                                       
|                  |  | Leo F. Wells, III                                                              
|                  |  | President, Principal Executive Officer, and Sole Directorof Wells Capital, Inc.
|                  | 
|November 14, 2005 |  | /s/    DOUGLAS P. WILLIAMS                                                     
|                  |  | Douglas P. Williams                                                            
|                  |  | Principal Financial Officer of Wells
Capital, Inc.                             



Page 25



---

##### Table of Contents

EXHIBIT INDEX



TO THIRD 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



Page 26