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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



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(Mark One)



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



For the quarterly period ended March 31, 2004



OR



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



For the transition period from
 to



Commission file number 0-14463



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WELLS REAL ESTATE FUND I

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-1565512                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6200 The Corners Parkway,Norcross, GA                          |  | 30092                               
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                      



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



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



Yes  x    No ̈



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CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q
of Wells Real Estate Fund I (the Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from
those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as
may, will, expect, intend, anticipate, estimate, believe, continue, or other similar words. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. 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 economic conditions or local conditions;
| | - |  | -------------------------------------------------------------------



| |  |  | Adverse economic conditions affecting the particular industry of one or more of our tenants;
| | - |  | --------------------------------------------------------------------------------------------



Real estate risks



| |  |  | Our ability to achieve appropriate occupancy levels resulting in sufficient rental amounts;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Supply of or demand for similar or competing rentable space, which may adversely impact our ability to retain or obtain new tenants at lease expiration at acceptable rental amounts;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Our potential need to fund tenant improvements, lease-up costs, or other capital expenditures out of operating cash flow;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Increases in property operating expenses, including property taxes, insurance, and other costs at our properties;
| | - |  | -----------------------------------------------------------------------------------------------------------------



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



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| |  |  | Unexpected costs of capital expenditures related to tenant build-out projects or other unforeseen capital expenditures;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any continuing obligations to us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



Other operational risks



| |  |  | Our dependency on Wells Capital, Inc., our corporate General Partner, its key personnel, and its affiliates for various administrative services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Increases in our operating expenses, including increased expenses associated with litigation involving the Partnership and operating as a public company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in governmental, tax, real estate, environmental, and zoning laws and regulations and the related costs of compliance;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to prove compliance with any governmental, tax, real estate, environmental, and zoning in the event that any such position is questioned by the respective authority; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                                         |  |         
|-------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                                         |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Consolidated Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Consolidated Balance Sheets  March 31, 2004 (unaudited) and December 31, 2003                                                          |  | 5       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Operations for the Three Months Ended March 31, 2004 (unaudited) and 2003 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Partners Capital for the Year Ended December 31, 2003 and the Three Months Ended March 31, 2004 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 (unaudited) and 2003 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Consolidated Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                   |  | 15      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risks                                                                             |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                                 |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  | 21                                                                                                                                     





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WELLS REAL ESTATE FUND I
AND SUBSIDIARY



CONSOLIDATED BALANCE SHEETS



ASSETS



|                                                                                                      |  |                          |            |                  |   |           
|----------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---------------- | - | ----------
|                                                                                                      |  | (unaudited)March 31,2004 |            | December 31,2003
|Real estate assets, at cost:                                                                          |  |                          |            |                  |   |           
|Building and improvements, less accumulated depreciation of $6,484,598 in 2004 and $6,347,730 in 2003 |  | $                        | 4,042,693  |                  | $ | 4,174,103 
|Land                                                                                                  |  |                          | 1,238,819  |                  |   | 1,238,819 
|Assets held for sale                                                                                  |  |                          | 577,990    |                  |   | 588,878   
|                                                                                                      |  |                          |            |                  |   |           
|Total real estate assets                                                                              |  |                          | 5,859,502  |                  |   | 6,001,800 
|Cash and cash equivalents                                                                             |  |                          | 11,570,142 |                  |   | 11,792,983
|Investments in joint ventures                                                                         |  |                          | 2,202,114  |                  |   | 2,263,584 
|Deferred lease acquisition costs                                                                      |  |                          | 132,191    |                  |   | 140,160   
|Prepaid expenses and other assets                                                                     |  |                          | 167,085    |                  |   | 121,111   
|Accounts receivable, net                                                                              |  |                          | 116,028    |                  |   | 102,518   
|Due from joint ventures                                                                               |  |                          | 18,842     |                  |   | 17,616    
|                                                                                                      |  |                          |            |                  |   |           
|Total assets                                                                                          |  | $                        | 20,065,904 |                  | $ | 20,439,772
|                                                                                                      |  |                          |            |                  |   |           
|                                                                                                      |  |                          |            |                  |   |           
|LIABILITIES AND PARTNERS CAPITAL                                                                    
|                                                                                                      |  |                          |            |                  |   |           
|Liabilities:                                                                                          |  |                          |            |                  |   |           
|Due to affiliate                                                                                      |  | $                        | 2,074,126  |                  | $ | 2,058,935 
|Accounts payable, accrued expenses, and refundable security deposits                                  |  |                          | 259,122    |                  |   | 303,958   
|Partnership distributions payable                                                                     |  |                          | 164,908    |                  |   | 164,908   
|Minority interest                                                                                     |  |                          | 35,022     |                  |   | 34,777    
|                                                                                                      |  |                          |            |                  |   |           
|Total liabilities                                                                                     |  |                          | 2,533,178  |                  |   | 2,562,578 
|                                                                                                      |  |                          |            |                  |   |           
|Partners capital:                                                                                    |  |                          |            |                  |   |           
|Limited partners:                                                                                     |  |                          |            |                  |   |           
|Class A  98,716 units outstanding                                                                    |  |                          | 17,532,726 |                  |   | 17,877,194
|Class B  42,568 units outstanding                                                                    |  |                          | 0          |                  |   | 0         
|General partners                                                                                      |  |                          | 0          |                  |   | 0         
|                                                                                                      |  |                          |            |                  |   |           
|Total partners capital                                                                               |  |                          | 17,532,726 |                  |   | 17,877,194
|                                                                                                      |  |                          |            |                  |   |           
|Total liabilities and partners capital                                                               |  | $                        | 20,065,904 |                  | $ | 20,439,772
|                                                                                                      |  |                          |            |                  |   |           



See accompanying notes.



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WELLS REAL ESTATE FUND I
AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                        |  |                                          |          |   |      |   |         |  
|------------------------------------------------------- |  | ---------------------------------------- | -------- | - | ---- | - | ------- | -
|                                                        |  | (unaudited) Three Months Ended March 31, |         
|                                                        |  | 2004                                     |          |   | 2003 |  
|REVENUES:                                               |  |                                          |          |   |      |   |         |  
|Rental income                                           |  | $                                        | 248,658  |   |      | $ | 247,539 |  
|Tenant reimbursements                                   |  |                                          | 28,148   |   |      |   | 37,279  |  
|Interest income                                         |  |                                          | 21,786   |   |      |   | 42,616  |  
|Equity in (loss) income of joint ventures (Note 2)      |  |                                          | (14,805  | ) |      |   | 47,940  |  
|Other income                                            |  |                                          | 0        |   |      |   | 2,181   |  
|                                                        |  |                                          |          |   |      |   |         |  
|                                                        |  |                                          | 283,787  |   |      |   | 377,555 |  
|                                                        |  |                                          |          |   |      |   |         |  
|EXPENSES:                                               |  |                                          |          |   |      |   |         |  
|Legal and accounting                                    |  |                                          | 319,399  |   |      |   | 46,154  |  
|Depreciation                                            |  |                                          | 136,869  |   |      |   | 133,025 |  
|Operating costs  rental properties                     |  |                                          | 119,151  |   |      |   | 107,956 |  
|Partnership administration                              |  |                                          | 27,081   |   |      |   | 31,768  |  
|Management and leasing fees                             |  |                                          | 27,042   |   |      |   | 24,266  |  
|Other                                                   |  |                                          | 903      |   |      |   | 4,467   |  
|                                                        |  |                                          |          |   |      |   |         |  
|                                                        |  |                                          | 630,445  |   |      |   | 347,636 |  
|                                                        |  |                                          |          |   |      |   |         |  
|NET (LOSS) INCOME FROM CONTINUING OPERATIONS            |  |                                          | (346,658 | ) |      |   | 29,919  |  
|DISCONTINUED OPERATIONS:                                |  |                                          |          |   |      |   |         |  
|Operating income (loss)                                 |  |                                          | 2,190    |   |      |   | (844    | )
|                                                        |  |                                          |          |   |      |   |         |  
|INCOME (LOSS) FROM DISCONTINUED OPERATIONS              |  |                                          | 2,190    |   |      |   | (844    | )
|                                                        |  |                                          |          |   |      |   |         |  
|NET (LOSS) INCOME                                       |  | $                                        | (344,468 | ) |      | $ | 29,075  |  
|                                                        |  |                                          |          |   |      |   |         |  
|NET (LOSS) INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |  | $                                        | (344,468 | ) |      | $ | 29,075  |  
|                                                        |  |                                          |          |   |      |   |         |  
|NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS          |  | $                                        | 0        |   |      | $ | 0       |  
|                                                        |  |                                          |          |   |      |   |         |  
|NET (LOSS) INCOME PER CLASS A LIMITED PARTNER UNIT      |  | $                                        | (3.49    | ) |      | $ | 0.29    |  
|                                                        |  |                                          |          |   |      |   |         |  
|NET LOSS PER CLASS B LIMITED PARTNER UNIT               |  | $                                        | 0.00     |   |      | $ | 0.00    |  
|                                                        |  |                                          |          |   |      |   |         |  
|CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT      |  | $                                        | 0.00     |   |      | $ | 2.50    |  
|                                                        |  |                                          |          |   |      |   |         |  



See accompanying notes.





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WELLS REAL ESTATE FUND I
AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2003

AND THE THREE MONTHS ENDED MARCH 31, 2004 (unaudited)



|                           |  |                  |  |                  |            |                        |       |        |         |   |   |  |   |   |  |   |            |  
|-------------------------- |  | ---------------- |  | ---------------- | ---------- | ---------------------- | ----- | ------ | ------- | - | - |  | - | - |  | - | ---------- | -
|                           |  | Limited Partners |  | General Partners |            | Total PartnersCapital |      
|                           |  | Class A          |  |                  | Class B    |                        |      
|                           |  | Units            |  | Amounts          |            |                        | Units |        | Amounts |   |  
|BALANCE, December 31, 2002 |  | 98,716           |  | $                | 18,632,747 |                        |       | 42,568 |         | $ | 0 |  | $ | 0 |  | $ | 18,632,747 |  
|                           |  |                  |  |                  |            |                       
|Net loss                   |  | 0                |  |                  | (508,763   | )                      |       | 0      |         |   | 0 |  |   | 0 |  |   | (508,763   | )
|Partnership distributions  |  | 0                |  |                  | (246,790   | )                      |       | 0      |         |   | 0 |  |   | 0 |  |   | (246,790   | )
|                           |  |                  |  |                  |            |                        |       |        |         |   |   |  |   |   |  |   |            |  
|BALANCE, December 31, 2003 |  | 98,716           |  |                  | 17,877,194 |                        |       | 42,568 |         |   | 0 |  |   | 0 |  |   | 17,877,194 |  
|                           |  |                  |  |                  |            |                       
|Net loss                   |  | 0                |  |                  | (344,468   | )                      |       | 0      |         |   | 0 |  |   | 0 |  |   | (344,468   | )
|                           |  |                  |  |                  |            |                        |       |        |         |   |   |  |   |   |  |   |            |  
|BALANCE, March 31, 2004    |  | 98,716           |  | $                | 17,532,726 |                        |       | 42,568 |         | $ | 0 |  | $ | 0 |  | $ | 17,532,726 |  
|                           |  |                  |  |                  |            |                        |       |        |         |   |   |  |   |   |  |   |            |  



See accompanying notes.





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WELLS REAL ESTATE FUND I
AND SUBSIDIARY



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                   |  |                                          |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                   |  | (unaudited) Three Months Ended March 31, |           
|                                                                                                   |  | 2004                                     |            |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                          |            |   |      |   |            |  
|Net (loss) income from continuing operations                                                       |  | $                                        | (346,658   | ) |      | $ | 29,919     |  
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                          |            |   |      |   |            |  
|Equity in loss (income) of joint ventures                                                          |  |                                          | 14,805     |   |      |   | (47,940    | )
|Depreciation                                                                                       |  |                                          | 136,869    |   |      |   | 133,024    |  
|Write-off of real estate asset                                                                     |  |                                          | 0          |   |      |   | 2,459      |  
|Amortization of deferred lease costs                                                               |  |                                          | 7,500      |   |      |   | 9,258      |  
|Changes in assets and liabilities:                                                                 |  |                                          |            |   |      |   |            |  
|Accounts receivable, net                                                                           |  |                                          | (6,733     | ) |      |   | (14,668    | )
|Prepaid expenses and other assets                                                                  |  |                                          | (45,868    | ) |      |   | (23,013    | )
|Accounts payable, accrued expenses, and refundable security deposits                               |  |                                          | (49,504    | ) |      |   | (26,399    | )
|Due to affiliate                                                                                   |  |                                          | 13,308     |   |      |   | 12,012     |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Net cash (used in) provided by continuing operations                                               |  |                                          | (276,281   | ) |      |   | 74,652     |  
|Net cash provided by discontinued operations                                                       |  |                                          | 13,460     |   |      |   | 23,829     |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Net cash (used in) provided by operating activities                                                |  |                                          | (262,821   | ) |      |   | 98,481     |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |  |                                          |            |   |      |   |            |  
|Distributions received from joint ventures                                                         |  |                                          | 45,439     |   |      |   | 129,745    |  
|Investment in real estate                                                                          |  |                                          | (5,459     | ) |      |   | 0          |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Net cash provided by investing activities                                                          |  |                                          | 39,980     |   |      |   | 129,745    |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |  |                                          |            |   |      |   |            |  
|Distributions to limited partners                                                                  |  |                                          | 0          |   |      |   | (246,776   | )
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Net cash used in financing activitiescontinuing operations                                        |  |                                          | 0          |   |      |   | (246,776   | )
|Minority interest distributionsdiscontinued operations                                            |  |                                          | 0          |   |      |   | (6,245     | )
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Net cash used in financing activities                                                              |  |                                          | 0          |   |      |   | (253,021   | )
|                                                                                                   |  |                                          |            |   |      |   |            |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                          |  |                                          | (222,841   | ) |      |   | (24,795    | )
|CASH AND CASH EQUIVALENTS, beginning of period                                                     |  |                                          | 11,792,983 |   |      |   | 10,404,816 |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                                           |  | $                                        | 11,570,142 |   |      | $ | 10,380,021 |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:                                                    |  |                                          |            |   |      |   |            |  
|Due from joint ventures                                                                            |  | $                                        | 18,842     |   |      | $ | 58,952     |  
|                                                                                                   |  |                                          |            |   |      |   |            |  
|Partnership distributions payable                                                                  |  | $                                        | 0          |   |      | $ | 411,698    |  
|                                                                                                   |  |                                          |            |   |      |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND I
AND SUBSIDIARY



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



MARCH 31, 2004 (unaudited)



|1. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------



|(a) |  | General
|--- |  | -------



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). 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 generally has equal voting rights regardless of class.



On September 6, 1984, the Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on
September 5, 1986, upon receiving and accepting gross proceeds of $35,321,000 for a total of 141,284 Class A and Class B limited partner units from 4,895 limited partners at $250 per unit.



As of March 31, 2004, the Partnership owned interests in the following two properties
directly: (i) an approximately 27% condominium interest in Paces Pavilion, a medical office building located in Atlanta, Georgia, and (ii) Black Oak Plaza, a shopping center located in Knoxville, Tennessee.



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



|                                                          |  |                                                          |  |                                                                            
|--------------------------------------------------------- |  | -------------------------------------------------------- |  | ---------------------------------------------------------------------------
|                                                         
|Joint Venture                                             |  | Joint Venture Partners                                   |  | Properties                                                                 
|                                                         
|Wells-Baker Associates                                    |  |   Wells Real Estate Fund I   Wells & Associates, Inc.* |  | 1. Peachtree PlaceA commercial office building located in Norcross, Georgia
|                                                         
|Fund I and Fund II Tucker (Fund I-II Tucker
Associates) |  |   Wells Real Estate Fund I   Fund II and Fund II-OW**  |  | 2. Heritage PlaceA commercial office complex located in Tucker, Georgia    
|                                                         

|* |  | Wells & Associates, Inc. is affiliated with the Partnership through common management.
|- |  | --------------------------------------------------------------------------------------

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



On April 7, 2003, Fund I-II Tucker Associates sold the retail portion of Heritage Place, which comprises approximately 30% of the total
premises, to an unrelated third party for a gross selling price of $3,400,000. As a result of this sale, net sales proceeds of approximately $1,665,000 and a gain of approximately $152,000 were allocated to the Partnership in the second quarter of
2003.



Each of the aforementioned properties was acquired on an all-cash basis.
The investment objectives of each of the joint venture partners listed in the above table are substantially identical to those of the Partnership. For further information regarding the foregoing properties and joint ventures, refer to the report
filed for the Partnership on Form 10-K for the year ended December 31, 2003.



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##### Table of Contents



|(b) |  | Basis of Presentation
|--- |  | ---------------------



The consolidated financial statements include the financial information of the Partnership and Wells-Baker Associates. The Partnerships interest in Wells-Baker
Associates was approximately 90% for each of the periods presented. 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 accounting principles generally accepted in the United States (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 present the results for those periods. Results for interim periods are not necessarily indicative of
full-year results. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2003.



|(c) |  | Allocations of Net Income, Net Loss, and Gain on Sale
|--- |  | -----------------------------------------------------



For the purpose of determining allocations per the partnership agreement, net income is defined generally as net income recognized by the Partnership, excluding
deductions for depreciation, amortization, and cost recovery and gain on the sale of assets. Net income, as defined, of the Partnership is generally allocated each year in the same proportions that net cash from operations is distributed to the
partners. To the extent the Partnerships net income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners and 1% to the General Partners.



Net loss, depreciation, and amortization deductions for each fiscal year are 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.



Under the partnership agreement, gain on the sale or exchange of the
Partnerships properties is 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 excess of (i) each limited partners adjusted capital contribution, plus a cumulative 15% per annum return on his adjusted capital contribution (16% for investments made before December 31, 1984), less the sum of all prior
distributions of cash flow from operations previously made to such limited partner, over (ii) such limited partners capital account balance as of the sale date; (c) then to the General Partners in proportion to and to the extent of the excess
of (i) each General Partners adjusted capital contribution, less the sum of all prior distributions of cash flow from operations previously made to such General Partners, over (ii) such General Partners capital account balance as of the
sale date; and (d) thereafter 85% to the limited partners and 15% to the General Partners.



|(d) |  | Distribution of Net Cash From Operations
|--- |  | ----------------------------------------



Cash available for distribution, if available, is generally distributed quarterly to the limited partners as follows:



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



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



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



|2. |  | INVESTMENTS IN JOINT VENTURE
|-- |  | ----------------------------



|(a) |  | Basis of Presentation
|--- |  | ---------------------



The Partnership does not have control over the operations of Fund I-II Tucker Associates; however, it does exercise significant influence. Accordingly, the
Partnerships investment in Fund I-II Tucker Associates 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. For further information, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2003.



|(b) |  | Summary of Operations
|--- |  | ---------------------



The following information summarizes the operations of Fund I-II Tucker Associates for the three months ended March 31, 2004 and 2003, respectively:



|                            |  |                             |         |                                         |   |                                   |  |                             |         |   |      |   |        |  |      |   |  |      |        |  |   |         |   |  |   |       
|--------------------------- |  | --------------------------- | ------- | --------------------------------------- | - | --------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ |  | ---- | - |  | ---- | ------ |  | - | ------- | - |  | - | ------
|                            |  | Total Revenues              |         | (Loss) Income FromContinuing Operations |   | Income FromDiscontinuedOperations |  | Net (Loss) Income          
|                            |  | Three Months EndedMarch 31, |         | Three Months EndedMarch 31,             |   | Three Months EndedMarch 31,       |  | Three Months EndedMarch 31,
|                            |  | 2004                        |         | 2003                                    |   | 2004                              |  |                             | 2003    |   | 2004 |   | 2003   |  | 2004 |   |  | 2003
|Fund I-II Tucker Associates |  | $                           | 178,220 |                                         | $ | 200,654                           |  | $                           | (28,520 | ) |      | $ | 22,286 |  | $    | 0 |  | $    | 70,066 |  | $ | (28,520 | ) |  | $ | 92,352
|                            |  |                             |         |                                         |   |                                   |  |                             |         |   |      |   |        |  |      |   |  |      |        |  |   |         |   |  |   |       



|3. |  | RECENT ACCOUNTING PRONOUNCEMENTS
|-- |  | --------------------------------



Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity



In May 2003, the Financial Accounting Standards Board (FASB) issued Statement
No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (FAS 150), certain components of which were deferred by the FASB in October 2003 for an indefinite period. This
statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. FAS 150 requires, among other things, that a
minority interest in a consolidated entity be classified as a liability and reported at settlement value if an unconditional obligation to exercise or redeem the minority interest exists. As Wells-Baker Associates is a finite life joint venture, the
Partnerships interest therein represents an unconditional obligation. Prior to its deferral, FAS 150 required this minority interest to be accounted for as a liability and reported at settlement value. Until further guidance is provided during
the deferral period for FAS 150, this interest will continue to be

classified as minority interest in the Partnerships financial statements. The
settlement value of this minority interest is estimated to be approximately $76,498 at March 31, 2004.



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



|(a) |  | 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 through joint ventures equal to (a) 3% of the gross revenues for management and 3% of the gross revenues for leasing (aggregate maximum



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of 6%) plus a separate fee for the one-time
lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in the case of
commercial properties which are leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. Since the third quarter of
1998, the on-site management and leasing of Black Oak Plaza has been performed by an independent third-party property management company. The management company receives a 3% fee, and the balance due to Wells Management is accrued.



Wells Management has elected to defer the current 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, such fees are expensed as incurred and comprise the due to affiliate balances
presented in the accompanying balance sheets. As of March 31, 2004 and 2003, the Partnership owed aggregate management and leasing fees to Wells Management of $2,837,723 and $2,755,901, respectively, of which $2,074,126 and $2,015,445, respectively,
are recorded as due to affiliate in the Partnerships balance sheet for the three months ended March 31, 2004 and 2003, respectively, and $763,597 and $740,456, respectively, are due from the Partnerships interest in Fund I-II Tucker
Associates and, therefore, included in Investment in Joint Ventures in the consolidated balance sheets for the three months ended March 31, 2004 and 2003, respectively.



|(b) |  | Administration Reimbursements
|--- |  | -----------------------------



Wells Capital, one of the General Partners, and its affiliates perform certain administrative services for the Partnership, such as accounting, property management, and
other partnership administration, and incur the related expenses. Such expenses are allocated among the various Wells Real Estate Funds based on time spent on each fund by individual administrative personnel. In the opinion of management, this
allocation is a reasonable estimation of such expenses. The Partnership and the properties owned directly by the Partnership reimbursed Wells Capital $56,090 and $44,936 for the three months ended March 31, 2004 and 2003, respectively, for these
services and expenses. In addition, the Joint Ventures reimbursed Wells Capital $16,782 and $13,224 for the three months ended March 31, 2004 and 2003, respectively, for these services and expenses.



|(c) |  | Conflicts of Interest
|--- |  | ---------------------



The General Partners are also general partners of other Wells Real Estate Funds. As such, there may exist conflicts of interest where the General Partners in their
capacity as general partners of other Wells Real Estate Funds may be in competition with the Partnership in connection with property acquisitions or for tenants in similar geographic markets.



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|5. |  | DISCONTINUED OPERATIONS
|-- |  | -----------------------



On March 23, 2004, Peachtree Place was classified as held for sale. As such, the results of discontinued operations included in the accompanying statements of income for
the three months ended March 31, 2004 and 2003 are summarized below:



|                                                 |  |                                         |        |   |      |   |        |  
|------------------------------------------------ |  | --------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                 |  | (unaudited) Three Months EndedMarch 31, |       
|                                                 |  | 2004                                    |        |   | 2003 |  
|Total property revenues                          |  | $                                       | 47,601 |   |      | $ | 33,581 |  
|                                                 |  |                                         |        |   |      |   |        |  
|Operating costsrental property                  |  |                                         | 31,926 |   |      |   | 19,319 |  
|Depreciation                                     |  |                                         | 10,888 |   |      |   | 10,183 |  
|Management and leasing fees                      |  |                                         | 2,353  |   |      |   | 5,017  |  
|                                                 |  |                                         |        |   |      |   |        |  
|Total expenses                                   |  |                                         | 45,167 |   |      |   | 34,519 |  
|                                                 |  |                                         |        |   |      |   |        |  
|Operating income (loss) before minority interest |  |                                         | 2,434  |   |      |   | (938   | )
|Minority interest                                |  |                                         | (244   | ) |      |   | 94     |  
|                                                 |  |                                         |        |   |      |   |        |  
|Income (loss) from discontinued operations       |  | $                                       | 2,190  |   |      | $ | (844   | )
|                                                 |  |                                         |        |   |      |   |        |  



|6. |  | CONTINGENCIES
|-- |  | -------------



On January 17, 2003, the Partnership was served with a putative class action by a limited partner holding Class B units, on behalf of all limited partners holding Class B units as of January 15, 2003, that seeks
equitable relief with regard to the rights and obligations of all the Partnerships limited partners and general partners under the partnership agreement. This litigation was filed in the Superior Court of Gwinnett County, Georgia (Roy
Johnston v. Wells Real Estate Fund I, Civil Action No. 03-A00525-6) (the Johnston Action). The plaintiff in the Johnston Action generally alleges that the terms of the partnership agreement, as it relates to the allocation and
distribution of net sale proceeds, are inconsistent with the original intent of the parties. The plaintiff alleges that the original intent was that limited partners holding Class B units would have a priority in payment of cash distributions of net
sale proceeds to bring them even with the amount of cash distributions previously made to limited partners holding Class A units. The Johnston Action seeks, among other things, to have the Partnerships partnership agreement equitably reformed
consistent with the alleged original intent or, in the alternative, to have the investments made by limited partners holding Class B units equitably rescinded, and requests an injunction prohibiting the General Partners of the Partnership from
distributing net sales proceeds until the resolution of the action.



On April
15, 2003, several limited partners holding Class A units filed a motion to intervene in the Johnston Action on the grounds that Mr. Johnston seeks relief that would be detrimental to limited partners holding Class A units, and that judgment in favor
of Mr. Johnston would impair or impede the Class A unit holders ability to protect their interests. The Partnership then filed its answer, a counterclaim seeking a declaratory judgment and an interpleader action, and a motion to join the
intervenor Class A unit holders and recast the action as one in interpleader. In its counterclaim, the Partnership seeks a declaratory judgment as to how net sale proceeds should be distributed as between limited partners holding Class A units and
limited partners holding Class B units.



On June 27, 2003, the Court entered an
order granting the motion to intervene previously filed by certain limited partners holding Class A units (the A Unit Holder Defendants). On July 29, 2003, the A Unit Holder



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Defendants filed a cross-claim against the
Partnership seeking that the Partnership be required and directed to disburse funds in accordance with the partnership documents.



On or about October 16, 2003, all of the A Unit Holder Defendants other than John Weiss (Defendant Weiss) filed a Dismissal Without Prejudice in the action.
On or about that same date, Defendant Weiss filed a motion to dismiss or in the alternative for summary judgment. On November 3, 2003, the Partnership filed a motion to dismiss or in the alternative for summary judgment.



On or about December 8, 2003, the plaintiff in the Johnston action filed a Motion to
Conditionally Certify Class Action Claims. On or about December 10, 2003, Mr. Johnston filed a Motion for Partial Summary Judgment as to his Count II for Rescission.



The Court held a hearing on February 2, 2004. The Court took matters under advisement, and directed that all the proceedings be held in
abeyance pending further order from the Court.



On or about March 12, 2004, a
putative class action complaint (the Complaint) was filed by four individuals (the plaintiffs) against the Partnership, and our General Partners, Leo F. Wells, III, Wells Capital, as well as Wells Investment Securities, Inc.,
and Wells Management (collectively, the Wells Defendants) (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 Complaint purportedly on
behalf of all limited partners holding B units of the Partnership as of January 15, 2003. The Complaint alleges, among other things, that (a) Mr. Wells, Wells Capital, Wells Investment Securities, Inc., and the Partnership negligently and
fraudulently made false statements and material omissions in connection with the initial sale (September 6, 1984  September 5, 1986) of the B units to investors of the Partnership by making false statements and omissions in sales literature
relating to the distribution of net sale proceeds to holders of B units, among other things; (b) Mr. Wells, Wells Capital, and the Partnership negligently and fraudulently misrepresented and concealed disclosure of, among other things, alleged
discrepancies between such statements and provisions in the partnership agreement for a period of time in order to delay such investors from taking any legal, equitable or other action to protect their investments in the Partnership, among other
reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of consent solicitations to the limited partners; and (d) Mr. Wells, Wells Capital, and the Partnership breached fiduciary duties to the limited partners.



The plaintiffs seek, among other remedies, the following: rescission of all
purported class members purchases of B units and an order for a full refund of all money paid for such units together with interest; judgment against the Wells Defendants, jointly and severally, in an amount to be proven at trial; punitive
damages; a declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; judicial dissolution of the Partnership and the appointment of a receiver to wind up and terminate the partnership; and an award to
plaintiffs of their attorneys fees, costs and expenses.



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|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 Partnerships accompanying financial statements and notes
thereto.



|(a) |  | Overview
|--- |  | --------



Management believes that the Partnership would ideally operate through the course of the following five key life cycle phases. The time spent in 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.



| |  |  | Fund-raising 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 fund-raising 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



| |  |  | 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.



| |  |  | Disposition and Liquidation phase
| | - |  | ---------------------------------



The period during which the Partnership sells its real estate investments and distributes net sales proceeds to the partners



Currently, management believes that the Partnership is straddling the positioning-for-sale
phase and the disposition and liquidation phase. Upon investing all capital proceeds and exiting the investing phase, the Partnership owned interests in six properties, either directly or through interests in affiliated joint ventures. As of March
31, 2004, one property is greater than 90% leased, two properties are less than 70% leased, the remaining building of one property is under contract to be sold, and two properties and a portion of two other properties have been sold. Management will
continue to pursue various re-leasing strategies for the space currently vacant at the properties in the Partnerships portfolio during 2004.



As the Partnership evolves through the life cycle, our most significant risks and challenges continue to evolve concurrently. In our attempts to position our remaining
properties for sale, we will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we seek to maximize returns to the limited partners by negotiating long-term leases at
market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs, and portfolio costs. As we focus on the disposition and liquidation phase, we have shifted our attention to locating suitable
acquirers,



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negotiating purchase and sale contracts that
will attempt to maximize the total return to the limited partners, and minimize contingencies and our post-closing involvement with the acquirer.



In 2004, net loss increased primarily as a result of incurring substantial additional legal costs in connection with defending the litigation discussed in Part II, Item
1, of this report. Cash flows decreased in 2004, primarily due to legal fees incurred in 2004.



Substantially all of our operating revenues are generated from the operations of the properties in the Partnerships portfolio. On a quarterly basis, we deduct the expenses related to the recurring operations of
the properties and the portfolio from such revenues and assess the amount of the remaining cash flows that will be required to fund known re-leasing costs and other capital improvements or other major expenses such as legal fees required in
connection with litigation. Any residual operating cash flows are considered available for distribution to the limited partners and are generally paid quarterly. As further outlined in section (c) below, we anticipate using a portion of our future
operating cash flows to fund litigation costs (see Part II, Item 1) and the costs necessary to re-lease currently vacant space in the properties within the Partnerships portfolio.



Industry Factors



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



General Economic and Real Estate Market Commentary



The U.S. economy appears to be recovering; however, thus far it has been a
jobless recovery, and because of this, real estate office fundamentals may not improve until employment growth strengthens. The economy has shown signs of growth recently, as companies have recommenced making investments in new employees. Job growth
is the most significant demand driver for office markets. The jobless recovery has resulted in a demand deficit for office space. In general, the real estate office market lags behind the overall economic recovery and, therefore, recovery is not
expected until late 2004 or 2005 at the earliest, and then will vary by market.



Overall, real estate market fundamentals are weak; however, capital continues to flow into the asset class. This increased capital drives the prices of many properties upward and investor returns downward. There is a
significant pricing differential in underwriting parameters between well-leased assets with credit tenants and those with either existing vacancies or substantial near-term tenant rollover. Properties with long-term leases to strong credit tenants
have seen an increase in value.



The office market has
significant excess space. Vacancy levels are believed to be at or near their peak. There is some encouraging news, new construction continues to taper off, coming to a complete halt in many markets. As a result of the slowdown in new construction
and the modest decline in sublease space, net absorption has turned positive, although barely, at year-end. Many industry professionals believe office market fundamentals are bottoming-out; however, a recovery cannot be expected until job growth and
corresponding demand for office space increases.



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



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



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



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|(b) |  | Results of Operations
|--- |  | ---------------------



Gross Revenues



Gross revenues of the Partnership were $283,787 and $377,555 for the three months ended March 31, 2004 and 2003, respectively. The 2004 decrease, as compared to 2003, resulted primarily from (i) a decline in interest
income, and (ii) the corresponding decline in equity in income of Joint Ventures described below.



Equity in Income of Joint Ventures



Gross Revenues of Joint Ventures



Gross revenues of Joint Ventures decreased in 2004, as compared to 2003, primarily due to a decrease in occupancy at the office portion of Heritage Place
during 2004.



Expenses of Joint Ventures



Expenses of Joint Ventures increased in 2004, as compared to 2003, primarily
due to increased operational expenses at the office portion of Heritage Place.



Equity in Income of Joint Ventures from Discontinued Operations



Equity in income of Joint Ventures from discontinued operations decreased for the three months ended March 31, 2004, as compared to the same period in
2003 due to the sale of the retail portion of Heritage Place on April 7, 2003.



As a result of all of the aforementioned factors, the Partnership recorded equity in loss from Joint Ventures of $(14,805) during the three months ended March 31, 2004 compared to equity in income from Joint Ventures
of $47,940 for the three months ended March 31, 2003.



Expenses of the
Partnership



Expenses of the Partnership were $630,445 and $347,636
for the three months ended March 31, 2004 and 2003, respectively. The 2004 increase, as compared to 2003, resulted primarily from a substantial increase in legal costs related to defending the litigation discussed in Part II, Item 1, of this report.



Net (Loss) Income of the Partnership



As a result of the aforementioned factors, net (loss) income of the Partnership was
$(344,468) and $29,075 for the three months ended March 31, 2004 and 2003, respectively.



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Discontinued Operations



On March 23, 2004, Peachtree Place was classified as held for sale.
As such, the results of discontinued operations included in the accompanying statements of income for the three months ended March 31, 2004 and 2003 are summarized below:



|                                                 |  |                                          |        |   |      |   |        |  
|------------------------------------------------ |  | ---------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                 |  | (unaudited) Three Months Ended March 31, |       
|                                                 |  | 2004                                     |        |   | 2003 |  
|Total property revenues                          |  | $                                        | 47,601 |   |      | $ | 33,581 |  
|                                                 |  |                                          |        |   |      |   |        |  
|Operating costs  rental property                |  |                                          | 31,926 |   |      |   | 19,319 |  
|Depreciation                                     |  |                                          | 10,888 |   |      |   | 10,183 |  
|Management and leasing fees                      |  |                                          | 2,353  |   |      |   | 5,017  |  
|                                                 |  |                                          |        |   |      |   |        |  
|Total expenses                                   |  |                                          | 45,167 |   |      |   | 34,519 |  
|                                                 |  |                                          |        |   |      |   |        |  
|Operating income (loss) before minority interest |  |                                          | 2,434  |   |      |   | (938   | )
|Minority interest                                |  |                                          | (244   | ) |      |   | 94     |  
|                                                 |  |                                          |        |   |      |   |        |  
|Income (loss) from discontinued operations       |  | $                                        | 2,190  |   |      | $ | (844   | )
|                                                 |  |                                          |        |   |      |   |        |  



|(c) |  | Liquidity and Capital Resources
|--- |  | -------------------------------



Cash Flows From Operating Activities



Net cash flows from operating activities were $(262,821) and $98,481 for the three months ended March 31, 2004 and 2003, respectively. The 2004 decrease from 2003
resulted primarily from the corresponding increases in Partnership expenses as described above.



Cash Flows From Investing Activities



Net cash flows from investing activities were $39,980 and $129,745 for the three months ended March 31, 2004 and 2003, respectively. The 2004 decrease, as compared to 2003, resulted primarily from the decrease in distributions received from
Fund I-II Tucker Associates as a result of the sale of the retail portion of Heritage Place in 2003.



Cash Flows From Financing Activities



Net cash flows from financing activities were $0 and $(253,021) for the three months ended March 31, 2004 and 2003, respectively. For the 2003 period, net cash flows from financing activities were solely comprised of operating distributions
paid to limited partners. There were no such distributions in 2004.



Distributions



The Partnership declared distributions
of net cash from operations to the limited partners holding Class A Units of $0.00 and $2.50 per unit for the quarters ended March 31, 2004 and 2003, respectively. Cash flows otherwise distributable to the limited partners have been reserved for the
first quarter of 2004 in order to fund additional legal costs anticipated in connection with the litigation discussed in Part II, Item 1., and lease-up costs anticipated with increasing occupancy of Black Oak Plaza and the remaining office portion
of Heritage Place. In accordance with the partnership agreement, no distributions were made to limited partners holding Class B Units.



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Contractual Obligations and
Commitments



On March 23, 2004, Wells-Baker Associates entered into an
agreement (the Agreement) to sell the remaining building at the Peachtree Place property located in Norcross, Georgia to an unrelated third party for a gross sale price of $1,030,000. The extended due diligence period under the Agreement
expired April 27, 2004, and this sale is expected to close during May 2004, however there are no assurances that this sale will close.



Sales Proceeds



The Partnerships share of the net proceeds generated from the sales of the Cherokee Commons, the Crowes Crossing, a portion of Peachtree Place, and the retail portion of Heritage Place have not been
distributed. The Partnership has calculated the amount of net sales proceeds available for distribution to limited partners out of the aggregate of approximately $10,900,000 in proceeds generated to date from the sales of certain real estate assets.
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 or reserves allowed for Partnership debts and liabilities (including without
limitation to management fees owed to Wells Management in the amount of approximately $2,800,000), and after the establishment of reserves which the General Partners, in their sole discretion, deem reasonably necessary, as of February 20, 2004,
there were net sales proceeds in the amount of

approximately $7,000,000 available for distribution to limited partners, which sum is being held in a
separate, interest-bearing bank account. As more fully set forth therein, Section 9.3 of the partnership agreement provides that the net sales 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). Due to pending litigation, however, the Partnership is not in a position to distribute net sales
proceeds until final resolution of the litigation described in Part II, Item 1.



Capital Resources



The Partnership is an investment
vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties and has invested all of its funds available for investment. Accordingly, it is unlikely that the Partnership will acquire interests in any additional
properties, except potentially for the acquisition of other interests in Paces Pavilion. Other than those mentioned above, the General Partners are unaware of any specific need requiring capital resources.



|(d) |  | Related-Party Transactions
|--- |  | --------------------------



The Partnership and its joint ventures have entered into agreements with Wells Capital and its affiliates, whereby the Partnership or its joint ventures pay certain fees
or reimbursements to Wells Capital or its affiliates for property management and leasing fees, and reimbursement of operating and administrative costs. See Note 4 to the Partnerships financial statements included in this report for a
discussion of the various related-party transactions, agreements and fees.



|(e) |  | 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 would
protect the Partnership from the 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 the Partnership would be able to replace existing leases with new leases at higher base rental rates.



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|(f) |  | Application of Critical Accounting Policies
|--- |  | -------------------------------------------



The Partnerships 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 the Partnerships
results of operations to those of companies in similar businesses.



Below is a
discussion of the accounting policies that management considers 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



Management is required to make subjective assessments as to the useful lives of its
depreciable assets. Management considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Partnerships assets by class
are as follows:



|                      |  |                                      
|--------------------- |  | -------------------------------------
|Building              |  | 25 years                             
|Building improvements |  | Remaining useful life of the building
|Land improvements     |  | 20 years                             
|Tenant improvements   |  | Lease term                           



In the event that management uses
inappropriate useful lives or methods for depreciation, the Partnerships net income would be misstated.



Valuation of Real Estate Assets



Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in joint
ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by
determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the 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. Management has determined that there has been no impairment in the carrying value of real estate
assets held by the Partnership as of March 31, 2004.



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.



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



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



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



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



There were no significant changes in the Partnerships internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the Partnerships internal control over financial reporting.



PART II. OTHER INFORMATION



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



On January 17, 2003, the Partnership was served with a putative class action by a limited partner holding Class B units, on behalf of all limited partners holding Class B units as of January 15, 2003, that seeks
equitable relief with regard to the rights and obligations of all the Partnerships limited partners and general partners under the partnership agreement. This litigation was filed in the Superior Court of Gwinnett County, Georgia (Roy
Johnston v. Wells Real Estate Fund I, Civil Action No. 03-A00525-6) (the Johnston Action). The plaintiff in the Johnston Action generally alleges that the terms of the partnership agreement, as it relates to the allocation and
distribution of net sale proceeds, are inconsistent with the original intent of the parties. The plaintiff alleges that the original intent was that limited partners holding Class B units would have a priority in payment of cash distributions of net
sale proceeds to bring them even with the amount of cash distributions previously made to limited partners holding Class A units. The Johnston Action seeks, among other things, to have the Partnerships partnership agreement equitably reformed
consistent with the alleged original intent or, in the alternative, to have the investments made by limited partners holding Class B units equitably rescinded, and requests an injunction prohibiting the General Partners of the Partnership from
distributing net sales proceeds until the resolution of the action.



On April
15, 2003, several limited partners holding Class A units filed a motion to intervene in the Johnston Action on the grounds that Mr. Johnston seeks relief that would be detrimental to limited partners holding Class A units, and that judgment in favor
of Mr. Johnston would impair or impede the Class A unit holders ability to protect their interests. The Partnership then filed its answer, a counterclaim seeking a declaratory judgment and an interpleader action, and a motion to join the
intervenor Class A unit holders and recast the action as one in interpleader. In its counterclaim, the Partnership seeks a declaratory judgment as to how net sale proceeds should be distributed as between limited partners holding Class A units and
limited partners holding Class B units.



On June 27, 2003, the Court entered an
order granting the motion to intervene previously filed by certain limited partners holding Class A units (the A Unit Holder Defendants). On July 29, 2003, the A Unit Holder



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Defendants filed a cross-claim against the
Partnership seeking that the Partnership be required and directed to disburse funds in accordance with the partnership documents.



On or about October 16, 2003, all of the A Unit Holder Defendants other than John Weiss (Defendant Weiss) filed a Dismissal Without Prejudice in the action.
On or about that same date, Defendant Weiss filed a motion to dismiss or in the alternative for summary judgment. On November 3, 2003, the Partnership filed a motion to dismiss or in the alternative for summary judgment.



On or about December 8, 2003, the plaintiff in the Johnston action filed a Motion to
Conditionally Certify Class Action Claims. On or about December 10, 2003, Mr. Johnston filed a Motion for Partial Summary Judgment as to his Count II for Rescission.



The Court held a hearing on February 2, 2004. The Court took matters under advisement, and directed that all the proceedings be held in
abeyance pending further order from the Court.



On or about March 12, 2004, a
putative class action complaint (the Complaint) was filed by four individuals (the plaintiffs) against the Partnership, and our General Partners, Leo F. Wells, III, Wells Capital, as well as Wells Investment Securities, Inc.,
and Wells Management (collectively, the Wells Defendants) (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 Complaint purportedly on
behalf of all limited partners holding B units of the Partnership as of January 15, 2003. The Complaint alleges, among other things, that (a) Mr. Wells, Wells Capital, Wells Investment Securities, Inc., and the Partnership negligently and
fraudulently made false statements and material omissions in connection with the initial sale (September 6, 1984  September 5, 1986) of the B units to investors of the Partnership by making false statements and omissions in sales literature
relating to the distribution of net sale proceeds to holders of B units, among other things; (b) Mr. Wells, Wells Capital, and the Partnership negligently and fraudulently misrepresented and concealed disclosure of, among other things, alleged
discrepancies between such statements and provisions in the partnership agreement for a period of time in order to delay such investors from taking any legal, equitable or other action to protect their investments in the Partnership, among other
reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of consent solicitations to the limited partners; and (d) Mr. Wells, Wells Capital, and the Partnership breached fiduciary duties to the limited partners.



The plaintiffs seek, among other remedies, the following: rescission of all
purported class members purchases of B units and an order for a full refund of all money paid for such units together with interest; judgment against the Wells Defendants, jointly and severally, in an amount to be proven at trial; punitive
damages; a declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; judicial dissolution of the Partnership and the appointment of a receiver to wind up and terminate the partnership; and an award to
plaintiffs of their attorneys fees, costs and expenses.



|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



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



|(b) |  | No reports on Form 8-K were filed with the Commission during the first quarter of 2004.
|--- |  | ---------------------------------------------------------------------------------------



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SIGNATURES



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



|             |  |  |  |                                                                                                  |  | 
|------------ |  |  |  | ------------------------------------------------------------------------------------------------ |  | 
|             |  |  |  | WELLS REAL ESTATE FUND I (Registrant)                                                           
|             |  | 
|             |  |  |  | By: WELLS CAPITAL, INC. (Corporate General Partner)                                             
|             |  | 
|May 10, 2004 |  |  |  | /s/    LEO F. WELLS, IIILeo F. Wells, III President                                             
|May 10, 2004 |  |  |  | /s/    DOUGLAS P. WILLIAMSDouglas P. Williams Principal Financial Officer of Wells Capital, Inc.





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EXHIBIT INDEX



TO FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND I



|           |  |                                                                                                                               
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | 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