<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark one)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934

For the quarterly period ended           March 31, 2002                      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                      0-18407
                       ------------------------------------------------------

                        WELLS REAL ESTATE FUND III, L.P.
    -----------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Georgia                                  58-1800833
  ---------------------------------        ------------------------------------
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

6200 The Corners Parkway, Suite 250  Norcross, Georgia            30092
-------------------------------------------------------   -------------------
      (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code       (770) 449-7800
                                                   --------------------------

                      ------------------------------------
         (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 ______
         -----

<PAGE>

                                    FORM 10-Q

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                Page No.
                                                                                                --------
<S>                                                                                             <C>
PART I.   FINANCIAL INFORMATION

 Item 1.  Financial Statements

          Balance Sheets--March 31, 2002 and December 31, 2001                                      3

          Statements of Income for the Three Months Ended March 31, 2002
          and 2001                                                                                  4

          Statement of Partner's Capital for the Year Ended December 31, 2001
          and the Three Months Ended March 31, 2002                                                 5

          Statements of Cash Flows for the Three Months Ended March 31, 2002
          and 2001                                                                                  6

          Condensed Notes to Financial Statements                                                   7

 Item 2.  Management's Discussion and Analysis of Financial Condition and Results
          of Operations                                                                            10

PART II.  OTHER INFORMATION                                                                        14
</TABLE>

                                       2

<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   March 31,         December 31,
                                                                                     2002                2001
                                                                                -------------        ------------
<S>                                                                             <C>                  <C>
ASSETS:
  Real estate, at cost:
     Land                                                                       $     576,350        $    576,350
     Building and improvements, less accumulated depreciation
       of $1,479,366 as of March 31, 2002 and $1,434,858 as of
       December 31, 2001                                                            2,242,185           2,286,693
                                                                                -------------        ------------
          Total real estate                                                         2,818,535           2,863,043
  Cash and cash equivalents                                                           426,684             134,766
  Investments in joint ventures                                                    10,524,811          10,655,517
  Due from affiliates                                                                 205,074             334,616
  Accounts receivable                                                                   2,940                   0
  Prepaid expenses and other assets                                                    21,824              20,515
                                                                                -------------        ------------
          Total assets                                                          $  13,999,868        $ 14,008,457
                                                                                =============        ============

LIABILITIES AND PARTNERS' CAPITAL:
  Liabilities:

     Accounts payable                                                           $      20,313        $     23,492
                                                                                -------------        ------------
  Partners' capital:
     Limited partners:
       Class A --19,635,965 units                                                  13,979,555          13,984,965
       Class B --2,544,540 units                                                            0                   0
                                                                                -------------        ------------
          Total partners' capital                                                  13,979,555          13,984,965
                                                                                -------------        ------------
          Total liabilities and partners' capital                               $  13,999,868        $ 14,008,457
                                                                                =============        ============
</TABLE>

      The accompanying notes are an integral part of these balance sheets.

                                       3

<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)

                           STATEMENTS OF (LOSS) INCOME

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                           -----------------------
                                                                            March 31,    March 31,
                                                                               2002        2001
                                                                           -----------  ----------
<S>                                                                         <C>          <C>
REVENUES:
    Rental income                                                           $   49,254   $ 117,655
    Equity in income of joint ventures (Note 2)                                 56,954     156,290
    Interest income                                                              2,546       2,438
                                                                           -----------  ----------
                                                                               108,754     276,383
                                                                           -----------  ----------
EXPENSES:
    Depreciation                                                                44,508      45,059
    Operating costs-rental properties, net of tenant reimbursements             43,537      49,209
    Partnership administration                                                  13,243       8,982
    Legal and accounting                                                         9,435      11,477
    Management and leasing fees                                                  3,441      14,804
                                                                           -----------  ----------
                                                                               114,164     129,531
                                                                           -----------  ----------
NET (LOSS) INCOME                                                           $   (5,410)  $ 146,852
                                                                           ===========  ==========

NET (LOSS) INCOME ALLOCATED TO CLASS A LIMITED PARTNERS                     $   (5,410)  $ 146,852
                                                                           ===========  ==========

NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS                              $        0   $       0
                                                                           ===========  ==========

NET INCOME PER CLASS A LIMITED PARTNER UNIT                                 $     0.00   $    0.01
                                                                           ===========  ==========

NET LOSS PER CLASS B LIMITED PARTNER UNIT                                   $     0.00   $    0.00
                                                                           ===========  ==========

CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT                          $     0.00   $    0.02
                                                                           ===========  ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       4

<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)


                         STATEMENTS OF PARTNERS' CAPITAL

                      FOR THE YEAR ENDED DECEMBER 31, 2001

                    AND THE THREE MONTHS ENDED MARCH 31, 2002

<TABLE>
<CAPTION>
                                                               Limited Partners                          Total
                                           --------------------------------------------------------
                                                      Class A                       Class B            Partners'
                                           --------------------------------------------------------
                                               Units          Amounts         Units        Amounts      Capital
                                           -----------     ------------     ----------    ---------   -----------
<S>                                        <C>             <C>              <C>           <C>         <C>
BALANCE, December 31, 2000                  19,635,965      $14,512,162      2,544,540    $      0    $14,512,162

  Net income                                         0          375,442              0           0        375,442
  Partnership distributions                          0         (902,639)             0           0       (902,639)
                                           -----------     ------------     ----------    ---------   -----------
BALANCE, December 31, 2001                  19,635,965       13,984,965      2,544,540           0     13,984,965

  Net loss                                           0           (5,410)             0           0         (5,410)
                                           -----------     ------------     ----------    ---------   -----------
BALANCE, March 31, 2002                     19,635,965      $13,979,555      2,544,540    $      0    $13,979,555
                                           ===========     ============     ==========    =========   ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       5

<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                     ------------------------
                                                                     March 31,      March 31,
                                                                        2002          2001
                                                                     ---------      ---------
<S>                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                                 $  (5,410)     $ 146,852
   Adjustments to reconcile net (loss) income to net cash
     (used in) provided by operating activities:
        Equity in income of joint ventures                             (56,954)      (156,290)
        Depreciation                                                    44,508         45,059
        Changes in assets and liabilities:
           Accounts receivable                                          (2,940)        (7,134)
           Prepaid expenses and other assets                            (1,309)       (13,849)
           Accounts payable                                             (3,179)        10,374
           Due from affiliates                                               0          3,215
                                                                     ---------      ---------
               Net cash (used in) provided by operating activities     (25,284)        28,227
                                                                     ---------      ---------
CASH FLOW FROM INVESTING ACTIVITIES:
   Distributions received from joint ventures                          317,202        228,416
                                                                     ---------      ---------
CASH FLOW FROM FINANCING ACTIVITIES:
   Partnership distribution paid                                             0              0
                                                                     ---------      ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                              291,918        256,643

CASH AND CASH EQUIVALENTS, beginning of year                           134,766        409,476
                                                                     ---------      ---------
CASH AND CASH EQUIVALENTS, end of period                             $ 426,684      $ 666,119
                                                                     =========      =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       6

<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.

                     (A Georgia Public Limited Partnership)

                     CONDENSED NOTES TO FINANCIAL STATEMENTS

                                 MARCH 31, 2002

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a) Organization and Business

     Wells Real Estate Fund III, L.P. (the "Partnership") is a Georgia public
     limited partnership with Leo F. Wells, III and Wells Capital, Inc., a
     Georgia corporation, serving as its General Partners. The Partnership was
     formed on July 31, 1988 for the purpose of acquiring, developing,
     constructing, owning, operating, improving, leasing and otherwise managing
     income-producing commercial properties for investment purposes. The
     Partnership has two classes of limited partnership interests, Class A and
     Class B Units. The 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 partner unit has equal voting rights
     regardless of class.

     On October 24, 1988, 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 offering was terminated on
     October 23, 1990 upon receiving and accepting $22,206,310 in limited
     partner capital contributions for a total of 22,206,310 Class A and Class B
     limited partner units at $1 per unit. From the original capital raised, the
     Partnership has paid $1,554,442 in acquisition and advisory fees and
     acquisition expenses, paid $2,664,668 in selling commissions and
     organization and offering expenses, and invested $17,983,843 in the
     properties described below. In 1990 and 1991, the Partnership repurchased
     6,128 and 19,677 limited partnership units.

     As of March 31, 2002, the Partnership owned a 100% interest in Greenville
     Center, an office building located in Greenville, North Carolina.

            (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

                                       7

<PAGE>

The Partnership owns interests in all of its real estate assets through
joint ventures with other Wells Real Estate Funds. As of March 31, 2002,
the Partnership owned interests in the following five properties through
the affiliated joint ventures listed below:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
          Joint Venture                       Joint Venture Partners                       Properties
          -------------                       ----------------------                       ----------
------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                      <C>
Fund II-III Associates - Atrium      -  Fund II-IIOW Associates*              1. Boeing at the Atrium
                                     -  Wells Real Estate Fund III, L.P.           A four story office building located
                                                                                   in Houston Texas
------------------------------------------------------------------------------------------------------------------------
Fund II-III Associates - Brookwood   -  Fund II-IIOW Associates*              2. Brookwood Grill
                                     -  Wells Real Estate Fund III, L.P.           A restaurant located in Fulton
                                                                                   County, Georgia
------------------------------------------------------------------------------------------------------------------------
Fund II-III-VI-VII Associates        -  Fund II-III Associates - Brookwood    3. Holcomb Bridge Property
                                     -  Wells Real Estate Fund VI, L.P.            An office/retail center located
                                     -  Wells Real Estate Fund VII, L.P.           in Roswell, Georgia
------------------------------------------------------------------------------------------------------------------------
Fund III-IV Associates               -  Wells Real Estate Fund III, L.P.      4. Stockbridge Village Shopping Center
                                     -  Wells Real Estate Fund IV, L.P.            A retail shopping center located in
                                                                                   Stockbridge, Georgia

                                                                              5. Reciprocal Group Building
                                                                                   An office building located
                                                                                   in Richmond, Virginia
------------------------------------------------------------------------------------------------------------------------
</TABLE>

 * Fund II-IIOW Associates is a joint venture between Wells Real Estate Fund
   II and Wells Real Estate Fund II-OW.

Each of the above properties was acquired on an all cash basis. For further
information regarding the foregoing joint ventures and properties, refer to the
report filed for the Partnership on Form 10-K for the year ended December 31,
2001.

(b) Basis of Presentation

The financial statements of the Partnership have been prepared in accordance
with the instructions for Form 10-Q and do not include all of the information
and footnotes required by generally accepted accounting principles ("GAAP") for
complete financial statements. The quarterly statements included herein have not
been examined by independent accountants. However, 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. For further information, refer to the
financial statements and footnotes included in the report filed for the
Partnership on Form 10-K for the year ended December 31, 2001.

(c) Distribution of Net Cash From Operations

As defined by the partnership agreement, cash available for distributions is
distributed quarterly on a cumulative non-compounded basis to limited partners
as follows:

  .  First, to the Class A limited partners until such limited partners have
     received an 8% per annum return on their respective adjusted capital
     contributions, as defined.

  .  Second, to the Class B limited partners until such limited partners have
     received an 8% per annum return on their respective adjusted capital
     contributions, as defined.

                                       8

<PAGE>

  .  Third, to the general partners until such partners have received
     distributions equal to 10% of the total net cash distributed from
     operations per annum.

  .  Thereafter, to the limited partners and the General Partners allocated on a
     basis of 90% and 10%, respectively.

2. INVESTMENTS IN JOINT VENTURES

   (a) Basis of Presentation

   The Partnership owns interests in five properties through its investment in
   joint ventures. The Partnership does not have control over the operations of
   the joint ventures described in Note 1; however, it does exercise significant
   influence. Accordingly, investments in joint ventures are recorded using the
   equity method of accounting. Interim results for 2002 are not necessarily
   indicative of results for the year. For further information, refer to the
   report filed for the Partnership on Form 10-K for the year ended December 31,
   2001.

   (b) Summary of Operations

   The following information summarizes the operations of the unconsolidated
   joint ventures, in which the Partnership holds ownership interests, for the
   three months ended March 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                       Partnership's
                                      Total Revenues            Net Income          Share of Net Income
                                  ----------------------  ----------------------  -----------------------
                                    Three Months Ended      Three Months Ended      Three Months Ended
                                  ----------------------  ----------------------  -----------------------
                                  March 31,    March 31,  March 31,    March 31,  March 31,     March 31,
                                     2002         2001       2002         2001       2002          2001
                                  ---------    ---------  ---------    ---------  ---------     ---------
   <S>                            <C>          <C>        <C>          <C>        <C>           <C>
   Fund II-III Associates -
     Atrium                       $  88,536    $ 367,536  $(268,961)   $   5,506  $(104,088)    $   2,131
   Fund II-III Associates -
     Brookwood                       64,100*      63,171*    25,586       42,679      9,634        16,068
   Fund III-IV Associates
                                    473,184      426,638    264,647      241,368    151,408       138,091
                                  ---------    ---------  ---------    ---------  ---------     ---------
                                  $ 625,820    $ 857,345  $  21,272    $ 289,553  $  56,954     $ 156,290
                                  =========    =========  =========    =========  =========     =========
</TABLE>

     *  The Partnership's share of income earned from its investment in Fund
        II-III-VI-VII Associates is recorded by Fund II-III Associates -
        Brookwood as equity in income of joint ventures, which is classified as
        revenue


<TABLE>
<CAPTION>
                                                                                       Partnership's
                                      Total Revenues            Net Income          Share of Net Income
                                  ----------------------  ----------------------  -----------------------
                                    Three Months Ended      Three Months Ended      Three Months Ended
                                  ----------------------  ----------------------  -----------------------
                                  March 31,    March 31,  March 31,    March 31,  March 31,     March 31,
                                     2002         2001       2002         2001       2002          2001
                                  ---------    ---------  ---------    ---------  ---------     ---------
   <S>                            <C>          <C>        <C>          <C>        <C>           <C>
   Fund II-III-VI-VII
     Associates                   $ 178,443    $ 210,377  $  60,829    $  28,807  $   5,505*    $   2,607*
                                  =========    =========  =========    =========  =========     =========
</TABLE>

                                       9

<PAGE>

     The following information summarizes the operations of the property, which
     is owned by one of the above joint ventures and significant to the
     Partnership, for the three months ended March 31, 2002 and 2001. Audited
     financial statements of this property are included in the report filed for
     the Partnership on Form 10-K for the year ended December 31, 2001:

<TABLE>
<CAPTION>
                                                                                                  Partnership's
                                       Total Revenues                 Net Income              Share of Net Income
                                 ----------------------------------------------------------------------------------------
                                     Three Months Ended           Three Months Ended           Three Months Ended
                                 ----------------------------------------------------------------------------------------
                                   March 31,     March 31,      March 31,     March 31,      March 31,     March 31,
                                     2002           2001          2002           2001          2002           2001
                                 ----------------------------------------------------------------------------------------
     <S>                           <C>          <C>            <C>            <C>            <C>           <C>
     Reciprocal Group
         Building                  $143,608        $96,389       $58,830        $29,849       $33,658        $17,077
                                 ========================================================================================
</TABLE>

     3.  RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, Statement of Financial Accounting Standard ("SFAS") No.
         141, "Business Combinations" (effective beginning July 1, 2001) and
         SFAS 142, "Goodwill and Other Intangible Assets" (effective beginning
         January 1, 2002) were issued. SFAS No. 141 prohibits
         pooling-of-interests accounting for acquisitions. SFAS No. 142
         specifies that goodwill and some intangible assets will no longer be
         amortized and, instead, will be subject to periodic impairment testing.
         We believe that the adoption of SFAS No. 141 and SFAS No. 142 will not
         have a significant impact on our financial statements.

         In August 2001, SFAS No. 143, "Accounting for Asset Retirement
         Obligations" (effective beginning January 1, 2003) and SFAS No. 144,
         "Accounting for the Impairment or Disposal of Long-Lived Assets"
         (effective beginning January 1, 2002) were issued. SFAS No. 143
         requires that entities recognize the fair value of a liability for an
         asset retirement obligation in the period in which it is incurred if a
         reasonable estimate of fair value can be made. SFAS No. 144 addresses
         financial accounting and reporting for the impairment of long-lived
         assets and for long-lived assets to be disposed of and supersedes SFAS
         No. 121, "Accounting for the Impairment of Long-Lived Assets and for
         Long-Lived Assets to be Disposed of". Among other factors, SFAS No. 144
         establishes criteria beyond that previously specified in SFAS No. 121
         to determine when a long-lived asset is to be considered held for sale.
         We believe that the adoption of SFAS No. 143 and SFAS No. 144 will not
         have a significant impact on our financial statements.

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

     The following discussion and analysis should be read in conjunction with
     the Partnership's accompanying financial statements and notes thereto.

     (a)  Forward-Looking Statements

     This report contains forward-looking statements, within the meaning of
     Section 27A of the Securities Act of 1933 and 21E of the Securities
     Exchange Act of 1934, including discussion and analysis of the financial
     condition of the Partnership, anticipated capital expenditures required to
     complete certain projects, amounts of cash distributions anticipated to be
     distributed to limited partners in the future and certain other matters.
     Readers of this report should be aware that there are various factors that
     could cause actual results to differ materially from any forward-looking
     statements made in this

                                       10

<PAGE>

     report, including construction costs that may exceed estimates,
     construction delays, lease-up risks, inability to obtain new tenants upon
     the expiration of existing leases, and the potential need to fund tenant
     improvements or other capital expenditures out of operating cash flows.

     (b) Results of Operations

     Revenues

     Gross revenues decreased to $108,754 for the three months ended March 31,
     2002 compared to $276,383 for the same period in 2001 due to reductions in
     occupancy at Greenville Center experienced during the preceding twelve
     months and decreased equity in income generated from joint ventures
     resulting from (i) a reduction in occupancy of Boeing at the Atrium from
     100% to 25% beginning in December 2001, (ii) reduced rental rates for
     Brookwood Grill, (iii) decreases in occupancy of the Holcomb Bridge
     property experienced during the preceding twelve months, (iv) decreased
     operating cost reimbursement billings to tenants at Brookwood Grill and the
     Reciprocal Group Building, offset by (i) an increase in occupancy of the
     Reciprocal Group Building and (ii) receivables due from tenants at the
     Holcomb Bridge property, which were written-off in 2001 and collected in
     2002. Tenants are billed for operating cost reimbursements at estimate
     amounts, which are reconciled as tenants are billed (credited) for the net
     annual under (over) billings in the following year.

     Expenses

     Expenses decreased to $114,164 for the three months ended March 31, 2002
     compared to $129,531 for the same period in 2001 primarily due to decreases
     in net operating costs, management and leasing fees and legal and
     accounting costs related to the decrease in occupancy of Greenville Center
     described above, offset by an increase in partnership administration
     expenses. As a result, net (loss) income decreased to $(5,410) for the
     three months ended March 31, 2002 from $146,852 for the same period in
     2001.

     Distributions

     Cash distributions to limited partners holding Class A Units decreased to
     $0.00 per unit for the three months ended March 31, 2002 from $0.02 per
     unit for the three months ended March 31, 2001 as a result of the decrease
     in cash available for limited partner distributions resulting from the
     decrease in the Partnership's net (loss) income as described above.
     Management anticipates reserving distributions to Class A limited partners
     in order to fund additional leasing costs and tenant improvements
     anticipated to be incurred in connection with leasing vacant space at
     Greenville Center and Boeing at the Atrium. No cash distributions were made
     to Class B Limited Partners or the General Partners.

     (c) Liquidity and Capital Resources

     Net cash flows from operating activities decreased to $(25,284) used for
     the three months ended March 31, 2002 from $28,227 provided for the three
     months ended March 31, 2001 due to the decrease in occupancy of Greenville
     Center and Boeing at the Atrium, as discussed further in the previous
     section, payment of partnership administration expenses and legal and
     accounting expenses in 2002 that were incurred in 2001 and amounts borrowed
     from affiliates to fund operations during the three months ended March 31,
     2001, which were repaid during the last three quarters of 2001. Net cash
     provided by investing activities increased to $317,202 for 2002 compared to
     $228,416 for 2001 as a result of reserving distributions at the joint
     venture level in order to fund tenant improvements for the Reciprocal Group
     Building in 2001. Net cash used in financing activities remained constant
     at $0 for 2002 and 2001, as the Partnership withheld distributions in 2001
     in order

                                       11

<PAGE>

     to fund tenant improvements for the Reciprocal Group Building and has
     withheld distributions in 2002 in order to fund leasing costs and tenant
     improvements anticipated to be incurred in connection with leasing vacant
     space at Greenville Center and Boeing at the Atrium in 2002.

     As the Partnership was formed for the purpose of acquiring, owning and
     operating income-producing real properties and has invested all of its
     funds available for investment the properties described above, it is
     unlikely that the Partnership will acquire interests in any additional
     properties. The Partnership expects to continue to meets its short-term
     liquidity requirements generally from net cash provided by operations and
     received from joint ventures.

     Management estimates that the fair market value of each of the properties
     in which the Partnership invests, either directly or through joint
     ventures, exceeds the carrying value of the corresponding real estate
     assets on a held for use basis under SFAS No. 121 and SFAS No. 144. Thus,
     no impairment losses have been recorded.

     The Partnership recently decided to begin the process of selling its
     properties. In April 2002, the Partnership entered into negotiations with a
     prospective buyer for Greenville Center. Upon finalizing negotiations, the
     real estate assets of Greenville Center would be reclassified as `held for
     sale' and, in accordance with SFAS No. 121 and SFAS No. 144, depreciation
     would be discontinued and the potential impairment of the related real
     estate assets would be reassessed on a held for sale basis. Management is
     not contractually or financially obligated to sell any of its properties.

     (d) Inflation

     The real estate market has not been affected significantly by inflation in
     the past three years due to the relatively low inflation rate. Most tenant
     leases contain provisions for common area maintenance, real estate tax and
     insurance reimbursements from tenants either on a per square foot basis, or
     above a certain allowance per square foot annually, which should reduce the
     Partnership's exposure to increases in costs and other operating expenses
     resulting from the impact of inflation. In addition, a number of the
     Partnership's leases are for remaining terms of less than five years, which
     may allow the Partnership to enter into new leases at higher base rental
     rates in the event that market rental rates rise above the existing lease
     rates. There is no assurance, however, that the Partnership would be able
     to replace existing leases with new leases containing higher base rental
     rates.

     (e) Critical Accounting Policies

     The Partnership's accounting policies have been established and conformed
     to in accordance with accounting principles generally accepted in the
     United States ("GAAP"). The preparation of financial statements in
     conformity with GAAP requires management to use judgments in the
     application of accounting policies, including making estimates and
     assumptions. These judgments may affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities as of the
     dates of the financial statements presented and the reported amounts of
     revenues and expenses during the respective reporting periods. If our
     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 our financial statements.

     The accounting policies that we consider to be critical, in that they may
     require complex judgment in their application or require estimates about
     matters that are inherently uncertain, are discussed below.

                                       12

<PAGE>

     For further information related to the Partnership's accounting policies,
     including the critical accounting policies described below, refer to the
     report filed for the Partnership on Form 10-K for the year ended December
     31, 2001.

     Straight-Lined Rental Revenues

     The Partnership recognizes rental income generated from all leases on real
     estate assets in which the Partnership has an ownership interest either
     directly or through its investments in joint ventures on a straight-line
     basis over the terms of the respective leases. Should tenants encounter
     financial difficulties in future periods, the amounts recorded as
     receivables may not be fully realized.

     Operating Cost Reimbursements

     The Partnership generally bills tenants for operating cost reimbursements
     either directly or through its investments in joint ventures on a monthly
     basis at amounts estimated largely based on actual prior period activity
     and the respective tenant lease terms. Such billings are generally adjusted
     on an annual basis to reflect reimbursements owed to the landlord based on
     the actual costs incurred during the period and the respective tenant lease
     terms. Should tenants encounter financial difficulties in future periods,
     the amounts recorded as receivables may not be fully realized.

     Real Estate

     Management continually monitors events and changes in circumstances
     indicating that the carrying amounts of the real estate assets in which the
     Partnership has ownership interests either directly or through its
     investments in joint ventures may not be recoverable. When such events or
     changes in circumstances are present, management assesses the potential
     impairment by comparing the fair market value of the underlying assets,
     estimated at amounts equal to the future undiscounted operating cash flows
     expected to be generated from tenants over the life of the assets and from
     their eventual disposition, to the carrying value of the assets. In the
     event that the carrying amount exceeds the estimated fair market value, the
     Partnership would recognize an impairment loss in the amount required to
     adjust the carrying amount of the asset to its estimated fair market value.
     Neither the Partnership nor its joint ventures have recognized impairment
     losses on real estate assets in 2002, 2001 or 2000.

            (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6 (b.) No reports on Form 8-K were filed during the first quarter of 2002.

                                   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 III, L.P.
                (Registrant)
                Dated: May 10, 2002       By: /s/Leo F. Wells, III
                                              --------------------
                                              Leo F. Wells, III, as Individual
                                              General Partner and as President
                                              and Chief Financial
                                              Officer of Wells Capital, Inc.

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