<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           September 30, 1999                 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)

3885 Holcomb Bridge Road, 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.
                       --------------------------------

                                     INDEX
                                     -----

<TABLE>
<CAPTION>
                                                                        Page No.
<S>                                                                     <C>
PART I.   FINANCIAL INFORMATION

          Item 1.  Financial Statements

               Balance Sheets - September 30, 1999
                  and December 31, 1998.....................................   3

               Statements of Income for the Three Months and Nine Months
                  Ended September 30, 1999 and 1998.........................   4

               Statement of Partner's Capital for the
                  Nine Months Ended September 30, 1999
                  and the Year Ended December 31, 1998......................   5

               Statements of Cash Flows for the Nine
                  Months Ended September 30, 1999 and 1998..................   6

               Condensed Notes to Financial Statements......................   7

          Item 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of
                   Operations...............................................   8

PART II.  OTHER INFORMATION.................................................  17
</TABLE>

                                       2
<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.
                     (A Georgia Public Limited Partnership)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
              Assets                                September 30, 1999   December  31, 1998
              ------                                ------------------   ------------------
<S>                                                 <C>                 <C>
Real estate, at cost:
 Land                                                      $   576,350         $   576,350
 Building and improvements, less accumulated
  depreciation of $1,052,887 in 1999 and $931,559
  in 1998                                                    2,547,331           2,668,658
                                                           -----------         -----------

  Total real estate                                          3,123,681           3,245,008
                                                           -----------         -----------

Cash and cash equivalents                                      161,118             156,648
Investment in joint ventures (Note 2)                       11,559,998          12,132,961
Due from affiliates                                            334,530             334,162
Accounts receivable                                             11,531               8,000
Prepaid expenses and other assets                               24,357              24,157
                                                           -----------         -----------

  Total assets                                             $15,215,215         $15,900,936
                                                           ===========         ===========

          Liabilities and Partners' Capital
          ---------------------------------

Liabilities:
 Accounts payable                                          $    27,399         $    13,362
 Partnership distributions payable                             403,403             458,724
 Due to affiliates                                                   0               7,966
                                                           -----------         -----------

  Total liabilities                                            430,802             480,052
                                                           -----------         -----------

Partners' capital:
  Limited Partners:
  Class A - 19,635,965 units outstanding                    14,784,413          15,420,884
  Class B - 2,544,540 units outstanding                              0                   0
                                                           -----------         -----------

     Total partners' capital                                14,784,413          15,420,884
                                                           -----------         -----------

     Total liabilities and partners' capital               $15,215,215         $15,900,936
                                                           ===========         ===========
</TABLE>

           See accompanying condensed notes to financial statements

                                       3
<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.
                     (A Georgia Public Limited Partnership)

                              STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                             Three Months Ended                      Nine Months Ended
                                   --------------------------------------  --------------------------------------
                                   September 30, 1999  September 30, 1998  September 30, 1999  September 30,1998
                                   ------------------  ------------------  ------------------  ------------------
<S>                               <C>                  <C>                 <C>                 <C>
Revenues:
 Rental income                             $138,090           $150,184            $410,250           $427,842
 Equity in income of
  joint ventures (Note 2)                   135,083            119,907             453,390            382,327
  Interest income                                36                 25                  23              1,044
                                           --------           --------            --------           --------
                                            273,209            270,116             863,663            811,213
                                           --------           --------            --------           --------

Expenses:
 Management and leasing fees                 18,747             29,656              53,972             66,625
 Operating costs - rental
  property                                   23,777            (13,861)             82,735             63,538

 Depreciation and Amortization               40,444             45,018             121,329            124,172
 Legal and Accounting                           199                531              12,846             14,450
 Computer costs                               2,158              2,325               5,327              6,173
 Partnership administration                  11,376             20,883              43,043             42,373
                                           --------           --------            --------           --------
                                             96,699             84,553             319,252            317,331
                                           --------           --------            --------           --------
Net income                                 $176,510           $185,563            $544,411           $493,882
                                           ========           ========            ========           ========

Net income allocated to
 General Partners                          $      0           $      0            $      0           $      0

Net  income allocated to
 Class A Limited Partners                  $176,510           $185,563            $544,411           $493,882

Net loss allocated to Class
 B Limited Partners                        $      0           $      0            $      0           $      0

Net income per Class A
 Limited Partner Unit                      $   0.01           $   0.01            $   0.03           $   0.03

Net loss per Class B Limited
 Partner Unit                              $      0           $      0            $      0           $      0

Cash distribution per Class A
 Limited Partner Unit                      $   0.02           $   0.02            $   0.06           $   0.06
</TABLE>

           See accompanying condensed notes to financial 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, 1998 AND THE NINE MONTHS ENDED
                               SEPTEMBER 30, 1999


<TABLE>
<CAPTION>
                                                    Limited Partners                      Total
                                     -----------------------------------------------
                                              Class A                 Class B           Partners'
                                     -------------------------  --------------------
                                       Units        Amounts       Units     Amounts      Capital
                                     ----------  -------------  ---------  ---------  -------------
<S>                                  <C>         <C>            <C>        <C>        <C>
BALANCE, December 31, 1997           19,635,965   $16,383,705   2,544,540         0    $16,383,705

   Net income                                 0       608,058           0    40,949        649,007
   Partnership distributions                  0    (1,570,879)          0   (40,949)    (1,611,828)
                                     ----------   -----------   ---------  --------    -----------
BALANCE, December 31, 1998           19,635,965   $15,420,884   2,544,540         0    $15,420,884
                                     ----------   -----------   ---------  --------    -----------

   Net income                                 0       544,410           0         0        544,410
   Partnership distributions                  0    (1,180,881)          0         0     (1,180,881)
                                     ----------   -----------   ---------  --------    -----------
BALANCE, September 30, 1999          19,635,965   $14,784,413   2,544,540  $      0    $14,784,413
                                     ==========   ===========   =========  ========    ===========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       5
<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.
                     (A Georgia Public Limited Partnership)

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                      -----------------------------------------------
                                                        September 30, 1999       September 30, 1998
                                                      -----------------------  ----------------------
<S>                                                   <C>                      <C>
Cash flows from operating activities:
 Net income                                                      $   544,411             $   493,882
 Adjustments to reconcile net income to net cash
    provided by operating activities:
       Equity in income of joint ventures                           (453,390)               (382,327)
       Depreciation and Amortization                                 121,329                 124,172
       Changes in assets and liabilities:
         Accounts receivable                                          (3,531)                 29,653
         Prepaids and other assets                                   (   200)                (14,571)
         Accounts payable                                             14,037                  22,307
         Due to affiliates                                            (7,966)                 20,169
                                                                 -----------             -----------
           Net cash provided by operating activities                 214,690                 293,285
                                                                 -----------             -----------

Cash flow from investing activities:
 Investment in joint ventures                                              0                 (93,820)
 Distributions received from joint ventures                        1,025,985                 941,306
                                                                 -----------             -----------
           Net cash provided by investing activities               1,025,985                 847,486

Cash flow from financing activities:
 Partnership distributions paid                                   (1,236,205)             (1,158,281)
                                                                 -----------             -----------

Net increase in cash and cash equivalents                              4,470                  17,510

Cash and cash equivalents, beginning of year                         156,648                 216,961
                                                                 -----------             -----------

Cash and cash equivalents, end of period                         $   161,118             $   199,451
                                                                 ===========             ===========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       6
<PAGE>

                        WELLS REAL ESTATE FUND III, L.P.
                     (A Georgia Public Limited Partnership)

                    Condensed Notes to Financial Statements

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

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

     Wells Real Estate Fund III, L.P. (the "Partnership") is a Georgia public
     limited partnership having Leo F. Wells, III and Wells Capital, Inc., a
     Georgia corporation, as General Partners.  The Partnership was formed on
     July 31, 1988, for the purpose of acquiring, developing, constructing,
     owning, operating, improving, leasing and otherwise managing for investment
     purposes income-producing commercial properties.

     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 Partnership terminated its
     offering on October 23, 1990, and received gross proceeds of $22,206,319
     representing subscriptions from 2,700 Limited Partners, composed of two
     classes of limited partnership interests, Class A and Class B limited
     partnership units.

     The Partnership owns interests in properties directly and through equity
     ownership in the following joint ventures:  (i) The Fund II - Fund III
     Joint Venture, (ii) The Fund II, III, VI and VII Joint Venture, and (iii)
     The Fund III - Fund IV Joint Venture.

     As of September 30, 1999, the Partnership owned interest in the following
     properties:  (i) the Greenville Property, an office building in Greenville,
     North Carolina, owned by the Partnership,  (ii) Boeing at the Atrium, an
     office building in Houston, Texas, owned by Fund II - Fund III Joint
     Venture, (iii) the Brookwood Grill, a restaurant located in Roswell,
     Georgia, owned by The Fund II - Fund III Joint Venture, (iv) the
     Stockbridge Village Shopping Center, a retail shopping center located in
     Stockbridge, Georgia, southeast of Atlanta, owned by Fund III - Fund IV
     Joint Venture, (v) the G.E. Office Building located in Richmond, Virginia,
     owned by Fund III - Fund IV Joint Venture, and (vi) the Holcomb Bridge Road
     Property, an office/retail center in Roswell, Georgia, owned by Fund II,
     III, VI and VII Joint Venture.  All of the foregoing properties were
     acquired on an all cash basis.

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

     The financial statements of Wells Real Estate Fund III, L.P. have been
     prepared in accordance with instructions to Form 10-Q and do not include
     all of the information and footnotes required by generally accepted
     accounting principles for complete financial

                                       7
<PAGE>

     statements. These quarterly statements have not been examined by
     independent accountants, but in the opinion of the General Partners, the
     statements for the unaudited interim periods presented include all
     adjustments, which are of a normal and recurring nature, necessary to
     present a fair presentation of the results for such periods. For further
     information, refer to the financial statements and footnotes included in
     the Partnership's Form 10-K for the year ended December 31, 1998.

(2)  Investment in Joint Ventures
     ----------------------------

     The Partnership does not have control over the operations of the joint
     ventures; however, it does exercise significant influence.  Accordingly,
     investment in joint ventures is recorded on the equity method.

     For a description of the joint ventures and properties owned by the
     Partnership, please refer to the Partnership's Form 10-K for the year ended
     December 31, 1998.


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

     The following discussion and analysis should be read in conjunction with
     the accompanying financial statements of the Partnership and notes thereto.
     This Report contains forward-looking statements, with 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
     statement made in the Report, which include construction costs which 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 flow.

     Results in Operations and Changes in Financial Conditions
     ---------------------------------------------------------

     General
     -------

     As of September 30, 1999, the properties owned by the Partnership were 94%
     occupied.  Gross revenues of the Partnership were $863,663 for the nine
     months ended September 30, 1999, as compared to $811,213 for the nine
     months ended September 30, 1998. The increase for 1999, over 1998, was due
     to increased income from joint ventures, primarily the 880 Holcomb Bridge
     Road Property and Stockbridge Village.

                                       8
<PAGE>

     Expenses of the Partnership remained relatively stable for the nine months
     ended September 30, 1999, but increased from $84,553 for the three months
     ended September 30, 1998, to $96,699 for the three months ended September
     30, 1999, due to timing differences in the prior year common area
     maintenance reconciliation.

     Net cash provided by operating activities decreased in 1999, compared to
     1998.  Net cash provided by investing activities increased from $847,486 in
     1998, to $1,025,985 in 1999, due to the increased distributions from joint
     ventures. Distributions to limited partners increased from $1,158,281 in
     1998 to $1,236,205 in 1999.  As a result, cash and cash equivalents
     increased for the nine months ended September 30, 1999.

     The Partnership made cash distributions to the Limited Partners holding
     Class A Units of $.02 per Class A Unit for the three months ended September
     30, 1999 and 1998.  No cash distributions were made to the Limited Partners
     holding Class B Units or the General Partners for the nine months ended
     September 30, 1999 and 1998.

     The Partnership's distributions paid and payable through the third quarter
     of 1999 have been paid from net cash from operations and from distributions
     received from its investments in joint ventures.

     The Partnership has recently been notified that General Electric has
     elected not to renew its current lease for the G.E. Building, which expires
     March 31, 2000.  Management has recently begun efforts to market and lease
     this building to one or more new tenants.  At the current time, the
     estimated cost of refurbishments, tenant improvements and building
     maintenance is anticipated to be approximately $750,000, which may vary
     significantly depending upon the ultimate tenant or tenants actually
     obtained for this property.  It is likely that these costs will be required
     to be funded out of cash from operations of the Partnership and Wells Fund
     IV, which is likely to cause a substantial reduction to distributions
     payable to Limited Partners in the year 2000.


     Year 2000
     ---------

     The Partnership is presently reviewing the potential impact of Year 2000
     compliance issues on its information systems and business operations.  A
     full assessment of Year 2000 compliance issues was begun in late 1997 and
     was completed by March 31, 1999.  Renovations and replacements of equipment
     have been and are being made as warranted.  The costs incurred by the
     Partnership and its affiliates thus far for renovations and replacements
     have been immaterial.  As of September 30, 1999, all testing of systems has
     been completed.

     As to the status of the Partnerships' information technology systems, it is
     presently believed that all major systems and software packages are Year
     2000 compliant. At the present time, it is believed that all major non-
     information technology systems are Year

                                       9
<PAGE>

     2000 compliant. The cost to upgrade any noncompliant systems is believed to
     be immaterial.

     The Partnership has confirmed with the Partnership's vendors, including
     third-party service providers, such as banks, that their systems are Year
     2000 compliant.

     The Partnership relies on computers and operating systems provided by
     equipment manufacturers, and also on application software designed for use
     with its accounting, property management and investment portfolio tracking.
     The Partnership has preliminary determined that any costs, problems or
     uncertainties associated with the potential consequences of Year 2000
     issues are not expected to have a material impact on the future operations
     or financial condition of the Partnership.  The Partnership will perform
     due diligence as to the Year 2000 readiness of each property owned by the
     Partnership and each property contemplated for purchase by the Partnership.

     The Partnership's reliance on embedded computer systems (i.e.
     microcontrollers) is limited to facilities related matters, such as office
     security systems and environmental control systems.

     The Partnership is currently formulating contingency plans to cover any
     areas of concern.  Alternate means of operating the business are being
     developed in the unlikely circumstance that the computer and phone systems
     are rendered inoperable.  An off-site facility from which the Partnership
     could operate is being sought as well as alternate means of communication
     with key third-party vendors.  A written plan is being developed for
     testing and dispensation to each staff member of the General Partner of the
     Partnership.

     Management believes that the Partnership's risk of Year 2000 problems is
     minimal.  In the unlikely event there is a problem, the worst case
     scenarios would include the risks that the elevator or security systems
     within the Partnership's properties would fail or the key third-party
     vendors upon which the Partnership relies would be unable to provide
     accurate investor information.  In the event that the elevator shuts down,
     the Partnership has devised a plan for each building whereby the tenants
     will use the stairs until the elevators are fixed.  In the event that the
     security system shuts down, the Partnership has devised a plan for each
     building to hire temporary on-site security guards.  In the event that a
     third-party vendor has Year 2000 problems relating to investor information,
     the Partnership intends to perform a full system back-up of all investor
     information as of December 31, 1999, so that the Partnership will have
     accurate hard-copy investor information.

                                       10
<PAGE>

Property Operations
-------------------

As of September 30, 1999, the Partnership owned interests in the following
properties:

The Greenville Property- Fund III
---------------------------------

<TABLE>
<CAPTION>
                                            Three Months Ended                        Nine Months Ended
                                 ----------------------------------------  ----------------------------------------
                                 September 30, 1999   September 30, 1998   September 30, 1999   September 30, 1998
                                 -------------------  -------------------  -------------------  -------------------
<S>                              <C>                  <C>                  <C>                  <C>
Revenues:
  Rental income                         $138,090             $150,184             $410,250             $427,842
                                        --------             --------             --------             --------
Expenses:
  Depreciation                            40,442               45,018              121,327              124,172
  Management and leasing
        expenses                          18,747               29,656               53,972               66,625
  Other operating expenses                23,777              (13,861)              82,737               63,537
                                        --------             --------             --------             --------
                                          82,966               60,813              258,036              254,334
                                        --------             --------             --------             --------

Net income                              $ 55,124             $ 89,371             $152,214             $173,508
                                        ========             ========             ========             ========

Occupied %                                  78.5%                  92%                78.5%                  92%

Partnership's Ownership %                    100%                 100%                 100%                 100%

Cash generated to the
  Partnership                           $ 98,884             $128,433             $283,497             $310,224

Net income allocated to the
  Partnership                           $ 55,124             $ 89,371             $152,214             $173,508
</TABLE>

Rental income decreased for the nine month period ended September 30, 1999, as
compared to the same period in 1998, due to a decline in occupancy from 92% to
78.5%.  Operating expenses increased for the three month and nine month period
ended September 30, 1999, due to additional tenant reimbursements of
approximately $63,000 during the third quarter of 1998.

                                       11
<PAGE>

Boeing at The Atrium/Fund II and Fund III Joint Venture
-------------------------------------------------------

<TABLE>
<CAPTION>
                                            Three Months Ended                        Nine Months Ended
                                 ----------------------------------------  ----------------------------------------
                                 September 30, 1999   September 30, 1998   September 30, 1999   September 30, 1998
                                 -------------------  -------------------  -------------------  -------------------
<S>                              <C>                  <C>                  <C>                  <C>
Revenues:
  Rental income                            $367,536             $367,536           $1,102,608           $1,102,608
  Other income                                    0                    0                    0               13,280
                                           --------             --------           ----------           ----------
                                            367,536              367,536            1,102,608            1,115,888
                                           --------             --------           ----------           ----------
Expenses:
  Depreciation                              216,930              216,930              650,790              650,790
  Management and leasing
        expenses                             45,060               44,775              134,703              133,942
  Other operating expenses                  185,397              174,424              498,892              516,248
                                           --------             --------           ----------           ----------
                                            447,387              436,129            1,284,385            1,300,980
                                           --------             --------           ----------           ----------

Net (loss)                                 $(79,851)            $(68,593)          $ (181,777)          $ (185,092)
                                           ========             ========           ==========           ==========

Occupied %                                      100%                 100%                 100%                 100%

Partnership's Ownership %                      38.7%                38.7%                38.7%                38.7%

Cash distributions to the
  Partnership                              $ 65,387             $ 65,091           $  204,309           $  203,110

Net loss allocated
  to the Partnership                       $(30,903)            $(26,582)          $  (70,348)          $  (71,667)
</TABLE>

Rental income remained stable for the nine months ended September 30, 1999, as
compared to the nine months ended September 30, 1998.  Operating expenses
decreased for the nine months ended September 30, 1999, as compared to the nine
months ended September 30, 1998, due primarily to increased common area
maintenance billings to the tenants that were under estimated in 1998.  Tenants
are billed an estimated amount for the current year common area maintenance
which is then reconciled the following year and the difference billed to the
tenant.

                                       12
<PAGE>

The Brookwood Grill Property/Fund II and Fund III Joint Venture
---------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Three Months Ended                        Nine Months Ended
                                 ----------------------------------------  ----------------------------------------
                                 September 30, 1999   September 30, 1998   September 30, 1999   September 30, 1998
                                 -------------------  -------------------  -------------------  -------------------
<S>                              <C>                  <C>                  <C>                  <C>
Revenues:
  Rental income                         $56,188              $56,488             $168,563             $168,863
  Equity income of
    joint venture                        23,307               20,308               62,611               53,382
                                        -------              -------             --------             --------
                                         79,495               76,796              231,174              222,245
                                        -------              -------             --------             --------
Expenses:
  Depreciation                           13,503               13,503               40,509               40,509
  Management and leasing
        expenses                          6,704                6,250               23,387               19,775
  Other operating expenses                2,467                8,271                8,797              (10,221)
                                        -------              -------             --------             --------
                                         22,674               28,024               72,693               50,063
                                        -------              -------             --------             --------

Net income                              $56,821              $48,772             $158,481             $172,182
                                        =======              =======             ========             ========

Occupied %                                  100%                 100%                 100%                 100%

Partnership's Ownership %                  37.7%                37.7%                37.7%                37.7%

Cash distributions  to the
  Partnership                           $35,993              $35,220             $105,696             $116,145

Net income allocated to the
  Partnership                           $21,393              $17,911             $ 59,668             $ 64,375
</TABLE>

Although rental income remained relatively stable, total revenues increased for
the three month and nine month periods ended September 30, 1999, as compared to
the same periods in 1998, due to the increased equity in income from the Fund
II, III, VI, and VII Joint Venture, as the Holcomb Bridge Road property became
more profitable this year.

Operating expenses increased for the nine months ended September 30, 1999, as
compared to the same periods in 1998, due primarily to a change in the rental
agreement of billing water reimbursements to the tenant in 1998, which was
overestimated for the year.

                                       13
<PAGE>

Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Three Months  Ended              Nine Months Ended
                                                ------------------------------  ------------------------------
                                                Sept 30, 1999   Sept 30, 1998   Sept 30, 1999   Sept 30, 1998
                                                --------------  --------------  --------------  --------------
<S>                                             <C>             <C>             <C>             <C>
Revenues:
Rental income                                       $213,028        $226,233        $670,852        $648,113
                                                    --------        --------        --------        --------
Expenses:
  Depreciation                                        79,605          94,128         277,862         282,161
  Management & leasing expenses                       22,263          20,198          93,200          79,450
  Other operating expenses                            14,889          27,664          39,670          64,494
                                                    --------        --------        --------        --------
                                                     116,757         141,990         410,732         426,105
                                                    --------        --------        --------        --------
Net income                                          $ 96,271        $ 84,243        $260,120        $222,008
                                                    ========        ========        ========        ========

Occupied %                                                94%            100%             94%            100%

Partnership's Ownership %                                9.1%            9.1%            9.1%            9.1%

Cash Distribution to Fund II-Fund III Joint
  Venture                                           $ 41,093        $ 45,561        $122,693        $128,719

Net Income Allocated to the
 Fund II-Fund III Joint Venture                     $ 23,307        $ 20,308        $ 62,611        $ 53,382
</TABLE>

* The Partnership holds a 37.65% ownership in the Fund II - Fund III Joint
Venture.

Rental income has increased for the nine months ended September 30, 1999, as
compared to the nine months ended September 30, 1998, due primarily to an
underestimate of straight line rent adjustments in 1998.  Expenses decreased due
to a decrease in 1999 property tax.

                                       14
<PAGE>

The G.E. Building/Richmond-Fund III-Fund IV Joint Venture
---------------------------------------------------------


<TABLE>
<CAPTION>
                                            Three Months Ended                        Nine Months Ended
                                 ----------------------------------------  ----------------------------------------
                                 September 30, 1999   September 30, 1998   September 30, 1999   September 30, 1998
                                 -------------------  -------------------  -------------------  -------------------
<S>                              <C>                  <C>                  <C>                  <C>
Revenues:
  Rental income                          $131,857             $131,857             $395,569             $395,569
                                         --------             --------             --------             --------

Expenses:
  Depreciation                             49,053               49,056              147,165              147,162
  Management and leasing
        expenses                           10,178               10,095               30,452               30,204
  Other operating expenses                    (44)               1,918                3,314               17,470
                                         --------             --------             --------             --------
                                           59,187               61,069              180,931              194,836
                                         --------             --------             --------             --------

Net income                               $ 72,670             $ 70,788             $214,638             $200,733
                                         ========             ========             ========             ========

Occupied %                                    100%                 100%                 100%                 100%

Partnership's Ownership %                    57.2%                57.3%                57.2%                57.3%

Cash distribution to the
  Partnership                            $ 74,909             $ 72,449             $221,376             $209,192

Net income allocated to the
  Partnership                            $ 41,575             $ 40,573             $122,849             $115,053
</TABLE>

Rental income has remained constant for 1999 and 1998.  Net income and cash
distributions generated from the G.E. Building increased for the nine months
ended September 30, 1999, as compared to the same period in 1998, due to
increased expenses in the first quarter of 1998 for extraordinary roof repairs.

The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998, due to additional fundings by Wells Fund IV, which
decreased the Partnership's ownership.

G.E. has decided not to renew their lease which expires March 31, 2000.
Management has begun its efforts to lease the building to one or more tenants.
At this time, the cost for new tenant buildout and building maintenance is
anticipated to be approximately $750,000.

                                       15
<PAGE>

The Stockbridge Village Shopping Center Property/Fund III-Fund IV Joint Venture
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Three Months Ended                        Nine Months Ended
                                 ----------------------------------------  ----------------------------------------
                                 September 30, 1999   September 30, 1998   September 30, 1999   September 30, 1998
                                 -------------------  -------------------  -------------------  -------------------
<S>                              <C>                  <C>                  <C>                  <C>
Revenues:
  Rental income                          $310,697             $312,855             $957,747             $898,740
  Interest income                           2,800                2,425                9,100                6,355
                                         --------             --------             --------             --------
                                          313,497              315,280              966,847              905,095
                                         --------             --------             --------             --------

Expenses:
  Depreciation                             89,214               87,501              266,524              258,368
  Management and leasing
        expenses                           28,163               29,558               90,813               84,381
  Other operating expenses                 16,059               44,681               13,316               83,314
                                         --------             --------             --------             --------
                                          133,436              161,740              370,653              426,063
                                         --------             --------             --------             --------

Net income                               $180,061             $153,540             $596,194             $479,032
                                         ========             ========             ========             ========

Occupied %                                     95%                  97%                  95%                  97%

Partnership's Ownership %                    57.2%                57.3%                57.2%                57.3%

Cash distributed to the
  Partnership                            $154,770             $136,306             $494,973             $405,834

Net income allocated to the
  Partnership                            $103,016             $ 88,004             $341,220             $274,565
</TABLE>

Rental income increased for the nine months ended September 30, 1999, as
compared to the same periods in 1998, due to increased rental renewal rates.
Rental income decreased in the third quarter of 1999, due to two leases which
expired and were not renewed.  Other operating expenses decreased due primarily
to differences in the adjustment for prior year common area maintenance billings
to tenants and decreased expenditures for property taxes and parking lot repairs
in 1999.  Tenants are billed an estimated amount for the current year common
area maintenance which is then reconciled the following year and the difference
billed to the tenant.

The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998, due to additional fundings by the Wells Fund IV,
which decreased the Partnership's ownership in the Fund III - Fund IV Joint
Venture.

                                       16
<PAGE>

                          PART II - OTHER INFORMATION
                          ---------------------------

Item 6(b).  No reports on Form 8-K were filed during the third quarter of 1999.

                                   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:  November 10, 1999     By:  /s/ Leo F. Wells, III
                                   ---------------------
                              Leo F. Wells, III, as Individual
                              General Partner and as President,
                              Sole Director and Chief Financial
                              Officer of Wells Capital, Inc.

                                       17