<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        June 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>                                                                                  <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

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

                  Statements of Income for the Six Months
                   and Three Months
                   Ended June 30, 1999 and 1998.................................................  4

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

                  Statements of Cash Flows for the Six
                   Months Ended June 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                     June 30, 1999  December  31, 1998
                        ------                     -------------  ------------------
<S>                                                 <C>          <C>
Real estate, at cost:
 Land                                               $   576,350     $   576,350
 Building and improvements, less accumulated
 depreciation of $1,012,443 in 1999 and $931,559
 in 1998                                              2,587,773       2,668,658
                                                    -----------     -----------

  Total real estate                                   3,164,123       3,245,008
                                                    -----------     -----------

Cash and cash equivalents                               100,112         156,648
Investment in joint ventures (Note 2)                11,755,975      12,132,961
Due from affiliates                                     366,113         334,162
Accounts receivable                                      15,979           8,000
Prepaid expenses and other assets                        17,671          24,157
                                                    -----------     -----------

  Total assets                                      $15,419,973     $15,900,936
                                                    ===========     ===========

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

Liabilities:
 Accounts payable                                   $    20,717     $    13,362
 Partnership distributions payable                      398,353         458,724
 Due to affiliates                                            0           7,966
                                                    -----------     -----------

  Total liabilities                                     419,070         480,052
                                                    -----------     -----------

Partners' capital:
 Limited Partners:
  Class A - 19,635,965 units outstanding             15,000,903      15,420,884
  Class B - 2,544,540 units outstanding                       0               0
                                                    -----------     -----------

     Total partners' capital                         15,000,903      15,420,884
                                                    -----------     -----------

     Total liabilities and partners' capital        $15,419,973     $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                    Six Months Ended
                                       -----------------------------------       -----------------------------------
                                       June 30, 1999         June 30, 1998        June 30,1999         June 30, 1998
                                       -------------         -------------       -------------         --------------
<S>                                    <C>                   <C>                 <C>                   <C>
Revenues:
  Rental income                             $133,449            $139,893             $272,160            $277,658
  Equity in earnings of joint
   ventures (Note 2)                         179,282             145,157              318,307             262,420
  Interest income                                (46)                390                  (13)              1,019
                                            --------            --------             --------            --------
                                             312,685             285,440              590,454             541,097
                                            --------            --------             --------            --------

Expenses:
  Management & leasing fees                    9,778              10,983               16,211              19,766
  Operating costs-rental
   property                                   21,550              48,244               77,974              94,601
  Depreciation                                40,443              39,577               80,885              79,154
  Legal & accounting                           6,993               9,148               12,647              13,919
  Computer costs                               1,477               1,838                3,169               3,848
  Partnership administration                  13,462              13,061               31,667              21,490
                                            --------            --------             --------            --------
                                              93,703             122,851              222,553             232,778
                                            --------            --------             --------            --------
  Net income                                $218,982            $162,589             $367,901            $308,319
                                            ========            ========             ========            ========
Net income allocated to
  General Partners                          $      0            $      0             $      0            $      0

Net income allocated to Class
  A Limited Partners                        $218,982            $162,589             $367,901            $308,319

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

Net income per Class A
 Limited Partner Unit                       $    .01            $    .01             $   0.02            $   0.02

Net loss per Class B
  Limited Partner Unit                      $   0.00            $  (0.00)            $  (0.00)           $  (0.00)

Cash distribution per Class A
  Limited Partner Unit                      $   0.02            $   0.02             $   0.04            $   0.04


</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 SIX MONTHS ENDED
                                 JUNE 30, 1999





<TABLE>
<CAPTION>

                                                  Limited Partners
                                     ----------------------------------------------------
                                             Class A                      Class B               Total
                                     ---------------------------     --------------------      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      0           608,058
  Partnership distributions                   0        (1,570,879)             0      0        (1,570,879)
                                     ----------       -----------      ---------     --       -----------
BALANCE, December 31, 1998           19,635,965        15,420,884      2,544,540      0        15,420,884

  Net income                                  0           367,901              0      0           367,901
  Partnership distributions                   0          (787,882)             0      0          (787,882)
                                     ----------       -----------      ---------     --       -----------
BALANCE, June 30, 1999               19,635,965       $15,000,903      2,544,540     $0       $15,000,903
                                     ==========       ===========      =========     ==       ===========

</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>

                                                                          Six Months Ended
                                                               -------------------------------------
                                                               June 30, 1999           June 30, 1998
                                                               -------------           -------------
<S>                                                            <C>                     <C>
Cash flows from operating activities:
 Net income                                                       $367,901                 $308,319
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Equity in income of joint ventures                             (318,307)                (262,420)
   Depreciation                                                     80,885                   79,154
   Changes in assets and liabilities:
     Accounts receivable                                            (7,980)                  13,927
     Prepaids and other assets                                       6,485                  (12,316)
     Accounts payable                                                7,353                   14,426
     Due to affiliates                                              (7,966)                   4,877
                                                                  --------                 --------
      Net cash provided by operating activities                    128,371                  145,967
                                                                  --------                 --------
Cash flow from investing activities:
 Investment in joint ventures                                            0                  (79,491)
 Distributions received from joint ventures                        663,345                  604,639
                                                                  --------                 --------
      Net cash provided by investing activities                    663,345                  525,148

Cash flow from financing activities:
 Partnership distribution paid                                    (848,252)                (765,645)
                                                                  --------                 --------
Net decrease in cash and cash equivalents                          (56,536)                 (94,530)

Cash and cash equivalents, beginning of year                       156,648                  216,961
                                                                  --------                 --------
Cash and cash equivalents, end of period                          $100,112                 $122,431
                                                                  ========                 ========
</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 through equity ownership in
     the following joint ventures:  (i) The Fund II - Fund III Joint Venture,
     (ii) The Fund II, III, VI and VII Associates Joint Venture and (iii) The
     Fund III - Fund IV Joint Venture.


     As of June 30, 1999, the Partnership owned interest in the following
     properties:  (i) the Greenville Property, an office building in Greenville,
     North Carolina, owned directly by the Partnership,  (ii) Boeing at the
     Atrium, an office building in Houston, Texas, owned directly 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 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

                                       7
<PAGE>

     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 1993 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 June 30, 1999, the properties owned by the Partnership were 94%
     occupied.  Gross revenues of the Partnership were $590,454 for the six
     months ended June 30, 1999, as compared to $541,097 for the six months
     ended June 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.

     Expenses of the Partnership decreased from $232,778 for the six months
     ended June 30, 1998, to $222,553 for the six months ended June 30, 1999.
     The decrease in expenses was due primarily to common area maintenance
     billings.  Tenants are billed an estimated amount for the current year
     common area maintenance which is then reconciled the second quarter of the
     following year and the difference billed to the tenant.

                                       8
<PAGE>

     Net cash provided by operating activities decreased slightly in 1999
     compared to 1998. Net cash provided by investing activities increased from
     $525,148 in 1998, to $663,428 in 1999, due to increased distributions from
     joint ventures and no additional investments in joint ventures.
     Distributions to limited partners increased from $765,645 in 1998 to
     $843,029 in 1999. As a result cash and cash equivalents decreased for the
     six months ended June 30, 1999, as compared to the same period of 1998.

     The Partnership's distributions paid and payable through the second quarter
     of 1999 have been paid from net cash from operations and from distributions
     received from its investments in joint ventures, and the Partnership
     anticipates that distributions will continue to be paid on a quarterly
     basis from such sources.  The Partnership expects to meet liquidity
     requirements and budget demands through cash flows.

     The Partnership is unaware of any know demands, commitments, events or
     capital expenditures other than that which is required for the normal
     operations of its properties or the properties in which it owns a joint
     venture interest that will result in the Partnership's liquidity increasing
     or decreasing in any material way.


     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 June 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 are Year 2000
     compliant. At the present time, it is believed that all major non-
     information technology systems are Year 2000 compliant.  The cost to
     upgrade any noncompliance 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.

                                       9
<PAGE>

     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 June 30, 1999, the Partnership owned interests in the following
properties:

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

<TABLE>
<CAPTION>

                                        Three Months Ended                         Six Months Ended
                                  ----------------------------------       -------------------------------
                                  June 30, 1999        June 30, 1998       June 30, 1999     June 30, 1998
                                  -------------        -------------       -------------     -------------
<S>                               <C>                  <C>                  <C>              <C>
Revenues:
 Rental income                     $133,449                $139,893          $272,160          $277,658
                                   --------                --------          --------          --------
Expenses:
 Depreciation                        40,443                  39,577            80,885            79,154
 Management & leasing expenses       18,656                  19,995            35,225            36,969
 Other operating expenses            12,673                  39,232            58,960            77,398
                                   --------                --------          --------          --------
                                     71,772                  98,804           175,070           193,521
                                   --------                --------          --------          --------
Net  income                        $ 61,677                $ 41,089          $ 97,090          $ 84,137
                                   ========                ========          ========          ========
Occupied %                             78.5%                   92.0%             78.5%             92.0%

Partnership Ownership %               100.0%                  100.0%            100.0%            100.0%

Cash generated to the Partnership  $105,949                $ 90,209          $184,613          $181,791

Net income generated to the
 Partnership                       $ 61,677                $ 41,089          $ 97,090          $ 84,137

</TABLE>


Rental income decreased from 1999 to 1998, due to the decline in occupancy from
92% to 78.5%. Other operating expenses decreased significantly due to annual
common area maintenance billing in 1999 and a substantial HVAC reimbursement of
$45,000 for overtime usage in 1998.

Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.

                                       11
<PAGE>

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

<TABLE>
<CAPTION>

                                             Three Months Ended                      Six Months Ended
                                       ----------------------------------      -------------------------------
                                       June 30, 1999        June 30, 1998      June 30, 1999     June 30, 1998
                                       -------------        -------------      -------------     -------------
<S>                                    <C>                  <C>                <C>               <C>
Revenues:
 Rental income                           $367,536             $367,536           $ 735,072         $ 735,072
 Interest income                                0               13,280                   0            13,280
                                         --------             --------           ---------         ---------
                                          367,536              380,816             735,072           748,352
                                         --------             --------           ---------         ---------
Expenses:
 Depreciation                             219,755              216,930             433,860           433,860
 Management & leasing expenses             44,869               44,679              89,643            89,167
 Other operating expenses                 117,325              183,393             313,495           341,824
                                         --------             --------           ---------         ---------
                                          381,949              445,002             836,998           864,851
                                         --------             --------           ---------         ---------
Net  (loss)                              $(14,413)            $(64,186)          $(101,926)        $(116,499)
                                         ========             ========           =========         =========
Occupied %                                  100.0%               100.0%              100.0%            100.0%

Partnership Ownership %                      38.7%                38.7%               38.7%             38.7%

Cash distributed to the Partnership      $ 82,335             $ 66,712           $ 138,922         $ 138,019

Net loss allocated to the
 Partnership                             $ (5,578)            $(24,840)          $ (39,446)        $ (45,085)

</TABLE>



Rental income remained relatively stable in 1999 as compared to 1998.  The
decrease in operating expenses in 1999, as compared to 1998, are due to
increased common area maintenance billings to 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 second quarter of 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                      Six Months Ended
                                       ----------------------------------      -------------------------------
                                       June 30, 1999        June 30, 1998      June 30, 1999     June 30, 1998
                                       -------------        -------------      -------------     -------------
<S>                                    <C>                  <C>                <C>               <C>
Revenues:
 Rental income                            $56,187              $ 56,037            $112,375         $112,375
 Equity in income of joint venture          6,248                16,943              39,304           33,074
                                          -------              --------            --------         --------
                                           62,435                72,980             151,679          145,449
                                          -------              --------            --------         --------
Expenses:
 Depreciation                              13,503                13,503              27,006           27,006
 Management & leasing expenses              7,955                 6,492              16,683           13,525
 Other operating expenses                     805               (23,721)              6,330          (18,492)
                                          -------              --------            --------         --------
                                           22,263                (3,726)             50,019           22,039
                                          -------              --------            --------         --------
Net income                                $40,172              $ 76,706            $101,660         $123,410
                                          =======              ========            ========         ========
Occupied %                                  100.0%                100.0%              100.0%           100.0%

Partnership Ownership %                      37.7%                 37.7%               37.7%            37.7%

Cash distributed to the Partnership       $30,184               $46,112            $ 69,703         $ 80,925

Net income allocated to the
 Partnership                              $15,125               $28,880            $ 38,275         $ 46,464


</TABLE>

Operating expenses increased for the six months ended June 30, 1999, as compared
to the same period in 1998, due primarily to the billing of reimbursements
during the second quarter in 1998.  As a result, net income and cash
distributions to the Partnership decreased for the six months ended June 30,
1999, as compared to the same period in 1998.

Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.

                                       13
<PAGE>

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


<TABLE>
<CAPTION>

                                             Three Months Ended                      Six Months Ended
                                       ----------------------------------      -------------------------------
                                       June 30, 1999        June 30, 1998      June 30, 1999     June 30, 1998
                                       -------------        -------------      -------------     -------------
<S>                                    <C>                  <C>                <C>               <C>
Revenues:
 Rental income                           $227,761              $208,645             $457,824        $421,880
                                         --------              --------             --------        --------
Expenses:
 Depreciation                              94,128                94,129              188,257         188,033
 Management & leasing expenses             42,063                29,888               80,937          59,252
 Other operating expenses                     387                13,797               24,781          36,830
                                         --------              --------             --------        --------
                                          136,578               137,814              293,975         284,115
                                         --------              --------             --------        --------
Net income                               $ 91,183              $ 70,831             $163,849        $137,765
                                         ========              ========             ========        ========
Occupied %                                     94%                  100%                  94%          100.0%

Partnership Ownership %                       9.1%                11.57%                 9.1%          11.57%

Cash distributed to the Fund II -
    Fund III Joint Venture               $ 46,181              $ 41,990             $ 81,600        $ 83,158

Net income allocated to the
 Fund II - Fund III Joint Venture        $  6,248              $ 16,943             $ 39,304        $ 33,074


</TABLE>


Rental income has increased for the six months ended June 30, 1999, as compared
to the same period in 1998, due primarily to a underestimate of straight line
rent adjustments in 1998.  Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the second quarter
of the following year and the difference billed to the tenant.

                                       14
<PAGE>

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



<TABLE>
<CAPTION>
                                             Three Months Ended                      Six Months Ended
                                       ----------------------------------      -------------------------------
                                       June 30, 1999        June 30, 1998      June 30, 1999     June 30, 1998
                                       -------------        -------------      -------------     -------------
<S>                                    <C>                  <C>                <C>               <C>
Revenues:
 Rental income                           $131,856              $131,856           $263,712          $263,712
                                         --------              --------           --------          --------
Expenses:
 Depreciation                              49,053                49,053             98,112            98,106
 Management & leasing expenses             10,179                10,095             20,274            20,109
 Other operating expenses                   2,113                    97              3,358            15,552
                                         --------              --------           --------          --------
                                           61,345                59,245            121,744           133,767
                                         --------              --------           --------          --------

Net income                               $ 70,511              $ 72,611           $141,968          $129,945
                                         ========              ========           ========          ========

Occupied %                                  100.0%                100.0%             100.0%            100.0%

Partnership Ownership %                      57.2%                 57.3%              57.2%             57.3%

Cash distributed to the Partnership      $ 73,674              $ 73,494           $146,467          $136,743

Net income allocated to the
 Partnership                             $ 40,341              $ 41,618           $ 81,274          $ 74,480

</TABLE>

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

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 in the Fund III - Fund IV Joint Venture.

                                       15
<PAGE>

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



<TABLE>
<CAPTION>

                                             Three Months Ended                      Six Months Ended
                                       ----------------------------------      -------------------------------
                                       June 30, 1999        June 30, 1998      June 30, 1999     June 30, 1998
                                       -------------        -------------      -------------     -------------
<S>                                    <C>                  <C>                <C>               <C>
Revenues:
 Rental income                           $321,880               $300,521            $647,050        $585,885
 Interest income                            2,800                  1,965               6,300           3,930
                                         --------               --------            --------        --------
                                          324,680                302,486             653,350         589,815
                                         --------               --------            --------        --------
Expenses:
 Depreciation                              89,126                 86,120             177,310         170,867
 Management & leasing expenses             29,466                 26,360              62,650          54,823
 Other operating expenses                 (20,081)                16,925              (2,743)         38,633
                                         --------               --------            --------        --------
                                           98,511                129,405             237,217         264,323
                                         --------               --------            --------        --------

Net income                               $226,169               $173,081            $416,133        $325,492
                                         ========               ========            ========        ========
Occupied %                                    100%                    97%                100%             97%

Partnership Ownership %                      57.2%                  57.3%               57.2%           57.3%

Cash distributed to the Partnership      $179,920               $146,046            $340,203        $269,528

Net income allocated to the
 Partnership                             $129,395               $ 99,175            $238,204        $186,561

</TABLE>



Rental income increased for the six months ended June 30, 1999, as compared to
the same period in 1998, due to increased rental renewal rates and increased
occupancy.  Other operating expenses decreased due primarily to differences in
the annual adjustment for prior year common area maintenance billings to tenants
and decreased expenditures for property taxes and parking lot repairs.  Tenants
are billed an estimated amount for the current year common area maintenance
which is then reconciled the second quarter of 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 second 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:  August 10, 1999       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.

                                       17