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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



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



For the quarterly period ended September 30, 2005 or



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



For the transition period from
 to



Commission file number 0-17876



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WELLS REAL ESTATE FUND II-OW

(Exact name of registrant as specified in its
charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Georgia                                                        |  | 58-1754703                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy.,Norcross, Georgia                       |  | 30092-3365                             
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         



N/A

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



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

Yes  x    No ̈



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

Yes ̈No  x



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

Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund II-OW (the
Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in
particular, statements about our plans, strategies and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will,
expect, intend, anticipate, estimate, believe, continue, or other similar words. Specifically, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date that this report is filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of
any such forward-looking statements. Actual results could differ materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.



Any such forward-looking statements
are subject to known and unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are
difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations; provide
distributions to limited partners; and maintain the value of our real estate properties, may be significantly hindered. Following are some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to
differ materially from those presented in certain forward-looking statements:



General economic risks



| |  |  | Adverse changes in general or local economic conditions;
| | - |  | --------------------------------------------------------



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



Enterprise risks



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



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



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



Real estate risks



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



| |  |  | Supply of or demand for similar or competing rentable space, which may adversely impact retaining or obtaining new tenants upon lease expiration at acceptable rental amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | Our ability to secure adequate insurance at reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions at our properties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to fund foreseen and unforeseen capital expenditures, including those related to tenant build-out projects, tenant improvements, and lease-up costs, out of operating
cash flow or net property sale proceeds;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any and all closing conditions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



Other operational risks



| |  |  | Our reliance on Wells Management Company, Inc. (Wells Management) or third parties to manage our properties;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Increases in our administrative operating expenses, including increased expenses associated with operating as a public company in the current regulatory environment;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to comply with governmental, tax, real estate, environmental, and zoning laws or regulations and funding the related costs of compliance; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



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



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WELLS REAL ESTATE FUND II-OW





TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                               |  |         
|-------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                               |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                              
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                          |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsSeptember 30, 2005 (unaudited) and December 31, 2004                                                           |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Nine Months Ended September 30, 2005 (unaudited) and 2004 (unaudited)       |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2004 and the Nine Months Ended September 30, 2005 (unaudited) |  | 8       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Nine Months Ended September 30, 2005 (unaudited) and 2004 (unaudited)                        |  | 9       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                           |  | 10      
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 14      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                    |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                       |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                              
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                             |  | 22      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                   |  | 22      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                               |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                           |  | 22      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                             |  | 22      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                      |  | 22      



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PART I.    FINANCIAL STATEMENTS



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



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



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WELLS REAL ESTATE FUND II-OW





BALANCE SHEETS



ASSETS



|                                           |  |                                |         |                  |   |          
|------------------------------------------ |  | ------------------------------ | ------- | ---------------- | - | ---------
|                                           |  | September 30, 2005 (unaudited) |         | December 31,2004
|Investment in Fund II and Fund II-OW       |  | $                              | 592,607 |                  | $ | 599,836  
|Cash and cash equivalents                  |  |                                | 5,342   |                  |   | 5,342    
|Due from Fund II and Fund II-OW            |  |                                | 394,384 |                  |   | 399,875  
|                                           |  |                                |         |                  |   |          
|Total assets                               |  | $                              | 992,333 |                  | $ | 1,005,053
|                                           |  |                                |         |                  |   |          
|                                          
|LIABILITIES AND PARTNERS CAPITAL         
|                                           |  |                               
|PARTNERS CAPITAL:                         |  |                                |         |                  |   |          
|Limited partners:                          |  |                                |         |                  |   |          
|Class A6,062 units issued and outstanding |  | $                              | 985,214 |                  | $ | 974,710  
|Class B1,626 units issued and outstanding |  |                                | 7,119   |                  |   | 30,343   
|General partners                           |  |                                | 0       |                  |   | 0        
|                                           |  |                                |         |                  |   |          
|Total partners capital                    |  |                                | 992,333 |                  |   | 1,005,053
|                                           |  |                                |         |                  |   |          
|Total liabilities and partners capital    |  | $                              | 992,333 |                  | $ | 1,005,053
|                                           |  |                                |         |                  |   |          



See accompanying notes.



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WELLS REAL ESTATE FUND II-OW





STATEMENTS OF OPERATIONS

(unaudited)



|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|------------------------------------------------- |  | ------------------------------- | ------ | ------------------------------ | ---- | - | ------ |  | - | ------- | - |  | - | ------- | -
|                                                  |  | Three Months EndedSeptember 30, |        | Nine Months EndedSeptember 30, |     
|                                                  |  | 2005                            |        |                                | 2004 |   | 2005   |  |   | 2004    |  
|EQUITY IN INCOME (LOSS) OF FUND II AND FUND II-OW |  | $                               | (8,072 | )                              |      | $ | 37,974 |  | $ | (12,720 | ) |  | $ | 17,851  |  
|INTEREST AND OTHER INCOME                         |  |                                 | 0      |                                |      |   | 0      |  |   | 0       |   |  |   | 250     |  
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|NET INCOME (LOSS)                                 |  | $                               | (8,072 | )                              |      | $ | 37,974 |  | $ | (12,720 | ) |  | $ | 18,101  |  
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|CLASS A                                           |  | $                               | 0      |                                |      | $ | 0      |  | $ | 10,504  |   |  | $ | (19,873 | )
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|CLASS B                                           |  | $                               | (8,072 | )                              |      | $ | 37,974 |  | $ | (23,224 | ) |  | $ | 37,974  |  
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:       |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|CLASS A                                           |  | $                               | 0.00   |                                |      | $ | 0.00   |  | $ | 1.73    |   |  | $ | (3.28   | )
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  
|CLASS B                                           |  | $                               | (4.96  | )                              |      | $ | 23.35  |  | $ | (14.28  | ) |  | $ | 23.35   |  
|                                                  |  |                                 |        |                                |      |   |        |  |   |         |   |  |   |         |  



See accompanying notes.



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WELLS REAL ESTATE FUND II-OW





STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND NINE MONTHS ENDED SEPTEMBER 30, 2005 (unaudited)



|                            |  |                  |  |         |                  |   |                         |       |         |   |         |   |  |   |   |  |   |           |  
|--------------------------- |  | ---------------- |  | ------- | ---------------- | - | ----------------------- | ----- | ------- | - | ------- | - |  | - | - |  | - | --------- | -
|                            |  | Limited Partners |  |         | General Partners |   | Total Partners Capital |      
|                            |  | Class A          |  |         | Class B          |   |                         |      
|                            |  | Units            |  | Amounts |                  |   | Units                   |       | Amounts |   |         |  
|BALANCE, December 31, 2003  |  | 6,062            |  | $       | 992,671          |   |                         | 1,626 |         | $ | 0       |   |  | $ | 0 |  | $ | 992,671   |  
|                            |  |                  |  |         |                  |  
|Net income (loss)           |  | 0                |  |         | (17,961          | ) |                         | 0     |         |   | 30,343  |   |  |   | 0 |  |   | 12,382    |  
|                            |  |                  |  |         |                  |   |                         |       |         |   |         |   |  |   |   |  |   |           |  
|BALANCE, December 31, 2004  |  | 6,062            |  |         | 974,710          |   |                         | 1,626 |         |   | 30,343  |   |  |   | 0 |  |   | 1,005,053 |  
|                            |  |                  |  |         |                  |  
|Net income (loss)           |  | 0                |  |         | 10,504           |   |                         | 0     |         |   | (23,224 | ) |  |   | 0 |  |   | (12,720   | )
|                            |  |                  |  |         |                  |   |                         |       |         |   |         |   |  |   |   |  |   |           |  
|BALANCE, September 30, 2005 |  | 6,062            |  | $       | 985,214          |   |                         | 1,626 |         | $ | 7,119   |   |  | $ | 0 |  | $ | 992,333   |  
|                            |  |                  |  |         |                  |   |                         |       |         |   |         |   |  |   |   |  |   |           |  



See accompanying notes.



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WELLS REAL ESTATE FUND II-OW





STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                                   |  |                                |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                                   |  | Nine Months EndedSeptember 30, |        
|                                                                                                   |  | 2005                           |         |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |  |                                |         |   |      |   |         |  
|Net income (loss)                                                                                  |  | $                              | (12,720 | ) |      | $ | 18,101  |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                                |         |   |      |   |         |  
|Equity in (income) loss of Fund II and Fund II-OW                                                  |  |                                | 12,720  |   |      |   | (17,851 | )
|                                                                                                   |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                                          |  |                                | 0       |   |      |   | 250     |  
|                                                                                                   |  |                                |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, beginning of period                                                     |  |                                | 5,342   |   |      |   | 6,161   |  
|                                                                                                   |  |                                |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                                           |  | $                              | 5,342   |   |      | $ | 6,411   |  
|                                                                                                   |  |                                |         |   |      |   |         |  



See accompanying notes.



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WELLS REAL ESTATE FUND II-OW





CONDENSED NOTES TO FINANCIAL STATEMENTS



SEPTEMBER 30, 2005 (unaudited)



|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------



Wells Real Estate Fund II-OW (the Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, a Georgia corporation,
serving as its general partners (collectively, the General Partners). The Partnership was formed on October 13, 1987 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing
income-producing properties for investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B Units. Limited partners may vote to, among other things, (a) amend the partnership agreement, subject to
certain limitations, (b) change the business purpose or investment objectives of the Partnership, and (c) remove a general partner. A majority vote on any of the above-described matters will bind the Partnership without the concurrence of the
General Partners. Each limited partnership unit generally has equal voting rights regardless of class.



On November 6, 1987, the Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated
its offering on September 7, 1988, upon receiving gross offering proceeds of $1,922,000 for 7,688 Class A and Class B limited partner units at $250 per unit.



The Partnership owns interests in all of its real estate assets through a joint venture, Fund II and Fund II-OW, which owns interests in real estate assets both directly
and through joint ventures with other entities affiliated with the General Partners. During the periods presented, the Partnership owned interests in the following joint ventures (the Joint Ventures) and properties:



|                                                                      |  |                                                                                                     |  |                                                                                                                                                    
|--------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                         |  | Joint Venture Partners                                                                              |  | Properties                                                                                                                                         
|Fund II and Fund II-OW (Fund II-IIOW Associates)                    |  |    Wells Real Estate Fund II    Wells Real Estate Fund II-OW                                      |  | 1. Louis Rose Building A two-story office building located in Charlotte, North Carolina                                                            
|Fund I and Fund II Tucker (Fund I-II Tucker Associates)             |  |    Wells Real Estate Fund I    Fund II-IIOW Associates                                            |  | 2. Heritage Place A commercial office complex located in Tucker, Georgia                                                                           
|Fund II and Fund III Associates (Fund II-III Associates)            |  |    Fund II-IIOW Associates    Wells Real Estate Fund III, L.P.                                    |  | 3. Boeing at the Atrium A four-story office building located in Houston, Texas 4. Brookwood Grill(1) A restaurant located in Fulton County,
Georgia
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates) |  |    Fund II-III Associates    Wells Real Estate Fund VI, L.P.    Wells Real Estate Fund VII, L.P. |  | 5. Holcomb Bridge Property(1) An office/retail center located in
Roswell, Georgia                                                                  



| | (1) | These properties were sold in July 2004.
| | --- | ----------------------------------------



Wells Real Estate Fund II, Wells Real Estate Fund III, L.P., Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII, L.P. are affiliated with the Partnership
through one or more common general partners. Each of



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the properties described above was acquired on an all-cash basis. For further information regarding the Joint Ventures and forgoing properties, refer to the
Partnerships Form 10-K for the year ended December 31, 2004.



On July 1,
2004, Fund II-III Associates and Fund II-III-VI-VII Associates, collectively, sold Brookwood Grill and the Holcomb Bridge Property to an unrelated third party for a gross sale price of $9,500,000. As a result of the sale of Brookwood Grill, the
Partnership received net sale proceeds of approximately $78,000 and was allocated a gain of approximately $26,000. As a result of the sale of the Holcomb Bridge Property, the Partnership received net sale proceeds of approximately $54,000 and was
allocated a gain of approximately $16,000.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



Basis of Presentation



The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the instructions to Form 10-Q and Article 10 of
Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of
the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and consistently present the results for such periods. Results for interim
periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2004.



Investment in Joint Ventures



The Partnership does not have control over the operations of the Joint Ventures; however, it
does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments.
Accordingly, the Partnerships investments in the Joint Ventures are recorded using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income
(loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net
cash from operations, if available, are distributed to the joint venture partners on a quarterly basis.



The Partnership adopted FIN 46(R) effective March 31, 2004. The Partnership owns interests in certain unconsolidated joint venture partnerships (see Note 4). The joint venture partners of the Partnerships
unconsolidated joint ventures in which the Partnership owns an interest have disproportionate voting rights for certain major decisions relative to their obligations to absorb expected losses and rights to receive residual returns of such ventures.
However, management has evaluated such joint ventures and has determined that they are not variable interest entities under the provisions of FIN 46(R) because not substantially all of the activities of the joint ventures are conducted on behalf of
a joint venture partner with disproportionately fewer voting rights. Management has also determined the joint venture partners are not related parties, as defined in FIN 46(R) and SFAS No. 57. Accordingly, the adoption of FIN 46(R) did not result in
the consolidation of any previously unconsolidated entities.



Distribution
of Net Cash from Operations



Net cash from operations, if available, is
generally distributed to limited partners quarterly. In accordance with the partnership agreement, such distributions are paid first to each limited partner holding Class A Units until he has received an 8% per annum return on his adjusted capital
contributions, as defined. Net cash from operations



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is then distributed to each limited partner holding Class B Units until he has received an 8% per annum return on his adjusted capital contributions, as
defined. Any excess net cash from operations would then be distributed to the General Partners until they have received 10% of the total distributions for the year. Thereafter, net cash from operations is distributed 90% to limited partners and 10%
to the General Partners.



Allocations of Net Income, Net Loss, and Gain on
Sale



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



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



Gains on the sale or exchange of the Partnerships properties will be allocated as follows: (a) first, to partners having negative capital accounts, if any, until
all negative capital accounts have been restored to zero; (b) then to the limited partners in proportion to and to the extent of the excess of (i) each limited partners adjusted capital contribution, plus a cumulative 12% per annum return on
his adjusted capital contribution, less the sum of all prior distributions of cash flow from operations previously made to such limited partner, over (ii) such limited partners capital account balance as of the sale date, subject to the
requirement to initially allocate gain on sale to limited partners holding Class B Units until they have been allocated an amount equal to the net from operations previously received by limited partners holding Class A Units on a per-unit basis; (c)
then to the General Partners in proportion to and to the extent of the excess of (i) each general partners adjusted capital contribution, over (ii) such general partners capital account balance as of the sale date; and (d) thereafter 85%
to the limited partners and 15% to the General Partners.



|3. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------



Management and Leasing Fees



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the management and leasing of the
Partnerships properties owned through Fund II-IIOW Associates equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time lease-up of newly constructed
properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in the case of commercial properties leased on a
long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. Management and leasing fees are paid by the Joint Ventures and,
accordingly, included in equity in income (loss) of Fund II-IIOW Associates in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Fund II-IIOW
Associates is $1,037 and $661 for the three months ended September 30, 2005 and 2004, respectively, and $3,009 and $4,258 for the nine months ended September 30, 2005 and 2004, respectively.



Administration Reimbursements



Wells Capital, one of the General Partners, and Wells Management perform certain
administrative services for the Partnership and Fund II-IIOW Associates, relating to accounting and other partnership administration, and incur the related expenses. Such expenses are allocated among various other entities affiliated with the
General Partners



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##### Table of Contents

based on time spent on each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation
of such expenses. The administrative charges related to the Partnership are recorded by Fund II-IIOW Associates and, therefore, included in equity loss of Fund II-IIOW Associates in the accompanying statements of operations. Fund II-IIOW Associates
reimbursed Wells Capital and Wells Management $2,837 and $3,229 for the three months ended September 30, 2005 and 2004, respectively, and $9,967 and $9,752 for the nine months ended September 30, 2005 and 2004, respectively, on behalf of the
Partnership.



|4. | INVESTMENT IN FUND II-IIOW ASSOCIATES
|-- | -------------------------------------



Summary of OperationsFund II-IIOW Associates



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



|                                |  |                                 |        |      |                                |          |                                |  |   |         |     |      |   |         |  |   |        |  |   |          |   |  |   |         |    
|------------------------------- |  | ------------------------------- | ------ | ---- | ------------------------------ | -------- | ------------------------------ |  | - | ------- | --- | ---- | - | ------- |  | - | ------ |  | - | -------- | - |  | - | ------- | ---
|Total Revenues                  |  | Net Income (Loss)               |        |      | Total Revenues                 |          | Net Income (Loss)              | 
|Three Months EndedSeptember 30, |  | Three Months EndedSeptember 30, |        |      | Nine Months EndedSeptember 30, |          | Nine Months EndedSeptember 30, | 
|2005                            |  | 2004                            |        | 2005 |                                |          | 2004                           |  |   | 2005    |     | 2004 |   | 2005    |  |   | 2004   | 
|$52,886                         |  | $                               | 13,203 |      | $                              | (152,013 | )                              |  | $ | 697,316 | (1) |      | $ | 131,391 |  | $ | 34,790 |  | $ | (239,543 | ) |  | $ | 318,355 | (1)
|                                |  |                                 |        |      |                                |          |                                |  |   |         |     |      |   |         |  |   |        |  |   |          |   |  |   |         |    



| | (1) | Effective July 1, 2004, the Fund II-IIOW Associates extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which
resulted in an increase to Fund II-IIOW Associates net income for the three months and nine months ended September 30, 2004 of $56,211.Management believes that this change more appropriately reflects the estimated useful lives of real
estate assets and is consistent with prevailing industry practice.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Summary of OperationsFund II-IIOW Associates Investments



Condensed financial information for the Joint Ventures in which the Partnership holds interests through its ownership in Fund II-IIOW Associates for the three months and nine months ended September 30, 2005 and 2004, respectively, is
presented below:



|                            |  |                                 |           |                                          |   |           |                                            |   |         |                                 |  |      |         |   |      |   |        |      |  |   |         |     |  |   |         |   |  |   |           |     
|--------------------------- |  | ------------------------------- | --------- | ---------------------------------------- | - | --------- | ------------------------------------------ | - | ------- | ------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------- | --- |  | - | ------- | - |  | - | --------- | ----
|                            |  | Total Revenues                  |           | Income (Loss) From Continuing Operations |   |           | Income (Loss) From Discontinued Operations |   |         | Net Income (Loss)               | 
|                            |  | Three Months EndedSeptember 30, |           | Three Months EndedSeptember 30,          |   |           | Three Months EndedSeptember 30,            |   |         | Three Months EndedSeptember 30, | 
|                            |  | 2005                            |           | 2004                                     |   | 2005      |                                            |   | 2004    |                                 |  | 2005 |         |   | 2004 |   |        | 2005 |  |   | 2004    |    
|Fund I-II Tucker Associates |  | $                               | 174,945   |                                          | $ | 183,593   |                                            | $ | (37,175 | )                               |  | $    | 35,136  |   |      | $ | 0      |      |  | $ | 0       |     |  | $ | (37,175 | ) |  | $ | 35,136    | (1) 
|Fund II-III Associates      |  |                                 | 429,291   |                                          |   | 441,564   |                                            |   | 49,990  |                                 |  |      | 537,915 |   |      |   | (8,981 | )    |  |   | 769,099 | (2) |  |   | 41,009  |   |  |   | 1,307,014 | (2) 
|                            |  |                                 |           |                                          |   |           |                                            |   |         |                                 |  |      |         |   |      |   |        |      |  |   |         |     |  |   |         |   |  |   |           |     
|                            |  | $                               | 604,236   |                                          | $ | 625,157   |                                            | $ | 12,815  |                                 |  | $    | 573,051 |   |      | $ | (8,981 | )    |  | $ | 769,099 |     |  | $ | 3,834   |   |  | $ | 1,342,150 |     
|                            |  |                                 |           |                                          |   |           |                                            |   |         |                                 |  |      |         |   |      |   |        |      |  |   |         |     |  |   |         |   |  |   |           |     
|                            |  |                                 |           |                                         
|                            |  | Total Revenues                  |           | Income (Loss) From Continuing Operations |   |           | Income (Loss) From Discontinued Operations |   |         | Net Income (Loss)               | 
|                            |  | Nine Months EndedSeptember 30,  |           | Nine Months EndedSeptember 30,           |   |           | Nine Months EndedSeptember 30,             |   |         | Nine Months EndedSeptember 30,  | 
|                            |  | 2005                            |           | 2004                                     |   | 2005      |                                            |   | 2004    |                                 |  | 2005 |         |   | 2004 |   |        | 2005 |  |   | 2004    |    
|Fund I-II Tucker Associates |  | $                               | 537,532   |                                          | $ | 537,166   |                                            | $ | (21,073 | )                               |  | $    | (18,731 | ) |      | $ | 0      |      |  | $ | 0       |     |  | $ | (21,073 | ) |  | $ | (18,731   | )(1)
|Fund II-III Associates      |  |                                 | 1,376,588 |                                          |   | 1,333,772 |                                            |   | 317,786 |                                 |  |      | 564,175 |   |      |   | (6,698 | )    |  |   | 904,880 | (2) |  |   | 311,088 |   |  |   | 1,469,055 |     
|                            |  |                                 |           |                                          |   |           |                                            |   |         |                                 |  |      |         |   |      |   |        |      |  |   |         |     |  |   |         |   |  |   |           |     
|                            |  | $                               | 1,914,120 |                                          | $ | 1,870,938 |                                            | $ | 296,713 |                                 |  | $    | 545,444 |   |      | $ | (6,698 | )    |  | $ | 904,880 |     |  | $ | 290,015 |   |  | $ | 1,450,324 |     
|                            |  |                                 |           |                                          |   |           |                                            |   |         |                                 |  |      |         |   |      |   |        |      |  |   |         |     |  |   |         |   |  |   |           |     



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##### Table of Contents

| | (1) | Effective July 1, 2004, Fund I-II Tucker Associates and Fund II-III Associates extended
the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase (decrease) to net income (loss) for the three months and nine months ended September 30, 2004 of $24,623 and $72,131,
respectively. Management believes that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes a gain of approximately $771,000 recognized on the sale of Brookwood Grill, of which approximately $26,000 was attributable to the Partnership and has
been allocated to the Class A and Class B partners pursuant to the provisions of the partnership agreement (Note 2).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Summary of OperationsFund II-III Associates Investments



Condensed financial information for the joint venture in which the Partnership holds an interest through its ownership in Fund II-III Associates for the three months and
nine months ended September 30, 2005 and 2004, respectively, is presented below:



|                              |  |                                 |   |                                 |   |      |                                    |   |        |                                 |  |      |         |      |  |   |       |  |      |           |     |  |   |       |  |   |          
|----------------------------- |  | ------------------------------- | - | ------------------------------- | - | ---- | ---------------------------------- | - | ------ | ------------------------------- |  | ---- | ------- | ---- |  | - | ----- |  | ---- | --------- | --- |  | - | ----- |  | - | ---------
|                              |  | Total Revenues                  |   | Loss FromContinuing Operations  |   |      | Income FromDiscontinued Operations |   |        | Net Income                     
|                              |  | Three Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |   |      | Three Months EndedSeptember 30,    |   |        | Three Months EndedSeptember 30,
|                              |  | 2005                            |   | 2004                            |   | 2005 |                                    |   | 2004   |                                 |  | 2005 |         | 2004 |  |   | 2005  |  | 2003
|Fund II-III-VI-VII Associates |  | $                               | 0 |                                 | $ | 0    |                                    | $ | (1,720 | )                               |  | $    | (10,708 | )    |  | $ | 3,668 |  | $    | 1,861,538 | (1) |  | $ | 1,948 |  | $ | 1,850,830
|                              |  |                                 |   |                                 |   |      |                                    |   |        |                                 |  |      |         |      |  |   |       |  |      |           |     |  |   |       |  |   |          



|                              |  |                                |   |                                |   |      |                                    |   |        |                                |  |      |         |      |  |   |        |  |      |           |     |  |   |        |  |   |          
|----------------------------- |  | ------------------------------ | - | ------------------------------ | - | ---- | ---------------------------------- | - | ------ | ------------------------------ |  | ---- | ------- | ---- |  | - | ------ |  | ---- | --------- | --- |  | - | ------ |  | - | ---------
|                              |  | Total Revenues                 |   | Loss FromContinuing Operations |   |      | Income FromDiscontinued Operations |   |        | Net Income                    
|                              |  | Nine Months EndedSeptember 30, |   | Nine Months EndedSeptember 30, |   |      | Nine Months EndedSeptember 30,     |   |        | Nine Months EndedSeptember 30,
|                              |  | 2005                           |   | 2004                           |   | 2005 |                                    |   | 2004   |                                |  | 2005 |         | 2004 |  |   | 2005   |  | 2004
|Fund II-III-VI-VII Associates |  | $                              | 0 |                                | $ | 0    |                                    | $ | (9,928 | )                              |  | $    | (18,865 | )    |  | $ | 93,697 |  | $    | 2,077,417 | (1) |  | $ | 83,769 |  | $ | 2,058,552
|                              |  |                                |   |                                |   |      |                                    |   |        |                                |  |      |         |      |  |   |        |  |      |           |     |  |   |        |  |   |          

| | (1) | Includes a total gain of approximately $1,869,000 recognized on the sale of the Holcomb
Bridge Property, of which approximately $15,000 was attributable to the Partnership and has been allocated to the Class A and Class B partners pursuant to the provisions of the partnership agreement(Note 2).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 and notes thereto. See also Cautionary Note Regarding
Forward-Looking Statements preceding Part I, as well as the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the
year ended December 31, 2004.



Overview



Management believes that the Partnership typically operates through the following five key
life cycle phases. The duration of each phase is dependent upon various economic, industry, market, and other internal/external factors. Some overlap naturally exists in the transition from one phase to the next.



| |  |  | Fundraising phase
| | - |  | -----------------

The period during which the
Partnership is raising capital through the sale and issuance of limited partner units to the public;



| |  |  | Investing phase
| | - |  | ---------------

The period during which the
Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets;



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##### Table of Contents

| |  |  | Holding phase
| | - |  | -------------

The period during which real estate
assets are owned and operated by the Partnership during the initial lease terms of the tenants. Strategic dispositions could occur during this phase in order to capitalize on market conditions;



| |  |  | Positioning-for-sale phase
| | - |  | --------------------------

The period during which
the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the
real estate assets, evaluate various options for disposition, and market the real estate assets for sale; and



| |  |  | Disposition-and-liquidation phase
| | - |  | ---------------------------------

The period
during which the Partnership sells its real estate investments, distributes net sale proceeds to the partners, liquidates, and terminates the Partnership.



Portfolio Overview



We have moved from the positioning-for-sale phase into the disposition-and-liquidation phase of our life cycle. We have now sold three assets and a portion of Heritage Place out of the six properties in which we
originally invested. Our focus on the remaining assets involves leasing and marketing efforts that we believe will result in the best disposition pricing for our limited partners. We continue to aggressively pursue leasing opportunities that will
increase occupancy at Heritage Place and the Louis Rose Building.



With a
number of properties sold, our General Partners are currently reserving operating distributions to limited partners and net sale proceeds, held by Fund II-IIOW Associates, to fund the re-leasing costs anticipated for the Louis Rose Building and
Heritage Place. Further, the General Partners anticipate continuing to reserve operating distributions until the Louis Rose Building and Heritage Place are fully re-leased. Once the outcome of the re-leasing efforts is known, the General Partners
will evaluate if distributions of net sale proceeds would be appropriate.



Property Summary



Information related to the properties owned,
or previously owned, by the Joint Ventures follows:



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



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



| |  |  | Brookwood Grill was sold on July 1, 2004.
| | - |  | -----------------------------------------



| |  |  | The Holcomb Bridge Property was sold on July 1, 2004.
| | - |  | -----------------------------------------------------



| |  |  | The Louis Rose Building is currently vacant. We are aggressively working on re-leasing this property.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Boeing at the Atrium property is currently 100% occupied by the Boeing/Shuttle Division of The Boeing Company. The existing lease extends through March 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of September 30, 2005, the property sales described above generated an aggregate of approximately $453,000 in net sale proceeds allocated to the Partnership, of which
approximately $79,000 has been utilized, and approximately $374,000 is currently being reserved to fund operating costs and the Partnerships pro-rata share of anticipated re-leasing costs and capital improvements at the Louis Rose Building,
Boeing at the Atrium, and Heritage Place.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we move further
into the disposition-and-liquidation phase, our attention will shift to locating suitable buyers and negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners and minimize contingencies and our
post-closing involvement with the buyer.



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##### Table of Contents

Results of Operations



Equity in Income (Loss) of Fund II and Fund II-OW



Equity in income (loss) of Fund II and Fund II-OW was $(8,072) and $37,974 for the three months ended September 30, 2005 and 2004, respectively, and $(12,720) and $17,851
for the nine months ended September 30, 2005 and 2004, respectively. The 2005 decreases, as compared to 2004, are primarily attributable to (i) gains recognized from the sale of Brookwood Grill and the Holcomb Bridge Property in 2004, (ii) forgone
operating income resulting from the sale of the two aforementioned properties, (iii) an increase in administrative expenses recorded by Fund II-IIOW Associates related to increased reporting and regulatory requirements, (iv) a decrease in rental
income and tenant reimbursements as a result of the decrease in occupancy at Heritage Place, partially offset by (v) a decline in depreciation expense as a result of changing the useful life for all buildings owned through the Joint Ventures from 25
years to 40 years effective July 1, 2004, and (vi) an increase in interest income as a result of Fund II-IIOW Associates holding additional net sale proceeds from the sales of the two aforementioned properties.



We expect equity in income of Joint Ventures to decrease on a going-forward basis as a result
of the forgone operating income resulting from the sale of the two aforementioned properties and additional increases in our administrative expenses in future periods related to compliance with reporting and regulatory requirements.



Liquidity and Capital Resources



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



Short-Term Liquidity



During the nine months ended September 30, 2005, we generated net operating cash flows of approximately $0 as compared to approximately $250
for the nine months ended September 30, 2004, which is comprised entirely of interest income. Fund II-IIOW Associates continues to reserve operating cash flow received from its investments in the Joint Ventures and otherwise payable to the
Partnership in order to provide funding for the costs anticipated in connection with re-leasing the Louis Rose Building and Heritage Place. Accordingly, no operating distributions were paid to limited partners during the nine months ended September
30, 2005 or 2004. The General Partners anticipate continuing to reserve operating distributions to limited partners until the Louis Rose Building and Heritage Place are fully re-leased. Future operating distributions to limited partners will be
largely dependent upon the amount of cash generated from the Joint Ventures, our expectations of future cash flows, and determination of near-term cash needs for tenant re-leasing costs and other capital improvements for properties owned by the
Joint Ventures.



During the remainder of 2005, we anticipate that we will be
able to fund our proportionate share of the capital expenditures noted above.



Long-Term Liquidity



We expect that our future sources of
capital will be primarily derived from net proceeds generated from the selective and strategic sale of properties and operating cash flows generated from the Joint Ventures. Our future



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##### Table of Contents

long-term liquidity requirements will include, but not be limited to, funding tenant improvements, renovations, expansions, and other significant capital
improvements necessary for properties owned through the Joint Ventures. Specifically, we anticipate funding the Partnerships proportionate share of the costs required to re-lease the Louis Rose Building and increase the occupancy of Heritage
Place. Future cash flows from operating activities will be primarily affected by distributions received from the Joint Ventures, which are dependent upon the net operating income generated by the Joint Ventures properties, less reserves for
known capital expenditures.



We have encountered problems re-leasing the Louis
Rose Building primarily due to the softening of the Charlotte office market and related Northeast submarket during the period following the expiration of First Unions lease on April 30, 2001. The Northeast submarket of Charlotte continues to
face challenges as the result of new office product deliveries, offering attractive rental rates and other concessions to potential tenants. As of September 30, 2005, vacancy in the Northeast submarket is 30.3%, compared to the vacancy rate for
Charlotte as a whole of 15.8%. Accordingly, there is no guarantee when the Louis Rose Building will be re-leased or of the level of rental rates which may be achieved in connection therewith.



Capital Resources



The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties and has
invested all of the partners original capital contributions. Thus, it is unlikely that we will acquire interests in any additional properties. Historically, our investment strategy has generally involved acquiring properties on an all-cash
basis that are pre-leased to creditworthy tenants through the Joint Ventures with affiliated partnerships.



The Joint Ventures fund capital expenditures primarily related to building improvements for the purpose of maintaining the quality of our properties, and tenant improvements for the purpose of readying our properties
for re-leasing. As leases expire, we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those
funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates.



Operating cash flows, if available, are generally distributed from the Joint Ventures to the
Partnership during the second month following each calendar quarter-end. However, the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management
policy typically includes first utilizing current period operating cash flows until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event that current and prior period accumulated
operating cash flows are insufficient to fund such costs, net property sale proceeds reserves would then be utilized.



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##### Table of Contents

As of September 30, 2005, Fund II-IIOW Associates received, used, and held net proceeds allocated to the Partnership from
the sale of properties as presented below:



|                                             |  |                   |           |                                     |     |         |                                         |   |                     |  |                                                            |        |                                                                            |                                                                                                                                |  |   |   |  |   |        
|-------------------------------------------- |  | ----------------- | --------- | ----------------------------------- | --- | ------- | --------------------------------------- | - | ------------------- |  | ---------------------------------------------------------- | ------ | -------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ |  | - | - |  | - | -------
|Property Sold                                |  | Total NetProceeds |           | PartnershipsApproximateOwnership % |     |         | Net ProceedsAllocated to thePartnership |   | Use of Net Proceeds |  | Net ProceedsDistributed toPartners as ofSeptember 30, 2005 |        | Undistributed NetProceeds CurrentlyBeing Reserved
as of September 30, 2005
|                                             |  |                   |           | Amount                              |     | Purpose |                                         |  
|Cherokee Commons (sold in 2001)              |  | $                 | 8,414,089 |                                     | 2.9 | %       |                                         | $ | 239,776             |  | $                                                          | 77,421 |                                                                            |     Re-leasing of Boeing at the Atrium (2003 and 2002)     Funding for Fund I-II Tucker Associates operating expenses (2005) |  | $ | 0 |  | $ | 162,355
|Heritage Placeretail portion (sold in 2003) |  |                   | 3,207,708 |                                     | 2.6 | %       |                                         |   | 81,797              |  |                                                            | 1,332  |                                                                            |     Funding for Fund I-II Tucker Associates operating expenses
(2005)                                                         |  |   | 0 |  |   | 80,465 
|880 Holcomb Bridge (sold in 2004)            |  |                   | 6,889,379 |                                     | 0.8 | %       |                                         |   | 53,737              |  |                                                            | 297    |                                                                            |     Funding for Fund I-II Tucker Associates operating expenses
(2005)                                                         |  |   | 0 |  |   | 53,440 
|Brookwood Grill (sold in 2004)               |  |                   | 2,346,693 |                                     | 3.3 | %       |                                         |   | 77,676              |  |                                                            | 429    |                                                                            |     Funding for Fund I-II Tucker Associates operating expenses (2005)                                                         |  |   | 0 |  |   | 77,247 
|                                             |  |                   |           |                                     |     |         |                                         |   |                     |  |                                                            |        |                                                                            |                                                                                                                                |  |   |   |  |   |        
|Total                                        |  |                   |           |                                     |     |         |                                         | $ | 452,986             |  | $                                                          | 79,479 |                                                                            |                                                                                                                                |  | $ | 0 |  | $ | 373,507
|                                             |  |                   |           |                                     |     |         |                                         |   |                     |  |                                                            |        |                                                                            |                                                                                                                                |  |   |   |  |   |        



The net proceeds listed above will
continue to be held in reserve by Fund II-IIOW Associates as our General Partners evaluate the capital needs of the existing properties in which we hold an interest.



Related-Party Transactions



Related-Party Fees and Reimbursements



We have entered into agreements with Wells Capital, Wells Management, an affiliate of our General Partners, and their affiliates, whereby we pay certain fees and expense
reimbursements to Wells Capital, Wells Management, and their affiliates for asset management; the management and leasing of our properties; administrative services relating to accounting, property management, and other partnership administration;
and incur the related expenses. See Note 3 to our financial statements included in this report for a description of these fees and expense reimbursements we have incurred.



Economic Dependency



We have engaged Wells Capital, our corporate General Partner, and its affiliates, including Wells Management, to provide certain services that are essential to the
Partnership, including asset management services, the management and leasing of properties owned through the Joint Ventures, asset acquisition and disposition services, as well as other administrative responsibilities for the Partnership including
accounting services, shareholder communications, and investor relations. These agreements are terminable by either party on 60 days written notice. As a result of these relationships, the Partnership is dependent upon Wells Capital and Wells
Management.



Wells Capital and Wells Management are all owned and controlled by
Wells Real Estate Funds, Inc. (WREF). The operations of Wells Capital and Wells Management represent substantially all of the business of WREF.



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##### Table of Contents

Accordingly, the Partnership focuses on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the
event that WREF were to become unable to meet its obligations as they become due, the Partnership might be required to find alternative service providers.



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



Dismissal of Litigation against
Related Parties



During early 2004, a putative class action complaint was
filed against, among others, Leo. F. Wells, III and Wells Capital, our General Partners, and Wells Management (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791-2). The Court
granted the plaintiffs motion to permit voluntary dismissal of this suit, and it was subsequently dismissed without prejudice. In November 2004, the same plaintiffs filed a second putative class action complaint against, among others, Mr.
Wells, Wells Capital, and Wells Management (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04A-13051-6). On January 28, 2005, the defendants filed motions for summary judgment and
motions to dismiss the plaintiffs claims. Pursuant to orders entered July 1, 2005, the Court granted the Wells defendants motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action has now been
dismissed, subject to the plaintiffs right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the plaintiffs an
opportunity to file a motion for reconsideration or notice of appeal. Both the plaintiffs and the defendants have filed briefs supporting their respective positions, and the plaintiffs motion is still pending before the Court.



Inflation



The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate.
However, there are provisions in the majority of tenant leases, which should protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance
reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. There is no assurance, however, that we would be able to replace existing leases with new leases at
higher base rental rates.



Application of Critical Accounting Policies



The Partnerships accounting policies have been established to
conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If managements judgment or interpretation of
the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other
companies may utilize different estimates that may impact comparability of the Partnerships results of operations to those of companies in similar businesses.



Below is a discussion of the accounting policies that management considers to be critical in that they may require complex judgment in their
application or require estimates about matters that are inherently uncertain.



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Investment in Real Estate Assets



We will be required to make subjective assessments as to the useful lives of its depreciable assets. We will consider the period of future
benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of Fund II-IIOW Associates assets by class are as follows:



|                      |  |            
|--------------------- |  | -----------
|Buildings             |  | 40 years   
|Building improvements |  | 10-25 years
|Land improvements     |  | 20 years   
|Tenant improvements   |  | Lease term 



Effective July 1, 2004, the Joint
Ventures extended the weighted-average composite useful life for all building assets from 25 years to 40 years. We believe that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with
prevailing industry practice. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be misstated.



Valuation of Real Estate Assets



We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest,
either directly or through investments in the Joint Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the
recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In
the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. We have determined that there has been no impairment in the
carrying value of any of the real estate assets held by the Partnership at September 30, 2005.



Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the
number of months it takes to re-lease the property, and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys
future cash flows and fair value, and could result in the overstatement of the carrying value of real estate assets held by the Joint Ventures and net income of the Partnership.



Potential Tax Impact on Limited Partners Holding Class B UnitsAmerican Jobs Creation Act of 2004



The American Jobs Creation Act of 2004 (the Act) added Section 470 to the
Internal Revenue Code, which provides certain limitations on the utilization of losses allocable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. In March 2005, the Internal Revenue
Service issued IRS Notice 2005-29 announcing that the IRS would not be applying Section 470 to partnerships for taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners; however, it is important to note
that IRS Notice 2005-29 provided relief for partnerships for taxable year 2004 only. Although the IRS has indicated that it is continuing to study the application of Section 470 to partnerships, such as the Partnership, unless Congress passes
legislation which addresses this issue or some other form of relief from the provisions of Section 470 of the Act is granted, beginning in taxable year 2005 and thereafter, passive losses allocable to limited partners holding Class B Units may only
be used to offset passive income generated from the same property or within the same fund.



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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



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



ITEM 4.    CONTROLS AND PROCEDURES



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



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



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PART II.    OTHER INFORMATION



ITEM 1.    LEGAL PROCEEDINGS



We were not involved in any material legal proceedings during the quarter ended September 30, 2005 requiring disclosure under Item 103 of Regulation S-K.



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



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



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



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



ITEM 3.    DEFAULTS UPON SENIOR SECURITIES



We were not subject to any indebtedness, and therefore, we did not default respect to any indebtedness during the quarter ended September 30, 2005.



ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



No matters were submitted to a vote of our limited partners during the quarter ended September 30, 2005.



ITEM 5.    OTHER INFORMATION



|(a) | During the quarter ended September 30, 2005, there was no information which was required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



ITEM 6.    EXHIBITS



The
Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.



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SIGNATURES



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



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



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EXHIBIT INDEX



TO THIRD QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



|            |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                   
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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