##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)



| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008

or



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------

For the transition period from to
 to

Commission file number 0-17876





WELLS REAL ESTATE FUND II-OW

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-1754703                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6200 The Corners Parkway, Norcross, Georgia                    |  | 30092-3365                          
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                      

N/A

(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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated file, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈                 Accelerated filer   ̈

Non-accelerated filer  x (Do not check if a smaller reporting
company)                 Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ̈    No  x









---

##### Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund II-OW (the Partnership or the Registrant) 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, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future
obligations, and the amount and timing of any 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 this
report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such 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 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
partners, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A. in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion of some of the risks and
uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.



Page 2



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                         |  |         
|-------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                         |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                    |  |         
|         |  |                       | 
|         |  |                       |  | Balance Sheets  June 30, 2008 (unaudited) and December 31, 2007                                                        |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Six Months Ended June 30, 2008 (unaudited) and 2007 (unaudited)       |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2007 and the Six Months Ended June 30, 2008 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Six Months Ended June 30, 2008 (unaudited) and 2007 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                     |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 16      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                              |  | 21      
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                                                                 |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                       |  | 22      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                            |  | 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      



Page 3



---

##### Table of Contents

|PART I. | FINANCIAL INFORMATION
|------- | ---------------------



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

The information furnished in the
Partnerships accompanying balance sheets and 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 accompanying 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, 2007. The Partnerships results of operations for the three months six months ended June 30, 2008 are not necessarily indicative of the operating results expected for the full year.



Page 4



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



BALANCE SHEETS

ASSETS



|                                             |  |                         |         |                  |   |        
|-------------------------------------------- |  | ----------------------- | ------- | ---------------- | - | -------
|                                             |  | (Unaudited)June 30,2008 |         | December 31,2007
|Investment in Fund II and Fund II-OW         |  | $                       | 353,679 |                  | $ | 416,446
|Due from Fund II and Fund II-OW              |  |                         | 182,968 |                  |   | 191,963
|Cash and cash equivalents                    |  |                         | 5,184   |                  |   | 5,184  
|                                             |  |                         |         |                  |   |        
|Total assets                                 |  | $                       | 541,831 |                  | $ | 613,593
|                                             |  |                         |         |                  |   |        
|                                            
|PARTNERS CAPITAL                           
|Limited partners:                            |  |                         |         |                  |   |        
|Class A  6,062 units issued and outstanding |  | $                       | 541,831 |                  | $ | 613,593
|Class B  1,626 units issued and outstanding |  |                         | 0       |                  |   | 0      
|General partners                             |  |                         | 0       |                  |   | 0      
|                                             |  |                         |         |                  |   |        
|Total partners capital                      |  | $                       | 541,831 |                  | $ | 613,593
|                                             |  |                         |         |                  |   |        

See accompanying notes.



Page 5



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



STATEMENTS OF OPERATIONS



|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|---------------------------------------- |  | ------------------------------------- | -------- | - | ----------------------------------- | - | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                         |  | (Unaudited)Three Months EndedJune 30, |          |   | (Unaudited)Six Months EndedJune 30, |  
|                                         |  | 2008                                  |          |   | 2007                                |   |        | 2008 |  |   | 2007     |  
|EQUITY IN LOSS OF FUND II AND FUND II-OW |  | $                                     | (63,154  | ) |                                     | $ | (5,515 | )    |  | $ | (71,762  | ) |  | $ | (8,538 | )
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|                                         |  |                                       |          |  
|NET LOSS                                 |  | $                                     | (63,154  | ) |                                     | $ | (5,515 | )    |  | $ | (71,762  | ) |  | $ | (8,538 | )
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|                                         |  |                                       |          |  
|NET LOSS ALLOCATED TO LIMITED PARTNERS:  |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|CLASS A                                  |  | $                                     | (63,154  | ) |                                     | $ | (5,515 | )    |  | $ | (71,762  | ) |  | $ | (8,538 | )
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|CLASS B                                  |  | $                                     | 0        |   |                                     | $ | 0      |      |  | $ | 0        |   |  | $ | 0      |  
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|                                         |  |                                       |          |  
|NET LOSS PER LIMITED PARTNER UNIT:       |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|CLASS A                                  |  |                                       | $(10.42  | ) |                                     |   | $(0.91 | )    |  |   | $(11.84  | ) |  |   | $(1.41 | )
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  
|CLASS B                                  |  |                                       | $   0.00 |   |                                     |   | $ 0.00 |      |  |   | $   0.00 |   |  |   | $ 0.00 |  
|                                         |  |                                       |          |   |                                     |   |        |      |  |   |          |   |  |   |        |  

See accompanying notes.



Page 6



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2007

AND SIX MONTHS ENDED JUNE 30, 2008
(UNAUDITED)



|                           |  |                  |  |                 |         |                       |       |       |        |    |  |    |  |   |         |  
|-------------------------- |  | ---------------- |  | --------------- | ------- | --------------------- | ----- | ----- | ------ | -- |  | -- |  | - | ------- | -
|                           |  | Limited Partners |  | GeneralPartners |         | TotalPartnersCapital |      
|                           |  | Class A          |  |                 | Class B |                       |      
|                           |  | Units            |  | Amount          |         |                       | Units |       | Amount |    | 
|BALANCE, December 31, 2006 |  | 6,062            |  | $               | 635,186 |                       |       | 1,626 |        | $0 |  | $0 |  | $ | 635,186 |  
|                           |  |                  |  |                 |         |                      
|Net loss                   |  | 0                |  |                 | (21,593 | )                     |       | 0     |        | 0  |  | 0  |  |   | (21,593 | )
|                           |  |                  |  |                 |         |                       |       |       |        |    |  |    |  |   |         |  
|BALANCE, December 31, 2007 |  | 6,062            |  |                 | 613,593 |                       |       | 1,626 |        | 0  |  | 0  |  |   | 613,593 |  
|                           |  |                  |  |                 |         |                      
|Net loss                   |  | 0                |  |                 | (71,762 | )                     |       | 0     |        | 0  |  | 0  |  |   | (71,762 | )
|                           |  |                  |  |                 |         |                       |       |       |        |    |  |    |  |   |         |  
|BALANCE, June 30, 2008     |  | 6,062            |  | $               | 541,831 |                       |       | 1,626 |        | $0 |  | $0 |  | $ | 541,831 |  
|                           |  |                  |  |                 |         |                       |       |       |        |    |  |    |  |   |         |  

See accompanying notes.



Page 7



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



STATEMENTS OF CASH FLOWS



|                                                                                |  |                              |         |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                |  | (Unaudited) Six Months Ended |        
|                                                                                |  | June 30,                     |        
|                                                                                |  | 2008                         |         |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |                              |         |   |      |   |        |  
|Net loss                                                                        |  | $                            | (71,762 | ) |      | $ | (8,538 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                              |         |   |      |   |        |  
|Equity in loss of Fund II and Fund II-OW                                        |  |                              | 71,762  |   |      |   | 8,538  |  
|                                                                                |  |                              |         |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                              | 0       |   |      |   | 0      |  
|                                                                                |  |                              |         |   |      |   |        |  
|CHANGE IN CASH AND CASH EQUIVALENTS                                             |  |                              | 0       |   |      |   | 0      |  
|                                                                                |  |                             
|CASH AND CASH EQUIVALENTS, beginning of period                                  |  |                              | 5,184   |   |      |   | 5,184  |  
|                                                                                |  |                              |         |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                        |  | $                            | 5,184   |   |      | $ | 5,184  |  
|                                                                                |  |                              |         |   |      |   |        |  

See accompanying notes.



Page 8



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW



CONDENSED NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2008 (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, Inc. (Wells Capital) a Georgia corporation, serving as its general partners (collectively, the General
Partners). Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. (WREF). Leo F. Wells, III is the president and sole director of Wells Capital and the president, sole director, and sole owner of WREF. 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 total limited partner capital contributions 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 its interest in Fund II and Fund
II-OW, a joint venture between the Partnership and Wells Real Estate Fund II. Fund II and Fund II-OW 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                                     |  |   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*                                 |  |   Wells Real Estate Fund I   Fund II and Fund II-OW         |  | No properties were owned by this joint venture during the periods presented.                                              
|Fund II and Fund III Associates (Fund II-III Associates) |  |   Fund II and Fund II-OW   Wells Real Estate Fund III, L.P. |  | 2. 2100 Space Park Drive (formerly known as Boeing at the
Atrium) A four-story office building located in Houston, Texas



| | * | This joint venture was liquidated in February 2008.
| | - | ---------------------------------------------------

Wells Real
Estate Fund I, Wells Real Estate Fund II, and Wells Real Estate Fund III, L.P. are affiliated with the Partnership through one or more common general partners. Each of the properties described above was acquired on an all-cash basis. For
further information regarding the Joint Ventures and foregoing properties, refer to the Partnerships Annual Report on Form 10-K for the year ended December 31, 2007.



Page 9



---

##### Table of Contents

|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 (SEC), 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 Annual Report on Form 10-K for the year ended December 31, 2007.

Investment in Fund II and Fund II-OW

The Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities under the provisions of Financial Accounting Standards Board
Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial
Statements. The Partnership does not have control over the operations of Fund II and Fund II-OW; 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, upon applying the provisions of Statement of Financial Accounting Standard (SFAS) No. 94,
Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position (SOP) No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in Fund II
and Fund II-OW 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 generally distributed to the
joint venture partners on a quarterly basis.

Impairment of Real Estate Assets

The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned through the Partnerships investment in the Joint Ventures
may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating cash flows expected from the use of the asset and its
eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less
costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices
for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value.

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 contribution, as defined. Net cash from operations is then distributed to each
limited partner holding Class B Units until he has received an 8% per annum return on his adjusted capital contribution, 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.



Page 10



---

##### Table of Contents

Distribution of Net Sale Proceeds

Under the terms of the partnership agreement, as amended effective January 1, 2000, after satisfying all debts and liabilities and establishing such reserves as the General Partners in their sole discretion deem
reasonably necessary, net sale proceeds from the sale of the Partnerships properties, unless reserved, are to be distributed to partners in the following order:



| |  |  | To limited partners holding Class B Units until they have received an amount equal to the net cash available for distribution previously received by limited
partners holding Class A Units on a per-unit basis;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners on a per-unit basis until limited partners have received 100% of their respective net capital contributions, as defined in the partnership
agreement, plus a cumulative 12% per annum return on their respective net capital contributions (less the sum of all prior distributions to such limited partner); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 85% to the limited partners on a per-unit basis and 15% 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 cash 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. | INVESTMENT IN FUND II AND FUND II-OW
|-- | ------------------------------------

Impairment of Real Estate
Assets

Fund II and Fund II-OW entered into an agreement on June 27, 2008 (amended July 21, 2008) to sell the Louis Rose Building, a
two-story office building comprised of approximately 71,000 square feet, to an unrelated third party for a gross sales price of $3,476,000 (the Agreement). Under the Agreement, the inspection period will expire on August 15, 2008,
at which time a buyer-funded earnest money deposit of $150,000 will become non-refundable. The Partnership expects the closing of this transaction to occur in the third quarter of 2008; however, there are no assurances regarding when or if this sale
will be completed.



Page 11



---

##### Table of Contents

The Louis Rose Building was purchased in May 1988 and as has remained vacant since April 30, 2001. In connection
with preparing the Louis Rose Building for disposition, Fund II and Fund II-OW considered both re-leasing and sell-as-vacant opportunities through the first quarter of 2008. After careful consideration of the impact that current market conditions in
the Charlotte, North Carolina area are having on the value of properties similar to the Louis Rose Building, management concluded that selling the Louis Rose Building vacant is likely to be in the best economic interests of the limited partners of
the Partnership at this time. As a result, Fund II and Fund II-OW adjusted the carrying amount of the Louis Rose Building to its fair market value, as estimated based on the gross selling price per the Agreement, less estimated closing costs. Fund
II and Fund II-OW recognized a corresponding impairment loss of approximately $931,000 in the second quarter of 2008. Of this amount, approximately $49,000 is allocable to the Partnership and is included in equity in loss of Fund II and
Fund II-OW for the periods ended June 30, 2008.

Summary of Financial Information

Condensed financial information for Fund II and Fund II-OW for the three months and six months ended June 30, 2008 and 2007, respectively, is presented below:



|                           |  |                            |  |                          |  |                          |  |         |  |         |  |              |  |           
|-------------------------- |  | -------------------------- |  | ------------------------ |  | ------------------------ |  | ------- |  | ------- |  | ------------ |  | ----------
|Total Revenues             |  | Net Loss                   |  | Total Revenues           |  | Net Loss                
|Three Months EndedJune 30, |  | Three Months EndedJune 30, |  | Six Months EndedJune 30, |  | Six Months EndedJune 30,
|2008                       |  | 2007                       |  | 2008                     |  | 2007                     |  | 2008    |  | 2007    |  | 2008         |  | 2007      
|$18,227                    |  | $43,607                    |  | $(1,189,332)             |  | $(103,861)               |  | $47,947 |  | $85,272 |  | $(1,351,440) |  | $(160,790)
|                           |  |                            |  |                          |  |                          |  |         |  |         |  |              |  |           

Condensed financial information for the joint ventures in which the Partnership held interests through its equity
interest in Fund II and Fund II-OW for the three months and six months ended June 30, 2008 and 2007, respectively, is presented below:



|                          |  |                          |                |                                         |   |                                         |                                           |   |          |                                           |  |      |         |                   |  |   |       |  |   |        |   |  |   |          |   |  |   |         |  
|------------------------- |  | ------------------------ | -------------- | --------------------------------------- | - | --------------------------------------- | ----------------------------------------- | - | -------- | ----------------------------------------- |  | ---- | ------- | ----------------- |  | - | ----- |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                          |  | Total Revenues           |                | Income (Loss) FromContinuing Operations |   |                                         | Income (Loss) FromDiscontinued Operations |   |          | Net Income (Loss)                         | 
|                          |  | Three Months Ended       |                | Three Months Ended                      |   |                                         | Three Months Ended                        |   |          | Three Months Ended                        | 
|                          |  | June 30,                 |                | June 30,                                |   |                                         | June 30,                                  |   |          | June 30,                                  | 
|                          |  | 2008                     |                | 2007                                    |   | 2008                                    |                                           |   | 2007     |                                           |  | 2008 |         | 2007              |  |   | 2008  |  |   | 2007   |  
|Fund I and Fund II Tucker |  | $                        | 0              |                                         | $ | 0                                       |                                           | $ | 0        |                                           |  | $    | 1,554   |                   |  | $ | 0     |  | $ | (2,288 | ) |  | $ | 0        |   |  | $ | (734    | )
|Fund II-III Associates    |  |                          | 71,991         |                                         |   | 474,196                                 |                                           |   | (165,029 | )                                         |  |      | 75,201  |                   |  |   | 7,142 |  |   | 932    |   |  |   | (157,887 | ) |  |   | 76,133  |  
|                          |  |                          |                |                                         |   |                                         |                                           |   |          |                                           |  |      |         |                   |  |   |       |  |   |        |   |  |   |          |   |  |   |         |  
|                          |  | $                        | 71,991         |                                         | $ | 474,196                                 |                                           | $ | (165,029 | )                                         |  | $    | 76,755  |                   |  | $ | 7,142 |  | $ | (1,356 | ) |  | $ | (157,887 | ) |  | $ | 75,399  |  
|                          |  |                          |                |                                         |   |                                         |                                           |   |          |                                           |  |      |         |                   |  |   |       |  |   |        |   |  |   |          |   |  |   |         |  
|                          |  |                          |                |                                        
|                          |  |                          | Total Revenues |                                         |   | Income (Loss) FromContinuing Operations |                                           |   |          | Income (Loss) FromDiscontinued Operations |  |      |         | Net Income (Loss) | 
|                          |  | Six Months EndedJune 30, |                | Six Months EndedJune 30,                |   |                                         | Six Months EndedJune 30,                  |   |          | Six Months EndedJune 30,                  | 
|                          |  | 2008                     |                | 2007                                    |   | 2008                                    |                                           |   | 2007     |                                           |  | 2008 |         | 2007              |  |   | 2008  |  |   | 2007   |  
|Fund I and Fund II Tucker |  | $                        | 0              |                                         | $ | 0                                       |                                           | $ | 0        |                                           |  | $    | (2,263  | )                 |  | $ | 0     |  | $ | (1,899 | ) |  | $ | 0        |   |  | $ | (4,162  | )
|Fund II-III Associates    |  |                          | 363,715        |                                         |   | 996,791                                 |                                           |   | (150,489 | )                                         |  |      | 205,679 |                   |  |   | 7,999 |  |   | 1,910  |   |  |   | (142,490 | ) |  |   | 207,589 |  
|                          |  |                          |                |                                         |   |                                         |                                           |   |          |                                           |  |      |         |                   |  |   |       |  |   |        |   |  |   |          |   |  |   |         |  
|                          |  | $                        | 363,715        |                                         | $ | 996,791                                 |                                           | $ | (150,489 | )                                         |  | $    | 203,416 |                   |  | $ | 7,999 |  | $ | 11     |   |  | $ | (142,490 | ) |  | $ | 203,427 |  
|                          |  |                          |                |                                         |   |                                         |                                           |   |          |                                           |  |      |         |                   |  |   |       |  |   |        |   |  |   |          |   |  |   |         |  



Page 12



---

##### Table of Contents

The Partnership allocates its share of net income, net loss, and gain on sale generated by the properties owned by the
Joint Ventures to its Class A and Class B limited partners pursuant to the partnership agreement provisions outlined in Note 2. The components of income (loss) from discontinued operations recognized by the Joint Ventures results are
provided below:



|                          |  |                               |       |                               |    |       |   |                       |  |   |             |   |       |    |  |   |        |  
|------------------------- |  | ----------------------------- | ----- | ----------------------------- | -- | ----- | - | --------------------- |  | - | ----------- | - | ----- | -- |  | - | ------ | -
|                          |  | Six Months EndedJune 30, 2008 |       | Six Months EndedJune 30, 2007 |   
|                          |  | OperatingIncome               |       | Gainon Sale                   |    | Total |   | OperatingIncome(Loss) |  |   | Gainon Sale |   | Total |   
|Fund I and Fund II Tucker |  | $                             | 0     |                               | $0 |       | $ | 0                     |  | $ | (1,899      | ) |       | $0 |  | $ | (1,899 | )
|Fund II-III Associates    |  |                               | 7,999 |                               | 0  |       |   | 7,999                 |  |   | 1,910       |   |       | 0  |  |   | 1,910  |  
|                          |  |                               |       |                               |    |       |   |                       |  |   |             |   |       |    |  |   |        |  
|                          |  | $                             | 7,999 |                               | $0 |       | $ | 7,999                 |  | $ | 11          |   |       | $0 |  | $ | 11     |  
|                          |  |                               |       |                               |    |       |   |                       |  |   |             |   |       |    |  |   |        |  

Due from Fund II and Fund II-OW

As presented in the accompanying balance sheets, due from Fund II and Fund II-OW represents the following cash flows generated by Fund II and Fund II-OW, which are attributable to the Partnership as of June 30,
2008 and December 31, 2007:



|                     |  |                    |         |                        |   |        
|-------------------- |  | ------------------ | ------- | ---------------------- | - | -------
|                     |  | As ofJune 30, 2008 |         | As ofDecember 31, 2007
|Operating cash flows |  | $                  | 32,692  |                        | $ | 41,687 
|Net sale proceeds    |  |                    | 150,276 |                        |   | 150,276
|                     |  |                    |         |                        |   |        
|                     |  | $                  | 182,968 |                        | $ | 191,963
|                     |  |                    |         |                        |   |        



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

Management and Leasing Fees

In accordance with the property management and leasing agreement, 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 and Fund II-OW equal to (a) 3% for management services and 3% for leasing services of the gross revenues
collected monthly, 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, which is assessed periodically based on market studies, 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, are included in equity in loss of Fund II and Fund II-OW in the accompanying statements of
operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures is $17 and $689 for the three months ended June 30, 2008 and 2007, respectively, and $409 and $1,660 for the
six months ended June 30, 2008 and 2007, respectively.

Administrative Reimbursements

Wells Capital, one of the General Partners, and Wells Management perform certain administrative services for the Partnership and the Joint Ventures, 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 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 and Fund II-OW and, therefore, are included in equity in loss of
Fund II and Fund II-OW in the accompanying statements of operations. The Partnerships share of administrative costs incurred by Fund II and Fund II-OW and payable to Wells Capital and Wells Management is $2,378 and $3,049 for
the three months ended June 30, 2008 and 2007, respectively, and $4,996 and $5,378 for the six months ended June 30, 2008 and 2007, respectively.



Page 13



---

##### Table of Contents

Economic Dependency

The Partnership has engaged Wells Capital and Wells Management to provide certain essential services, including supervision of the management and leasing of its properties, asset acquisition and disposition services, as well as other
administrative responsibilities, including accounting services and investor communications and relations. These agreements are terminable by either party upon 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 WREF. The operations of Wells
Capital and Wells Management represent substantially all of the business of WREF. 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 and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for
certain WREF-sponsored programs and the volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs, as well as anticipated dividend income earned from its holdings of common stock of Piedmont Office Realty Trust,
Inc. (Piedmont REIT), formerly known as Wells Real Estate Investment Trust, Inc., which was acquired in connection with the Piedmont REIT internalization transaction (see Assertion of Legal Actions Against Related-Parties below). In
addition, during 2007, WREF guaranteed certain debt of another WREF-sponsored product that is in the start-up phase of its operations. As of June 30, 2008, the General Partners believe that WREF 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.

As of July 31, 2008, the amount of the debt guaranteed by WREF was equal to approximately $106.9 million.

The Partnership is also
dependent upon the ability of its current tenants to pay their contractual rent amounts as they become due. The inability of a tenant to pay future rental amounts would be likely to have a negative impact on the Partnerships results of
operations. The Partnership is not currently aware of any reason why its existing tenants will not be able to pay their contractual rental amounts as they become due in all material respects. Situations preventing the tenants from paying contractual
rents could result in a material adverse impact on the Partnerships results of operations.

Assertion of Legal Actions Against Related-Parties

On March 12, 2007, a stockholder of Piedmont REIT, filed a putative class action and derivative complaint, presently styled In re Wells Real
Estate Investment Trust, Inc. Securities Litigation, in the United States District Court for the District of Maryland against, among others, Piedmont REIT; Leo F. Wells, III and Wells Capital, our General Partners; Wells Management, our
property manager; certain affiliates of WREF; the directors of Piedmont REIT; and certain individuals who formerly served as officers or directors of Piedmont REIT prior to the closing of the internalization transaction on April 16, 2007. The
complaint alleges, among other things, violations of the federal proxy rules and breaches of fiduciary duty arising from the Piedmont REIT internalization transaction and the related proxy statement filed with the SEC on February 26, 2007, as
amended. The complaint seeks, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization transaction. On April 9, 2007, the District Court denied the plaintiffs motion for an order enjoining
the internalization transaction. On April 17, 2007, the Court granted the defendants motion to transfer venue to the United States District Court for the Northern District of Georgia, and the case was docketed in the Northern District of
Georgia on April 24, 2007. On June 7, 2007, the Court granted a motion to designate the class lead plaintiff and class co-lead counsel. On June 27, 2007, the plaintiff filed an amended complaint, which attempts to assert class action
claims on behalf of those persons who received and were entitled to vote on the



Page 14



---

##### Table of Contents

Piedmont REIT proxy statement filed with the SEC on February 26, 2007 and derivative claims on behalf of Piedmont REIT. On July 9, 2007, the Court
denied the plaintiffs motion for expedited discovery related to an anticipated motion for a preliminary injunction. On August 13, 2007, the defendants filed a motion to dismiss the amended complaint. On March 31, 2008, the Court
granted in part the defendants motion to dismiss the amended complaint. The Court dismissed five of the seven counts of the amended complaint in their entirety. The Court dismissed the remaining two counts with the exception of allegations
regarding the failure to disclose in the Piedmont REIT proxy statement details of certain expressions of interest in acquiring Piedmont REIT. On April 21, 2008, the plaintiff filed a second amended complaint, which alleges violations of the
federal proxy rules based upon allegations that the proxy statement to obtain approval for the Piedmont REIT internalization transaction omitted details of certain expressions of interest in acquiring Piedmont REIT. The second amended complaint
seeks, among other things, unspecified monetary damages, to nullify and rescind the internalization transaction, and to cancel and rescind any stock issued to the defendants as consideration for the internalization transaction. On May 12,
2008, the defendants answered and raised certain defenses to the second amended complaint. On June 23, 2008, the plaintiff filed a motion for class certification. As of the date of this filing, the time for the defendants to respond to the
plaintiffs motion for class certification has not yet passed. The parties are presently engaged in discovery. Mr. Wells, Wells Capital, and Wells Management intend to vigorously defend this action. Any financial loss incurred by Wells
Capital, Wells Management, or their affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.

On
August 24, 2007, two stockholders of Piedmont REIT filed a derivative complaint, styledDonald and Donna Goldstein, Derivatively on behalf of Defendant Wells Real Estate Investment Trust, Inc. v. Leo F. Wells, III, et
al.,in the Superior Court of Fulton County, Georgia, on behalf of Piedmont REIT against, among others, Leo F. Wells, III and Wells Capital, our General Partners, and a number of individuals who currently or formerly served as officers or
directors of Piedmont REIT. The complaint alleges, among other things, that the consideration paid by Piedmont REIT as part of the internalization transaction was excessive; that the defendants breached their fiduciary duties to Piedmont REIT;
and that the internalization transaction unjustly enriched the defendants. The complaint seeks, among other things, a judgment declaring that the defendants committed breaches of their fiduciary duties and were unjustly enriched at the expense
of Piedmont REIT; monetary damages equal to the amount by which Piedmont REIT was damaged by the defendants; an order awarding Piedmont REIT restitution from the defendants and ordering disgorgement of all profits and benefits obtained by the
defendants from their wrongful conduct and fiduciary breaches; an order rescinding the internalization transaction; and the establishment of a constructive trust upon any benefits improperly received by the defendants as a result of their wrongful
conduct. On October 19, 2007, the Court verbally granted the defendants motion for a protective order (and entered a written order on October 24, 2007) staying discovery until the Court rules on the defendants motion to
dismiss the complaint. On October 31, 2007, the defendants filed their motion to dismiss the plaintiffs derivative complaint. On December 19, 2007, the Court entered an order allowing the plaintiffs to take limited written
discovery on the issue of derivative demand, but the order staying discovery entered in October 2007 otherwise remains in effect. The defendants responded to the limited discovery requested by the plaintiffs. On January 10, 2008, the
plaintiffs filed an amended complaint, which contains substantially the same counts against the same defendants as the original complaint with certain additional factual allegations based primarily on events occurring after the original
complaint was filed. In addition, the plaintiffs responded to the defendants motion to dismiss this lawsuit. A hearing on the motion to dismiss was held on February 22, 2008. On March 13, 2008, the Court granted the
defendants motion to dismiss. On April 11, 2008, the plaintiffs filed a notice to appeal the Courts judgment granting the defendants motion to dismiss.



|5. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

From time to time, the Partnership
and its General Partners are party to legal proceedings which arise in the ordinary course of our business. The Partnership is not currently involved in any litigation for which the outcome would, in the judgment of the General Partners based on
information currently available, have a materially adverse impact on the results of operations or financial condition of the Partnership, nor is management aware of any such litigation threatened against us.



Page 15



---

##### Table of Contents

|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, 2007.

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;



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

The period
during which the Partnership owns and operates its real estate assets during the initial lease terms of the tenants;



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

The period during which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership
continues to own and operate the real estate assets, evaluate various options for disposition, and market the real estate assets for sale; 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 are currently in the disposition-and-liquidation phase of our life cycle. Of the six assets in
which we originally owned interests, we have sold four assets. The lease with Boeing/Shuttle Division (Boeing), the sole tenant at 2100 Space Park Drive, expired on March 31, 2008.

During the second quarter of 2008, we engaged in several significant activities related to the properties in which we own interests. On April 24, 2008, Fund II-III
Associates entered into a 90-month lease agreement with Hoyer Global (USA), Inc. (Hoyer) to occupy approximately 19% of 2100 Space Park Drive, which commenced in June 2008. On July 3, 2008, Fund II-III Associates also entered
into a 63-month lease agreement with Lockheed Martin Corporation (Lockheed) to occupy approximately 52% of 2100 Space Park Drive. The lease commencement date is the earlier of the date on which (i) the tenant improvements are
substantially complete, or (ii) Lockheed accepts possession and occupies the space. Fund II and Fund II-OW entered into the Agreement on June 27, 2008 (amended July 21, 2008) with an unrelated third party to sell the
Louis Rose Building for a gross sales price of $3,476,000. The completion of this transaction is subject to, among other things, a due diligence period. Accordingly, there are no assurances that this sale will be completed. If the
transaction progresses, we believe the closing of the transaction is likely to occur in the third quarter of 2008.



Page 16



---

##### Table of Contents

Our focus at this time involves concentrating on leasing and marketing efforts that we believe will ultimately result in
the best disposition pricing of our assets for our limited partners.

With a number of properties having been sold, our General Partners are currently
reserving operating and net sale proceeds distributions to limited partners as a result of the aforementioned Boeing lease expiration, as well as our intention to fund our pro rata share of the re-leasing costs associated with the Hoyer lease at
2100 Space Park Drive. Further, the General Partners anticipate continuing to reserve operating and net sale proceeds distributions primarily because the Louis Rose Building remains vacant and our intention to fund our pro rata share of anticipated
re-leasing costs and capital improvements at 2100 Space Park Drive. Once the details surrounding leasing and/or the potential sales of the Louis Rose Building and 2100 Space Park Drive become known, the General Partners will evaluate if
distributions of net sale proceeds are appropriate.

Property Summary

As we move further into the disposition-and-liquidation phase, we will continue to focus on re-leasing vacant space. In doing so, we seek to maximize returns to our limited partners by attempting to negotiate
long-term leases at market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs, and portfolio costs. As the remaining properties are positioned for sale, our attention will shift to locating
suitable buyers and negotiating purchase-sale contracts that will attempt to maximize the total return to our limited partners and minimize contingencies and our post-closing involvement with buyers.

Information relating to the properties owned, or previously owned, by the joint ventures is provided below:



| |  |  | 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 was sold on May 10, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | The Louis Rose Building, located in Charlotte, North Carolina, is vacant. We are currently under contract to sell this property.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | The 2100 Space Park Drive property, located in Houston, Texas, will be approximately 71% leased following the commencement of the 63-month lease with Lockheed. We
are aggressively marketing the remaining vacant space for lease.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources

Overview

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 generally considered available for distribution to the Class A limited partners and, unless reserved, 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. In the event of either situation, cash flows and, consequently, our ability to provide funding for capital needs could be adversely affected.

Short-Term Liquidity

We did not generate cash flow
from operating activities during the six months ended June 30, 2008, as Fund II and Fund II-OW continues to hold operating distributions received from the Joint Ventures and otherwise



Page 17



---

##### Table of Contents

payable to the Partnership as a result of our intention to fund our pro rata share of anticipated re-leasing costs and capital improvements for 2100 Space
Park Drive, absorbing the rental abatement periods associated with the recent leasing activity at 2100 Space Park Drive, and the remaining vacancy at this property and the Louis Rose Building. Accordingly, no operating distributions were
paid to limited partners during the six months ended June 30, 2008. 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 our share of tenant re-leasing costs and other capital improvements for properties owned by the Joint Ventures.

We believe that the cash on hand and distributions due from the Joint Ventures are sufficient to cover our current working capital needs.

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 long-term liquidity requirements will include, but not be limited to, funding our share of tenant improvements, renovations, expansions, and
other significant capital improvements necessary for properties owned through the Joint Ventures. Specifically, we anticipate funding our proportionate share of anticipated re-leasing costs and capital improvements at 2100 Space Park Drive. 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 difficulties in re-leasing the Louis Rose Building primarily due to the softening of the Charlotte office market and
related Northeast submarket of Charlotte during the period following the expiration of the sole tenants lease on April 30, 2001. The Northeast submarket of Charlotte continues to present challenges to landlords, primarily due to
the availability of office space for lease, and low rental rates and concessions offered to prospective tenants. As of June 30, 2008, the vacancy rate for the Northeast submarket of Charlotte is 21.8%, compared to the vacancy
rate for Charlotte as a whole of 12.1%.

Although, as set forth above, the Louis Rose Building is currently under contract to sell, the potential buyer
still has a right to terminate the contract during the inspection period; therefore, there are no assurances that this potential transaction will close. Accordingly, we are uncertain as to when the Louis Rose Building will be re-leased or sold, the
level of rental rates which may be achieved in connection with such potential re-leasing, the sales price which may be achieved in connection with the potential sale, the amount of re-leasing costs we will be required to fund in connection with the
potential re-leasing of this property, or the amount of closing cost we will be required to fund in connection with the potential sale.

Capital
Resources

The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties or
investing in joint ventures formed for the same purpose, and has invested all of the partners original net offering proceeds available for investment. Thus, it is unlikely that we will acquire interests in any additional properties or joint
ventures. Historically, our investment strategy has generally involved acquiring properties on an all-cash basis that are pre-leased to creditworthy tenants through 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. Any capital or other expenditures not provided for by the operations of the Joint Ventures will be required to be funded by the Partnership and the respective joint venture partners on a pro rata basis.



Page 18



---

##### Table of Contents

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 sale proceeds reserves would then be
utilized.

As of June 30, 2008, Fund II and Fund II-OW received, used, and held net sale proceeds allocated to the Partnership from the sale of
properties as presented below:



|                                              |  |                       |  |                                     |  |                                             |         |                         |   |                                                            |  |                                                                                                                         |  |   |         |  |   |        
|--------------------------------------------- |  | --------------------- |  | ----------------------------------- |  | ------------------------------------------- | ------- | ----------------------- | - | ---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | - | ------- |  | - | -------
|Property Sold                                 |  | TotalNet SaleProceeds |  | PartnershipsApproximateOwnership % |  | Net SaleProceedsAllocated toThe Partnership |         | Use ofNet Sale Proceeds |   | Net Sale ProceedsDistributed toPartners
as ofJune 30, 2008 |  | Undistributed NetSale Proceeds BeingReserved as ofJune 30, 2008                                                        
|                                              |  |                       |  | Amount                              |  | Purpose                                     |         |                        
|                                              |  |                       |  |                                     |  |                                             |        
|Cherokee Commons(sold in 2001)                |  | $8,414,089            |  | 2.9%                                |  | $                                           | 239,776 |                         | $ | 77,421                                                     |  |  Re-leasing of 2100 Space Park Drive (2002 and 2003)  Funding for Fund I and Fund II Tucker operating expenses (2005) |  | $ | 162,355 |  | $ | 0      
|                                              |  |                       |  |                                     |  |                                             |        
|Heritage Place  retail portion(sold in 2003) |  | $3,207,708            |  | 2.6%                                |  |                                             | 81,797  |                         |   | 1,332                                                      |  |  Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 80,465  |  |   | 0      
|                                              |  |                       |  |                                     |  |                                             |        
|Brookwood Grill(sold in 2004)                 |  | $2,318,115            |  | 3.3%                                |  |                                             | 76,730  |                         |   | 429                                                        |  |  Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 48,329  |  |   | 27,972 
|                                              |  |                       |  |                                     |  |                                             |        
|Holcomb Bridge Property(sold in 2004)         |  | $6,889,379            |  | 0.8%                                |  |                                             | 53,737  |                         |   | 297                                                        |  |  Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 33,851  |  |   | 19,589 
|                                              |  |                       |  |                                     |  |                                             |        
|Heritage Place office portion(sold in 2006)   |  | $4,028,043            |  | 2.6%                                |  |                                             | 102,715 |                         |   | 0                                                          |  |                                                                                                                        |  |   | 0       |  |   | 102,715
|                                              |  |                       |  |                                     |  |                                             |         |                         |   |                                                            |  |                                                                                                                         |  |   |         |  |   |        
|                                              |  |                       |  |                                     |  |                                             |        
|Total                                         |  |                       |  |                                     |  | $                                           | 554,755 |                         | $ | 79,479                                                     |  |                                                                                                                         |  | $ | 325,000 |  | $ | 150,276
|                                              |  |                       |  |                                     |  |                                             |         |                         |   |                                                            |  |                                                                                                                         |  |   |         |  |   |        

Upon evaluating the capital needs of our properties in which we currently hold an interest, our General Partners
have determined that substantially all of the undistributed net sale proceeds above will be required to fund our pro rata share of anticipated re-leasing costs and capital improvements at 2100 Space Park Drive. Accordingly, the net sale proceeds
listed above will continue to be held in reserve by Fund II and Fund II-OW.

Results of Operations

Equity in loss of Fund II and Fund II-OW was $63,154 and $5,515 for the three months ended June 30, 2008 and 2007, respectively and $71,762 and $8,538 for the six
months ended June 30, 2008 and 2007, respectively. The increases in loss are primarily attributable to an impairment loss recognized by Fund II and Fund II-OW related to the Louis Rose Building in the second quarter of 2008, of which
approximately $49,000 was allocated to the Partnership, and a decrease in rental income as a result of the recent Boeing lease expiration in March 2008.

We expect equity in loss of Fund II and Fund II-OW to decline in the future as a result of the recent leasing activity at 2100 Space Park Drive as well as recognizing a non-recurring impairment loss at the Louis Rose Building in
the second quarter of 2008.



Page 19



---

##### Table of Contents

Inflation

We are
exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to help protect us from the impact of inflation. These
provisions include rent steps, 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. However, due to the long-term nature of our leases, the leases may not readjust their reimbursement rates frequently enough to cover inflation.

Application of Critical Accounting Policies

Summary

Our 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 our results of operations to those of
companies in similar businesses.

Below is a discussion of the accounting policies used by the Partnership and the Joint Ventures, which are considered to
be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Investment
in Real Estate Assets

We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future
benefit of the assets to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Joint Ventures assets by class are provided below:



|                      |  |                                       
|--------------------- |  | --------------------------------------
|                      | 
|Buildings             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant improvements   |  | Shorter of lease term or economic life

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 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 assets and their 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. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices,



Page 20



---

##### Table of Contents

(ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. In the
second quarter of 2008, Fund II and Fund II-OW recorded an impairment loss at the Louis Rose Building of approximately $931,000, of which approximately $49,000 was allocated to the Partnership, in order to reduce the carrying value of the property
to its fair value less costs to sell, as a result of management refining its strategy for disposing of this building.

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.

Related-Party Transactions

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 4 to our financial statements included in this report for a description of the fees and expense reimbursements we have incurred.



|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 currency exchange rate fluctuations, or the other market risks contemplated
by Item 305 of Regulation S-K.



|ITEM 4T. | 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 the Principal Financial Officer of Wells Capital, of the effectiveness of the design and operation of
the Partnerships disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act) as of the end of the quarterly period covered by this report. Based upon that evaluation,
the Principal Executive Officer and the Principal Financial Officer of Wells Capital 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 the reports we file or submit under the Exchange Act 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 the reports we file under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial
Officer of Wells Capital, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over
financial reporting during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



Page 21



---

##### Table of Contents

|PART II. | OTHER INFORMATION
|-------- | -----------------



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

We are from time to time a party to legal
proceedings, which arise in the ordinary course of our business. We are not currently involved in any litigation the outcome of which would, in managements judgment based on information currently available, have a material adverse effect on
our results of operations or financial condition, nor is management aware of any such litigation threatened against us during the quarter ended June 30, 2008, requiring disclosure under Item 103 of Regulation S-K.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes from the risk
factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.



|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 June 30, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended June 30, 2008.
|--- | ------------------------------------------------------------------------



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



|(a) | We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended June 30, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



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



|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 June 30, 2008.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



|(a) | During the quarter ended June 30, 2008, there was no information 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 Second Quarter Form 10-Q attached hereto.



Page 22



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has 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)
|               |  | 
|August 8, 2008 |  |  |  | /s/ LEO F. WELLS, III                                                                             
|               |  |  |  | Leo F. Wells, III President, Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|               |  | 
|August 8, 2008 |  |  |  | /s/ DOUGLAS P. WILLIAMS                                                                           
|               |  |  |  | Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.                            



Page 23



---

##### Table of Contents

EXHIBIT INDEX

TO SECOND QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



|           |  |                                                                                                                                                                                                          
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                              
|           | 
|*10.1      |  | Office Lease with Hoyer Global (USA), Inc. relating to 2100 Space Park Drive (Exhibit 10.1 to Form 10-Q of Wells Real Estate Fund II for the quarter ended March 31, 2008,
Commissions File No. 0-16518) 
|           | 
|*10.2      |  | Office Lease with Lockheed Martin Corporation relating to 2100 Space Park Drive (Exhibit 10.2 to Form 10-Q of Wells Real Estate Fund II for the quarter ended June 30, 2008, Commission
File No. 0-16518)
|           | 
|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                                                                           



|* | previously filed and incorporated herein by reference
|- | -----------------------------------------------------