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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, 2009

or



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

For the transition period from
 to

Commission file number 0-17876





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 Number)
|                                                               | 
|6200 The Corners Pkwy., Norcross, Georgia                      |  | 30092-3365                             
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         

N/A

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [Not yet applicable to
registrant.]    Yes   ̈    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 filer, 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









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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund II-OW (the Partnership 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 and provide distributions to
partners may be significantly hindered. See Item 1A. in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2008 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.



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WELLS REAL ESTATE FUND II-OW



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                         |  |         
|-------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                         |  | Page No.
|         |  |                      
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                    |  |         
|         |  |                       | 
|         |  |                       |  | Balance Sheets  June 30, 2009 (unaudited) and December 31, 2008                                                        |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Six Months Ended June 30, 2009 (unaudited) and 2008 (unaudited)       |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2008 and the Six Months Ended June 30, 2009 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Six Months Ended June 30, 2009 (unaudited) and 2008 (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                                                              |  | 22      
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                                                                 |  | 22      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                        
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                       |  | 22      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                            |  | 23      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                             |  | 23      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                         |  | 23      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                     |  | 23      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                       |  | 23      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                |  | 23      



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|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, 2008. The Partnerships results of operations for the three months and six months ended June 30, 2009 are not necessarily indicative of the operating results expected for the full year.



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WELLS REAL ESTATE FUND II-OW



BALANCE SHEETS

ASSETS



|                                             |  |                         |         |                  |   |        
|-------------------------------------------- |  | ----------------------- | ------- | ---------------- | - | -------
|                                             |  | (Unaudited)June 30,2009 |         | December 31,2008
|Investment in Fund II and Fund II-OW         |  | $                       | 407,340 |                  | $ | 442,566
|Due from Fund II and Fund II-OW              |  |                         | 0       |                  |   | 11,480 
|Cash and cash equivalents                    |  |                         | 11,674  |                  |   | 194    
|                                             |  |                         |         |                  |   |        
|Total assets                                 |  | $                       | 419,014 |                  | $ | 454,240
|                                             |  |                         |         |                  |   |        
|                                            
|PARTNERS CAPITAL                           
|                                             |  |                        
|Limited partners:                            |  |                         |         |                  |   |        
|Class A  6,062 units issued and outstanding |  | $                       | 418,203 |                  | $ | 454,240
|Class B  1,626 units issued and outstanding |  |                         | 811     |                  |   | 0      
|General partners                             |  |                         | 0       |                  |   | 0      
|                                             |  |                         |         |                  |   |        
|Total partners capital                      |  | $                       | 419,014 |                  | $ | 454,240
|                                             |  |                         |         |                  |   |        

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF OPERATIONS



|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|------------------------------------------------ |  | ------------------------------------- | ------ | - | ----------------------------------- | - | -------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                                 |  | (Unaudited)Three Months EndedJune 30, |        |   | (Unaudited)Six Months EndedJune 30, |  
|                                                 |  | 2009                                  |        |   | 2008                                |   |          | 2009 |  |   | 2008    |  
|EQUITY IN LOSS OF FUND II AND FUND II-OW         |  | $                                     | (519   | ) |                                     | $ | (63,154  | )    |  | $ | (35,226 | ) |  | $ | (71,762  | )
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|NET LOSS                                         |  | $                                     | (519   | ) |                                     | $ | (63,154  | )    |  | $ | (35,226 | ) |  | $ | (71,762  | )
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|                                                 |  |                                       |        |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS: |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|CLASS A                                          |  | $                                     | (1,330 | ) |                                     | $ | (63,154  | )    |  | $ | (36,037 | ) |  | $ | (71,762  | )
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|CLASS B                                          |  | $                                     | 811    |   |                                     | $ | 0        |      |  | $ | 811     |   |  | $ | 0        |  
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|                                                 |  |                                       |        |  
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:      |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|CLASS A                                          |  |                                       | $(0.22 | ) |                                     |   | $(10.42  | )    |  |   | $(5.94  | ) |  |   | $(11.84  | )
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  
|CLASS B                                          |  |                                       | $ 0.50 |   |                                     |   | $   0.00 |      |  |   | $ 0.50  |   |  |   | $   0.00 |  
|                                                 |  |                                       |        |   |                                     |   |          |      |  |   |         |   |  |   |          |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2008

AND SIX MONTHS ENDED JUNE 30, 2009
(UNAUDITED)



|                           |  |                  |  |                 |          |                       |       |       |        |   |     |  |    |  |   |          |  
|-------------------------- |  | ---------------- |  | --------------- | -------- | --------------------- | ----- | ----- | ------ | - | --- |  | -- |  | - | -------- | -
|                           |  | Limited Partners |  | GeneralPartners |          | TotalPartnersCapital |      
|                           |  | Class A          |  |                 | Class B  |                       |      
|                           |  | Units            |  | Amount          |          |                       | Units |       | Amount |   |    
|BALANCE, December 31, 2007 |  | 6,062            |  | $               | 613,593  |                       |       | 1,626 |        | $ | 0   |  | $0 |  | $ | 613,593  |  
|                           |  |                  |  |                 |          |                      
|Net loss                   |  | 0                |  |                 | (159,353 | )                     |       | 0     |        |   | 0   |  | 0  |  |   | (159,353 | )
|                           |  |                  |  |                 |          |                       |       |       |        |   |     |  |    |  |   |          |  
|BALANCE, December 31, 2008 |  | 6,062            |  |                 | 454,240  |                       |       | 1,626 |        |   | 0   |  | 0  |  |   | 454,240  |  
|                           |  |                  |  |                 |          |                      
|Net loss                   |  | 0                |  |                 | (36,037  | )                     |       | 0     |        |   | 811 |  | 0  |  |   | (35,226  | )
|                           |  |                  |  |                 |          |                       |       |       |        |   |     |  |    |  |   |          |  
|BALANCE, June 30, 2009     |  | 6,062            |  | $               | 418,203  |                       |       | 1,626 |        | $ | 811 |  | $0 |  | $ | 419,014  |  
|                           |  |                  |  |                 |          |                       |       |       |        |   |     |  |    |  |   |          |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF CASH FLOWS



|                                                                                |  |                                     |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                |  | (Unaudited)Six Months EndedJune 30, |        
|                                                                                |  | 2009                                |         |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |                                     |         |   |      |   |         |  
|Net loss                                                                        |  | $                                   | (35,226 | ) |      | $ | (71,762 | )
|Operating distribution received from Fund II and Fund II-OW                     |  |                                     | 11,480  |   |      |   | 0       |  
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                     |         |   |      |   |         |  
|Equity in loss of Fund II and Fund II-OW                                        |  |                                     | 35,226  |   |      |   | 71,762  |  
|                                                                                |  |                                     |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                                     | 11,480  |   |      |   | 0       |  
|                                                                                |  |                                     |         |   |      |   |         |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                       |  |                                     | 11,480  |   |      |   | 0       |  
|                                                                                |  |                                    
|CASH AND CASH EQUIVALENTS, beginning of period                                  |  |                                     | 194     |   |      |   | 5,184   |  
|                                                                                |  |                                     |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                        |  | $                                   | 11,674  |   |      | $ | 5,184   |  
|                                                                                |  |                                     |         |   |      |   |         |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



CONDENSED NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2009 (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 owned 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 owned 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(1) A two-story office building located in Charlotte, North Carolina
|Fund I and Fund II Tucker(2)                               |  |   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(3) A four-story office building located in Houston, Texas        



| | (1) | This property was sold in April 2009.
| | --- | -------------------------------------

| | (2) | This joint venture was liquidated and dissolved in February 2008.
| | --- | -----------------------------------------------------------------

| | (3) | This property was sold in April 2009.
| | --- | -------------------------------------

Wells
Real Estate Fund II and Wells Real Estate Fund III, L.P. are affiliated with the Partnership through common general partners. Wells Real Estate Fund I was affiliated with the Partnership through common general partners prior to its dissolution.
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,
2008.



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On April 20, 2009, Fund II and Fund II-OW sold the Louis Rose Building to an unrelated third party for a gross sale
price of $2,122,000. During 2008, Fund II and Fund II-OW reduced the carrying value of Louis Rose Building to its estimated fair value, less estimated costs to sell, by recording an aggregate impairment loss of approximately
$2,136,000. As a result of this sale, net proceeds of approximately $105,000 and a gain of approximately $900 were allocated to the Partnership in the second quarter of 2009. The net proceeds from this sale are currently being held in
reserve by Fund II and Fund II-OW pending future distribution to the limited partners.

On April 30, 2009, Fund II-III Associates sold 2100 Space
Park Drive to an unrelated third party for a gross sale price of $8,000,000. During the first quarter of 2009, Fund II-III Associates reduced the carrying value of 2100 Space Park Drive to its estimated fair value, less estimated costs to sell,
by recording an impairment loss of approximately $850,000. As a result of this sale, net proceeds of approximately $261,000 and a gain of approximately $1,900 were allocated to the Partnership in the second quarter of 2009. The net proceeds from
this sale are currently being held in reserve by Fund II and Fund II-OW pending future distribution to the limited partners.



|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, 2008. The Partnership has evaluated subsequent events occurring during the period from July 1, 2009 through August 12, 2009, the date of filing with
the SEC.

The Partnerships policy is to adopt the liquidation basis of accounting once the liquidation of the Partnership is imminent, which the
Partnership has defined as beginning on the first day of the quarter following the completion of the sale of all real estate assets. On April 30, 2009, the Partnership, through its investment in the Joint Ventures, sold the remaining
property in the portfolio, 2100 Space Park Drive. Accordingly, the Partnership is planning to adopt the liquidation basis of accounting effective July 1, 2009. Under the liquidation basis of accounting, assets and liabilities will be stated at
their estimated net realizable values and net settlement amounts, respectively, and statements of operations and statements of cash flows will no longer be presented.

Investment in Fund II and Fund II-OW

The Partnership has evaluated the Joint Ventures and concluded that none are
variable interest entities. 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, 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.



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Evaluating the Recoverability of Real Estate Assets

The Partnership continually monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets owned through the Partnerships investment in the Joint
Ventures were not recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not be recoverable, management assessed the recoverability of the real estate assets by
determining whether the respective carrying values would have been recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their 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 did not exceed the
respective asset carrying value, management adjusted the real estate assets to the respective estimated fair values, pursuant to the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No. 144), and recognized an impairment loss. Estimated fair values were calculated based on the following information, in order of preference, dependent upon
availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future 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.

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.
| | - |  | --------------------------------------------------------------------------------------------

Liquidating Distributions

Pursuant to the partnership agreement,
after satisfying all debts and liabilities and establishing reserves deemed reasonably necessary in the sole discretion of the General Partners, liquidating distributions will be allocated to the limited partners in accordance with their respective
positive tax capital balances, as adjusted for allocations of gain or loss on the sale of properties.

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



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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, such excess net income 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.

Gain 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.

Recent Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 165,
Subsequent Events (SFAS 165). SFAS 165 provides guidance on managements assessment of subsequent events. SFAS 165 clarifies U.S. auditing literature and states that management must evaluate, as of each reporting period,
events or transactions that occur after the balance sheet date through the date that the financial statements are issued or are available to be issued. SFAS 165 allows the assessment of subsequent events to occur through the date on
which the financial statements are available to be issued or the date they are issued; however, management must also disclose the date through which events or transactions have been evaluated. Management must perform its assessment for
both interim and annual financial reporting periods. SFAS 165 is effective prospectively for interim and annual periods ending after June 15, 2009. The adoption of SFAS 165 did not have a material impact on the Partnerships financial
statements or disclosures.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles (SFAS 168). SFAS 168 requires that the FASB Accounting Standards Codification (the Codification) become the source of authoritative U.S. GAAP recognized by the FASB to be applied
by nongovernmental entities. Once the Codification is in effect, all of its content will carry the same level of authority, effectively superseding SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 168 is
effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Partnership expects that the adoption of SFAS 168 will not have a significant impact on its financial statements or disclosures.



|3. | INVESTMENT IN FUND II AND FUND II-OW
|-- | ------------------------------------

Impairment of Real Estate
Assets

In the first quarter of 2009, Fund II-III Associates recorded an impairment loss on 2100 Space Park Drive of approximately $850,000
(approximately $29,000 of which was allocated to the Partnership) to reduce the carrying value of the property to a revised estimate of its fair value estimated based on an executed contract to sell the property for $8,000,000, less estimated
selling costs.



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##### Table of Contents

In the second quarter of 2008, Fund II and Fund II-OW recorded an impairment loss on the Louis Rose Building of
approximately $931,000 (approximately $49,000 of which was allocated to the Partnership) in order to reduce the carrying value of the property to its estimated fair value prompted by managements decision to refine its strategy for disposing of
the building. In the fourth quarter of 2008, Fund II and Fund II-OW recorded an additional impairment loss on the Louis Rose Building of approximately $1,205,000 (approximately $64,000 of which was allocated to the Partnership) in order to reduce
the carrying value of the property to a revised estimate of its fair value estimated based on an executed contract to sell the property for $2,122,000, less estimated selling costs.

Summary of Financial Information

Condensed financial information for Fund II and Fund II-OW for the three months and
six months ended June 30, 2009 and 2008, respectively, is presented below:



|                       |  |                            |       |                                |   |        |                                           |   |         |                            |  |      |          |      |  |        |      |   |            |      |  |   |        |   |  |   |            |  
|---------------------- |  | -------------------------- | ----- | ------------------------------ | - | ------ | ----------------------------------------- | - | ------- | -------------------------- |  | ---- | -------- | ---- |  | ------ | ---- | - | ---------- | ---- |  | - | ------ | - |  | - | ---------- | -
|                       |  | Total Revenues             |       | Loss FromContinuing Operations |   |        | Income (Loss) FromDiscontinued Operations |   |         | Net Loss                   | 
|                       |  | Three Months EndedJune 30, |       | Three Months EndedJune 30,     |   |        | Three Months EndedJune 30,                |   |         | Three Months EndedJune 30, | 
|                       |  | 2009                       |       | 2008                           |   | 2009   |                                           |   | 2008    |                            |  | 2009 |          | 2008 |  |        | 2009 |   |            | 2008 | 
|Fund II and Fund II-OW |  | $                          | 4,748 |                                | $ | 18,227 |                                           | $ | (11,994 | )                          |  | $    | (169,183 | )    |  | $2,224 |      | $ | (1,020,149 | )    |  | $ | (9,770 | ) |  | $ | (1,189,332 | )
|                       |  |                            |       |                                |   |        |                                           |   |         |                            |  |      |          |      |  |        |      |   |            |      |  |   |        |   |  |   |            |  



|                       |  |                          |       |                                |   |        |                                  |   |          |                          |  |      |          |      |  |           |      |   |            |      |  |   |          |   |  |   |            |  
|---------------------- |  | ------------------------ | ----- | ------------------------------ | - | ------ | -------------------------------- | - | -------- | ------------------------ |  | ---- | -------- | ---- |  | --------- | ---- | - | ---------- | ---- |  | - | -------- | - |  | - | ---------- | -
|                       |  | Total Revenues           |       | Loss FromContinuing Operations |   |        | Loss FromDiscontinued Operations |   |          | Net Loss                 | 
|                       |  | Six Months EndedJune 30, |       | Six Months EndedJune 30,       |   |        | Six Months EndedJune 30,         |   |          | Six Months EndedJune 30, | 
|                       |  | 2009                     |       | 2008                           |   | 2009   |                                  |   | 2008     |                          |  | 2009 |          | 2008 |  |           | 2009 |   |            | 2008 | 
|Fund II and Fund II-OW |  | $                        | 8,108 |                                | $ | 47,947 |                                  | $ | (592,925 | )                        |  | $    | (238,987 | )    |  | $(70,462) |      | $ | (1,112,453 | )    |  | $ | (663,387 | ) |  | $ | (1,351,440 | )
|                       |  |                          |       |                                |   |        |                                  |   |          |                          |  |      |          |      |  |           |      |   |            |      |  |   |          |   |  |   |            |  

Condensed financial information for Fund II-III Associates in which the Partnership held an interest through its
equity interest in Fund II and Fund II-OW for the three months and six months ended June 30, 2009 and 2008, respectively, is presented below:



|                       |  |                            |  |                                |  |      |                                           |   |      |                            |        |      |  |         |  |   |          |   |      |   |        |  |   |          |  
|---------------------- |  | -------------------------- |  | ------------------------------ |  | ---- | ----------------------------------------- | - | ---- | -------------------------- | ------ | ---- |  | ------- |  | - | -------- | - | ---- | - | ------ |  | - | -------- | -
|                       |  | Total Revenues             |  | Loss FromContinuing Operations |  |      | Income (Loss) FromDiscontinued Operations |   |      | Net Income (Loss)          |       
|                       |  | Three Months EndedJune 30, |  | Three Months EndedJune 30,     |  |      | Three Months EndedJune 30,                |   |      | Three Months EndedJune 30, |       
|                       |  | 2009                       |  | 2008                           |  | 2009 |                                           |   | 2008 |                            |        | 2009 |  | 2008    |  |   | 2009     |   | 2008 |  
|Fund II-III Associates |  | $0                         |  | $203                           |  | $    | (4,172                                    | ) |      | $                          | (6,900 | )    |  | $90,418 |  | $ | (150,987 | ) |      | $ | 86,246 |  | $ | (157,887 | )
|                       |  |                            |  |                                |  |      |                                           |   |      |                            |        |      |  |         |  |   |          |   |      |   |        |  |   |          |  



|                       |  |                          |  |                                |  |      |                                  |   |      |                          |        |      |  |            |  |   |          |   |  |      |          |   |  |   |          |  
|---------------------- |  | ------------------------ |  | ------------------------------ |  | ---- | -------------------------------- | - | ---- | ------------------------ | ------ | ---- |  | ---------- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                       |  | Total Revenues           |  | Loss FromContinuing Operations |  |      | Loss FromDiscontinued Operations |   |      | Net Loss                 |       
|                       |  | Six Months EndedJune 30, |  | Six Months EndedJune 30,       |  |      | Six Months EndedJune 30,         |   |      | Six Months EndedJune 30, |       
|                       |  | 2009                     |  | 2008                           |  | 2009 |                                  |   | 2008 |                          |        | 2009 |  | 2008       |  |   | 2009     |   |  | 2008 |         
|Fund II-III Associates |  | $25                      |  | $2,716                         |  | $    | (9,858                           | ) |      | $                        | (9,902 | )    |  | $(667,652) |  | $ | (132,588 | ) |  | $    | (677,510 | ) |  | $ | (142,490 | )
|                       |  |                          |  |                                |  |      |                                  |   |      |                          |        |      |  |            |  |   |          |   |  |      |          |   |  |   |          |  



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##### 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, 2009 |         |   | Six Months EndedJune 30, 2008 |  
|                       |  | OperatingIncome               |         |   | ImpairmentLoss                |   |          | Gainon Sales |  | Total |        |  | OperatingLoss |          |   | ImpairmentLoss |   |          | Gainon Sale |  | Total |         
|Fund II and Fund II-OW |  | $                             | (86,588 | ) |                               | $ | 0        |              |  | $     | 16,126 |  | $             | (70,462  | ) |                | $ | (181,662 | )           |  | $     | (930,791 | ) |  | $0 |  | $ | (1,112,453 | )
|Fund II-III Associates |  |                               | 125,404 |   |                               |   | (849,964 | )            |  |       | 56,908 |  |               | (667,652 | ) |                |   | (132,588 | )           |  |       | 0        |   |  | 0  |  |   | (132,588   | )
|                       |  |                               |         |   |                               |   |          |              |  |       |        |  |               |          |   |                |   |          |             |  |       |          |   |  |    |  |   |            |  
|                       |  | $                             | 38,816  |   |                               | $ | (849,964 | )            |  | $     | 73,034 |  | $             | (738,114 | ) |                | $ | (314,250 | )           |  | $     | (930,791 | ) |  | $0 |  | $ | (1,245,041 | )
|                       |  |                               |         |   |                               |   |          |              |  |       |        |  |               |          |   |                |   |          |             |  |       |          |   |  |    |  |   |            |  



|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 and payable to Wells Management is ($173) and $17 for the three months ended June 30 2009 and 2008,
respectively, and $588 and $409 for the six months ended June 30, 2009 and 2008, respectively. Such fees were adjusted in the second quarter of 2009 to reflect a refund due to Fund II-III Associates for management and leasing fees paid on rents
received in advance for periods following the sale of 2100 Space Park Drive.

From October 2008 through March 2009, Wells Management elected to
defer the receipt of management and leasing fees due from the Partnership through its interest in the Joint Ventures totaling approximately $1,000, all of which was repaid in May 2009.

Administrative Reimbursements

Wells Capital, one of our 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 $2,647 and $2,378 for the three months ended June 30, 2009 and 2008, respectively, and $5,095 and $4,996 for the six months ended June 30, 2009 and 2008, respectively.



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##### Table of Contents

From October 2008 through March 2009, Wells Management and Wells Capital elected to defer the receipt of
administrative reimbursements due from the Partnership through its interest in Fund II and Fund II-OW totaling approximately $4,200, all of which was repaid in May 2009.

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 both 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), which was acquired in connection with
the Piedmont REIT internalization transaction (see Assertion of Legal Action Against Related-Parties below). In addition, WREF guarantees unsecured debt of another WREF-sponsored product which was in the amount of approximately $34.7 million as of
July 31, 2009. 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 other investments necessary to meet its current and future obligations as
they become due.

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 Action 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, the Partnerships General Partners; Wells Management, the Partnerships 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



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##### Table of Contents

complaint, which attempts to assert class action claims on behalf of those persons who received and were entitled to vote on the 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. The defendants responded to the plaintiffs motion for class certification on January 16, 2009. The plaintiff filed its reply in support of its motions for class certification on
February 19, 2009. The motion for class certification is currently pending before the Court. The parties are presently engaged in discovery. On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add
additional defendants. The defendants responded to the plaintiffs motion for leave to amend on April 30, 2009. The plaintiff filed its reply in support of its motion for leave to amend on May 18, 2009. The Court denied the
plaintiffs motion for leave to amend on June 23, 2009. 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.



|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.



|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, 2008.

Overview

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



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

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



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

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



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##### Table of Contents

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

The period
during which 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. With the completion
of the sales of the Louis Rose Building and 2100 Space Park Drive in April 2009, we have now sold all of the real estate assets in which we had owned interests. We have begun to take the steps necessary to liquidate and dissolve the Partnership.
Having sold all of the real estate assets within the portfolio, the General Partners are currently reserving operating cash and a portion of net sale proceeds to fund anticipated costs necessary to liquidate and dissolve the Partnership, which is
expected to occur in the fourth quarter of 2009.

Property Summary

We have now sold all of the real estate assets in which we had owned interests following the sales of the Louis Rose Building and 2100 Space Park Drive in April 2009. We have begun to take steps necessary to
liquidate and dissolve the Partnership, which is expected to occur in the fourth quarter of 2009.

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 was sold on April 20, 2009.
| | - |  | ---------------------------------------------------



| |  |  | The 2100 Space Park Drive property was sold on April 30, 2009.
| | - |  | --------------------------------------------------------------

Liquidity and Capital Resources

Overview

Our operating strategy has entailed 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. Historically, any residual operating cash flows
were generally considered available for distribution to the limited partners and, unless reserved, were generally paid quarterly. To the extent that operating cash flows were not sufficient to fund our recurring operations, net sale proceeds would
have been utilized. As a result, the ongoing monitoring of our cash position has been critical to ensuring that adequate liquidity and capital resources were available.



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##### Table of Contents

Short-Term Liquidity

During the six months ended June 30, 2009, we generated net operating cash flows of approximately $11,500. Fund II and Fund II-OW continues to hold operating distributions received from the Joint Ventures and otherwise payable to
the Partnership. Accordingly, no operating distributions were paid to limited partners during the six months ended June 30, 2009. We believe that the cash on hand, including net proceeds from the sale of properties, will be sufficient to cover
our working capital needs as we begin to wrap-up the Partnerships affairs and prepare for dissolution.

Long-Term Liquidity

We have sold all of the real estate assets in which we had owned interests and do not anticipate acquiring additional properties. As a result of the sales of the
remaining real estate assets in which the Partnership held interests in April 2009, we have begun to take the steps necessary to liquidate and dissolve the Partnership. We are in the process of evaluating the amount of cash reserves needed to settle
estimated liabilities of the Partnership at dissolution and intend to distribute the cash balances remaining at that time to the limited partners pursuant to the provisions of the partnership agreement in the fourth quarter of 2009.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)



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##### Table of Contents

Capital Resources

As
of June 30, 2009, we had received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



|                                              |  |                       |  |                                     |        |                                              |         |                         |   |                                                            |  |                                                                                                                                                                            |  |   |         |  |   |        
|--------------------------------------------- |  | --------------------- |  | ----------------------------------- | ------ | -------------------------------------------- | ------- | ----------------------- | - | ---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- |  | - | -------
|                                              |  | TotalNet SaleProceeds |  | PartnershipsApproximateOwnership % |        | Net Sale ProceedsAllocated to
ThePartnership |         | Use ofNet Sale Proceeds |   | Net Sale ProceedsDistributed toPartners
as ofJune 30, 2009 |  | Undistributed NetSale Proceeds BeingReserved as ofJune 30,
2009                                                                                                           
|Property Sold                                 |  |                       |  |                                     | 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  |                         |   | 28,401                                                     |  |   Funding for Fund I and Fund II Tucker operating expenses (2005)    Capital improvements
for 2100 Space Park Drive (2008)    Funding for Fund II and Fund II-OW (2008) |  |   | 48,329  |  |   | 0      
|                                              |  |                       |  |                                     |        |                                              |        
|Holcomb BridgeProperty(sold in 2004)          |  | $6,889,379            |  | 0.8%                                |        |                                              | 53,737  |                         |   | 19,886                                                     |  |   Funding for Fund I and Fund II Tucker operating expenses (2005)    Capital improvements
for 2100 Space Park Drive (2008)    Funding for Fund II and Fund II-OW (2008) |  |   | 33,851  |  |   | 0      
|                                              |  |                       |  |                                     |        |                                              |        
|Heritage Place  office portion(sold in 2006) |  | $4,028,043            |  | 2.6%                                |        |                                              | 102,715 |                         |   | 54,677                                                     |  |   Capital improvements for 2100 Space Park
Drive (2008 and 2009)    Funding for Fund II and Fund II-OW (2008 and 2009)                                                   |  |   | 0       |  |   | 48,038 
|                                              |  |                       |  |                                     |        |                                              |        
|Louis Rose(sold in 2009)                      |  | $1,975,436            |  | 5.3%                                |        |                                              | 104,896 |                         |   | 0                                                          |  |                                                                                                                                                                            |  |   | 0       |  |   | 104,896
|                                              |  |                       |  |                                     |        |                                              |        
|2100 Space Park Drive(sold in 2009)           |  | $7,717,991            |  | 3.4%                                |        |                                              | 261,305 |                         |   | 0                                                          |  |                                                                                                                                                                            |  |   | 0       |  |   | 261,305
|                                              |  |                       |  |                                     |        |                                              |         |                         |   |                                                            |  |                                                                                                                                                                            |  |   |         |  |   |        
|                                              |  |                       |  |                                     |        |                                              |        
|Total                                         |  |                       |  |                                     |        | $                                            | 920,956 |                         | $ | 181,717                                                    |  |                                                                                                                                                                            |  | $ | 325,000 |  | $ | 414,239
|                                              |  |                       |  |                                     |        |                                              |         |                         |   |                                                            |  |                                                                                                                                                                            |  |   |         |  |   |        

Upon evaluating the remaining obligations of the Partnership associated with its final dissolution, our
General Partners anticipate distributing net sale proceeds of approximately $350,000 in October 2009, as further described below. In addition, our General Partners intend to make a final liquidating distribution to the limited partners of any
proceeds that are not required to fund final dissolution costs for the Partnership in the fourth quarter of 2009.



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Contractual Obligations and Commitments

In August 2009, our General Partners approved a distribution of net sale proceeds from the sales of Heritage Place  office portion, Louis Rose and 2100 Space Park Drive of approximately $350,000 in
October 2009. In addition, our General Partners intend to make a final liquidating distribution to the limited partners of any proceeds that are not required to fund final dissolution costs for the Partnership and to dissolve the Partnership in
the fourth quarter of 2009. These distributions will be made to limited partners effective as of October 1, 2009. In order to make this distribution in October, we must receive any transfers of unit
ownership in good order no later than August 31, 2009. Furthermore, since these will be the final distributions for the Partnership, the Partnership will not recognize transfers received after August 31, 2009.

These distributions have not been formally declared by our General Partners. In accordance with the terms of the partnership agreement, our General Partners may elect to
retain reserves deemed reasonably necessary in the sole discretion of our General Partners. Thus, should a change in circumstances prior to the intended distribution dates require our General Partners to reevaluate our reserve requirements, it is
possible that these distributions may not occur, or that such distributions could be made at lower amounts.

Results of Operations

Equity in loss of Fund II and Fund II-OW was $519 and $63,154 for the three months ended June 30, 2009 and 2008, respectively. The decrease in loss is primarily
attributable to (i) 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; (ii) an increase in rental and
reimbursement income in the second quarter of 2009 as a result of an increase in occupancy at 2100 Space Park Drive prior to disposition; and (iii) the gain recognized on the sales of the Louis Rose Building and 2100 Space Park Drive in the
second quarter of 2009, of which approximately $900 and $1,900, respectively, were allocated to the Partnership.

Equity in loss of Fund II and Fund II-OW
was $35,226 and $71,762 for the six months ended June 30, 2009 and 2008, respectively. The decrease in loss is primarily attributable to (i) 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; (ii) an increase in rental and reimbursement income in 2009 as a result of an increase in occupancy at 2100 Space Park Drive prior to disposition;
(iii) the gain recognized on the sales of the Louis Rose Building and 2100 Space Park Drive in the second quarter of 2009, of which approximately $900 and $1,900, respectively, were allocated to the Partnership, partially offset by
(iv) an impairment loss recognized by Fund II-III Associates related to 2100 Space Park Drive in the first quarter of 2009, of which approximately $29,000 was allocated to the Partnership.

We anticipate future equity in loss of Fund II and Fund II-OW to be reflective of the Partnerships share of costs associated with wrapping up the affairs of the
Joint Ventures and the Partnership in the third and fourth quarters of 2009.

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.



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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 were required to make subjective assessments as to the useful lives of our depreciable assets. We considered the period of
future benefit of the assets to determine the appropriate useful lives. These assessments had a direct impact on net income. The estimated useful lives of the Joint Ventures assets were depreciated using the straight-line method over the
following useful lives:



|                      |  |                                       
|--------------------- |  | --------------------------------------
|                      | 
|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 utilized inappropriate useful lives or methods of depreciation, our net
income would be misstated.

Evaluating the Recoverability of Real Estate Assets

We continually monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets in which we had an ownership interest through investments in the Joint
Ventures were not recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not be recoverable, we assessed the recoverability of the real estate assets by determining
whether the respective carrying values would be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their 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 such expected undiscounted future cash flows for assets held for use, or the estimated fair values, less costs to sell, for assets held for sale, did not exceed the respective
assets carrying values, we adjusted the real estate assets to the respective estimated fair values, pursuant to the provisions of SFAS No. 144, and recognized an impairment loss. Estimated fair values were calculated based on the
following information, in order of preference, dependent upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage
value.

In the first quarter of 2009, Fund II-III Associates recorded an impairment loss on 2100 Space Park Drive of approximately $850,000 (approximately
$29,000 of which was allocated to the Partnership) to reduce the carrying value of the property to a revised estimate of its fair value estimated based on an executed contract to sell the property for $8,000,000, less estimated selling costs.

In the second quarter of 2008, Fund II and Fund II-OW recorded an impairment loss on the Louis Rose Building of approximately $931,000 (approximately
$49,000 of which was allocated to the Partnership) in order to reduce the carrying value of the property to its estimated fair value prompted by managements decision to refine its strategy for disposing of the building. In the fourth quarter
of 2008, Fund II and Fund II-OW recorded an additional impairment loss on the Louis Rose Building of approximately $1,205,000 (approximately $64,000 of which was allocated to the Partnership) in order to reduce the carrying value of the property to
a revised estimate of its fair value estimated based on an executed contract to sell the property for $2,122,000, less estimated selling costs.

Projections of expected future cash flows required that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the
property, and the number of years the property is held for investment, among other factors.



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The subjectivity of assumptions used in the future cash flow analysis, including discount rates, would have resulted in an incorrect assessment of the
propertys future cash flows and fair value, and could have resulted in the misstatement 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.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2009 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.



|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, 2009, requiring disclosure under Item 103 of Regulation S-K. For a description of
pending litigation involving certain related parties, see Assertion of Legal Action Against Related-Parties in Note 4 to our financial statements included in this report.



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|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, 2008.



|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, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended June 30, 2009.
|--- | ------------------------------------------------------------------------



|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, 2009.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



|(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, 2009.



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



|(a) | During the quarter ended June 30, 2009, 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.



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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 12, 2009 |  |  |  | /s/ LEO F. WELLS, III                                                                             
|                |  |  |  | Leo F. Wells, III President, Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|                |  | 
|August 12, 2009 |  |  |  | /s/ DOUGLAS P. WILLIAMS                                                                           
|                |  |  |  | Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.                            



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EXHIBIT INDEX

TO SECOND QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



|              |  |                                                                                                                                                                                                                    
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                            
|              | 
|*10.1         |  | Purchase and Sale Agreement for the sale of the Louis Rose Building (Exhibit 10(ll) to the Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2008,
Commission File No. 0-16518)        
|              | 
|*10.2         |  | Purchase and Sale Agreement for the sale of 2100 Space Park Drive (Exhibit 10.2 to the Form 10-Q of Wells Real Estate Fund II for the quarter ended March 31, 2009, Commission File No.
1-16518)                   
|              | 
|*10.3         |  | First Amendment to Purchase and Sale Agreement for the sale of 2100 Space Park Drive (Exhibit 10.3 to the Form 10-Q of Wells Real Estate Fund II for the quarter ended March 31,
2009, Commission File No. 1-16518)
|              | 
|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