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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



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

For the quarterly period ended March 31, 2006 or



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

For the transition period from
 to

Commission file number 0-17876



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WELLS REAL ESTATE FUND II-OW

(Exact name of registrant as specified in its
charter)



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

N/A

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

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No ̈

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

|Large | accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x
|----- | ------------------------------------------------------------

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



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund II-OW (the Partnership) other than historical facts may be considered
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans, strategies, and
prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a
guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will, expect, intend,
anticipate, estimate, believe, continue, or other similar words. Specifically, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future
obligations, and the amount and timing of any future distributions to limited partners to be forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this
report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update
or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are
subject to unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or
impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to
stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005 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March 31, 2006 (unaudited) and December 31, 2005                                                            |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2005 and the Three Months Ended March 31, 2006 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2006 (unaudited) and 2005 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 16      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                    |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                          |  | 22      
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                                                               |  | 22      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 22      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                            |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 22      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                          |  | 22      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                   |  | 22      



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PART I.    FINANCIAL STATEMENTS

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

The 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, 2005. The
Partnerships results of operations for the three months ended March 31, 2006 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)    |         |                  
|                                             |  | March 31, 2006 |         | December 31, 2005
|Investment in Fund II and Fund II-OW         |  | $              | 565,011 |                   | $ | 593,240
|Due from Fund II and Fund II-OW              |  |                | 397,263 |                   |   | 392,134
|Cash and cash equivalents                    |  |                | 5,184   |                   |   | 5,184  
|                                             |  |                |         |                   |   |        
|Total assets                                 |  | $              | 967,458 |                   | $ | 990,558
|                                             |  |                |         |                   |   |        
|                                            
|LIABILITIES AND PARTNERS CAPITAL           
|                                             |  |               
|Partners capital:                           |  |                |         |                   |   |        
|Limited partners:                            |  |                |         |                   |   |        
|Class A  6,062 units issued and outstanding |  | $              | 967,458 |                   | $ | 990,432
|Class B  1,626 units issued and outstanding |  |                | 0       |                   |   | 126    
|General partners                             |  |                | 0       |                   |   | 0      
|                                             |  |                |         |                   |   |        
|Total partners capital                      |  |                | 967,458 |                   |   | 990,558
|                                             |  |                |         |                   |   |        
|Total liabilities and partners capital      |  | $              | 967,458 |                   | $ | 990,558
|                                             |  |                |         |                   |   |        

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF OPERATIONS



|                                                 |  |                                         |         |   |      |   |        |  
|------------------------------------------------ |  | --------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                 |  | (Unaudited) Three Months EndedMarch 31, |        
|                                                 |  | 2006                                    |         |   | 2005 |  
|EQUITY IN LOSS OF FUND II AND FUND II-OW         |  | $                                       | (23,100 | ) |      | $ | (2,040 | )
|                                                 |  |                                         |         |   |      |   |        |  
|                                                 |  |                                        
|NET LOSS                                         |  | $                                       | (23,100 | ) |      | $ | (2,040 | )
|                                                 |  |                                         |         |   |      |   |        |  
|                                                 |  |                                        
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS: |  |                                         |         |   |      |   |        |  
|CLASS A                                          |  | $                                       | (22,974 | ) |      | $ | 5,549  |  
|                                                 |  |                                         |         |   |      |   |        |  
|CLASS B                                          |  | $                                       | (126    | ) |      | $ | (7,589 | )
|                                                 |  |                                         |         |   |      |   |        |  
|                                                 |  |                                        
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:      |  |                                         |         |   |      |   |        |  
|CLASS A                                          |  | $                                       | (3.79   | ) |      | $ | 0.92   |  
|                                                 |  |                                         |         |   |      |   |        |  
|CLASS B                                          |  | $                                       | (0.08   | ) |      | $ | (4.67  | )
|                                                 |  |                                         |         |   |      |   |        |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2005

AND THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)



|                           |  |                  |  |        |                  |   |                         |       |        |   |         |   |  |   |   |  |   |           |  
|-------------------------- |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ----- | ------ | - | ------- | - |  | - | - |  | - | --------- | -
|                           |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |      
|                           |  | Class A          |  |        | Class B          |   |                         |      
|                           |  | Units            |  | Amount |                  |   | Units                   |       | Amount |   |         |  
|BALANCE, DECEMBER 31, 2004 |  | 6,062            |  | $      | 974,710          |   |                         | 1,626 |        | $ | 30,343  |   |  | $ | 0 |  | $ | 1,005,053 |  
|                           |  |                  |  |        |                  |  
|Net income (loss)          |  | 0                |  |        | 15,722           |   |                         | 0     |        |   | (30,217 | ) |  |   | 0 |  |   | (14,495   | )
|                           |  |                  |  |        |                  |   |                         |       |        |   |         |   |  |   |   |  |   |           |  
|BALANCE, DECEMBER 31, 2005 |  | 6,062            |  |        | 990,432          |   |                         | 1,626 |        |   | 126     |   |  |   | 0 |  |   | 990,558   |  
|                           |  |                  |  |        |                  |  
|Net loss                   |  | 0                |  |        | (22,974          | ) |                         | 0     |        |   | (126    | ) |  |   | 0 |  |   | (23,100   | )
|                           |  |                  |  |        |                  |   |                         |       |        |   |         |   |  |   |   |  |   |           |  
|BALANCE, MARCH 31, 2006    |  | 6,062            |  | $      | 967,458          |   |                         | 1,626 |        | $ | 0       |   |  | $ | 0 |  | $ | 967,458   |  
|                           |  |                  |  |        |                  |   |                         |       |        |   |         |   |  |   |   |  |   |           |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



STATEMENTS OF CASH FLOWS



|                                                                                |  |                                         |         |   |      |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                |  | (Unaudited) Three Months EndedMarch 31, |        
|                                                                                |  | 2006                                    |         |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |                                         |         |   |      |   |        |  
|Net loss                                                                        |  | $                                       | (23,100 | ) |      | $ | (2,040 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                         |         |   |      |   |        |  
|Equity in loss of Fund II and Fund II-OW                                        |  |                                         | 23,100  |   |      |   | 2,040  |  
|                                                                                |  |                                         |         |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                                         | 0       |   |      |   | 0      |  
|                                                                                |  |                                         |         |   |      |   |        |  
|CHANGE IN CASH AND CASH EQUIVALENTS                                             |  |                                         | 0       |   |      |   | 0      |  
|                                                                                |  |                                        
|CASH AND CASH EQUIVALENTS, beginning of period                                  |  |                                         | 5,184   |   |      |   | 5,342  |  
|                                                                                |  |                                         |         |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                        |  | $                                       | 5,184   |   |      | $ | 5,342  |  
|                                                                                |  |                                         |         |   |      |   |        |  

See accompanying notes.



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WELLS REAL ESTATE FUND II-OW



CONDENSED NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2006 (unaudited)



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

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

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

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



|                                                                      |  |                                                                                                  |  |                                                                                        
|--------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------
|Joint Venture                                                         |  | Joint Venture Partners                                                                           |  | Properties                                                                             
|Fund II and Fund II-OW                                                |  |   Wells Real Estate Fund II   Wells Real Estate Fund II-OW                                     |  | 1. Louis Rose Building A two-story office building located in Charlotte, North Carolina
|Fund I and Fund II Tucker                                             |  |   Wells Real Estate Fund I   Fund II and Fund II-OW                                            |  | 2. Heritage Place(1) A commercial office complex located in
Tucker, Georgia            
|Fund II and Fund III Associates (Fund II-III Associates)            |  |   Fund II and Fund II-OW   Wells Real Estate Fund III, L.P.                                    |  | 3. Boeing at the Atrium A four-story office building located in Houston, Texas         
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates) |  |   Fund II-III Associates   Wells Real Estate Fund VI, L.P.   Wells Real Estate Fund VII, L.P. |  | No properties owned during the periods presented.                                      



| | (1) | The retail portion of this property (approximately 30%) was sold in April 2003, and the remaining office component of this property was sold in May 2006.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Wells Real Estate Fund I, Wells Real Estate Fund II, Wells Real Estate Fund III, L.P., Wells Real Estate Fund VI, L.P., and
Wells Real Estate Fund VII, L.P. are affiliated with the Partnership through one or more common general partners. Each of 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 Form 10-K for the year ended December 31, 2005.



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

Basis of
Presentation

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting
principles (GAAP) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to
fairly and consistently present the results for such periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the
Partnerships Form 10-K for the year ended December 31, 2005.

Investment in Joint Ventures

The Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities under the provisions of Financial Accounting Standards Board
Interpretation No. (FIN) 46(R), Consolidation of Variable Interest Entities, which supersedes FIN 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements.
The Partnership does not have control over the operations of Fund II and Fund II-OW; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major decision or any
action that would materially affect the Joint Ventures, or their real property investments. Accordingly, upon applying the provisions of Statement of Financial Accounting Standard (SFAS) No. 94, Consolidation of All
Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in Fund II and Fund II-OW using the equity method of
accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income (loss)
and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

Distribution of Net Cash from Operations

Net cash
from operations, if available, is generally distributed to limited partners quarterly. In accordance with the partnership agreement, such distributions are paid first to each limited partner holding Class A Units until he has received an
8% per annum return on his adjusted capital contributions, as defined. Net cash from operations is then distributed to each limited partner holding Class B Units until he has received an 8% per annum return on his adjusted capital
contributions, as defined. Any excess net cash from operations would then be distributed to the General Partners until they have received 10% of the total distributions for the year. Thereafter, net cash from operations is distributed 90% to limited
partners and 10% to the General Partners.

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
reasonable 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.
| | - |  | --------------------------------------------------------------------------------------------



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

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

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

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

Impairment of Real Estate
Assets

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

Recent Accounting Pronouncements

In June 2005, the Financial
Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required
recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154
requires retrospective application to prior periods financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning
after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting pronouncements. The adoption of this statement is not expected to have a material effect on the Partnerships financial
statements.



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

Impairment of Real Estate
Assets

Fund I and Fund II Tucker considers real estate assets to be held for sale, as defined by SFAS No. 144, at the point at which a sale
contract is executed. During first quarter 2006, Fund I and Fund II Tucker executed a contract to sell the office component of Heritage Place for a gross sale price of $4,215,000. Upon entering into this contract, Fund I and Fund II Tucker
determined that the carrying value of the related real estate assets was not recoverable as compared to the gross sale price, less estimated costs to sell. Accordingly, Fund I and Fund II Tucker reduced the carrying value of such real estate assets
to the estimated fair value by recognizing an impairment loss of approximately $795,000 during the three months ended March 31, 2006, of which approximately $20,000 is allocable to the Partnership. This impairment loss is included in income
(loss) from discontinued operations in the table below.

Summary of Financial Information  Fund II and Fund II-OW

Condensed financial information for Fund II and Fund II-OW for the three months ended March 31, 2006 and 2005, respectively, is presented below:



|                       |  |                    |        |                    |   |        |  |   |          |   |  |   |         |  
|---------------------- |  | ------------------ | ------ | ------------------ | - | ------ |  | - | -------- | - |  | - | ------- | -
|                       |  | Total Revenues     |        | Net Loss           |  
|                       |  | Three Months Ended |        | Three Months Ended |  
|                       |  | March 31,          |        | March 31,          |  
|                       |  | 2006               |        | 2005               |   | 2006   |  |   | 2005     |  
|Fund II and Fund II-OW |  | $                  | 78,015 |                    | $ | 35,513 |  | $ | (435,028 | ) |  | $ | (38,415 | )
|                       |  |                    |        |                    |   |        |  |   |          |   |  |   |         |  

Summary of Financial Information  Fund II and Fund II-OWs Investments

Condensed financial information for the Joint Ventures in which the Partnership holds interests through its ownership in Fund II and Fund II-OW for the three months ended
March 31, 2006 and 2005, respectively, is presented below:



|                          |  |                    |         |                                         |   |         |                                           |   |                    |   |  |      |         |   |      |   |          |   |  |      |        |  |   |          |   |  |   |        
|------------------------- |  | ------------------ | ------- | --------------------------------------- | - | ------- | ----------------------------------------- | - | ------------------ | - |  | ---- | ------- | - | ---- | - | -------- | - |  | ---- | ------ |  | - | -------- | - |  | - | -------
|                          |  | Total Revenues     |         | Income (Loss) FromContinuing Operations |   |         | Income (Loss) FromDiscontinued Operations |   | Net Income (Loss) 
|                          |  | Three Months Ended |         | Three Months Ended                      |   |         | Three Months Ended                        |   | Three Months Ended
|                          |  | March 31,          |         | March 31,                               |   |         | March 31,                                 |   | March 31,         
|                          |  | 2006               |         | 2005                                    |   | 2006    |                                           |   | 2005               |   |  | 2006 |         |   | 2005 |   | 2006     |   |  | 2005
|Fund I and Fund II Tucker |  | $                  | 929     |                                         | $ | 0       |                                           | $ | (2,267             | ) |  | $    | (523    | ) |      | $ | (800,343 | ) |  | $    | 10,474 |  | $ | (802,610 | ) |  | $ | 9,951  
|Fund II-III Associates    |  |                    | 460,687 |                                         |   | 456,928 |                                           |   | 84,696             |   |  |      | 115,975 |   |      |   | 1,553    |   |  |      | 820    |  |   | 86,249   |   |  |   | 116,795
|                          |  |                    |         |                                         |   |         |                                           |   |                    |   |  |      |         |   |      |   |          |   |  |      |        |  |   |          |   |  |   |        
|                          |  | $                  | 461,616 |                                         | $ | 456,928 |                                           | $ | 82,429             |   |  | $    | 115,452 |   |      | $ | (798,790 | ) |  | $    | 11,294 |  | $ | (716,361 | ) |  | $ | 126,746
|                          |  |                    |         |                                         |   |         |                                           |   |                    |   |  |      |         |   |      |   |          |   |  |      |        |  |   |          |   |  |   |        

Summary of Financial Information  Fund II-III Associates Investments

Condensed financial information for the joint venture in which the Partnership holds an interest through its ownership in Fund II-III Associates for the three months
ended March 31, 2006 and 2005, respectively, is presented below:



|                              |  |                    |   |                                |   |      |                                    |      |                    |  |      |        |      |  |      |   |      |   |       |  |   |   |  |   |    
|----------------------------- |  | ------------------ | - | ------------------------------ | - | ---- | ---------------------------------- | ---- | ------------------ |  | ---- | ------ | ---- |  | ---- | - | ---- | - | ----- |  | - | - |  | - | ---
|                              |  | Total Revenues     |   | Loss FromContinuing Operations |   |      | Income FromDiscontinued Operations |      | Net Income        
|                              |  | Three Months Ended |   | Three Months Ended             |   |      | Three Months Ended                 |      | Three Months Ended
|                              |  | March 31,          |   | March 31,                      |   |      | March 31,                          |      | March 31,         
|                              |  | 2006               |   | 2005                           |   | 2006 |                                    | 2005 |                    |  | 2006 |        | 2005 |  | 2006 |   | 2005
|Fund II-III-VI-VII Associates |  | $                  | 0 |                                | $ | 0    |                                    | $    | 0                  |  | $    | (6,042 | )    |  | $    | 0 |      | $ | 6,353 |  | $ | 0 |  | $ | 311
|                              |  |                    |   |                                |   |      |                                    |      |                    |  |      |        |      |  |      |   |      |   |       |  |   |   |  |   |    



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



|                              |  |                       |        |   |                 |   |          |             |  |       |   |  |                       |          |   |                 |   |              |   |  |       |   |  |   |       |     |  |   |       
|----------------------------- |  | --------------------- | ------ | - | --------------- | - | -------- | ----------- |  | ----- | - |  | --------------------- | -------- | - | --------------- | - | ------------ | - |  | ----- | - |  | - | ----- | --- |  | - | ------
|                              |  | March 31, 2006        |        |   | March 31, 2005 
|                              |  | OperatingIncome(loss) |        |   | Impairment Loss |   |          | Gainon Sale |  | Total |   |  | OperatingIncome(loss) |          |   | Impairment Loss |   | Gain on Sale |   |  | Total
|Fund I and Fund II Tucker     |  | $                     | (5,531 | ) |                 | $ | (794,812 | )           |  | $     | 0 |  | $                     | (800,343 | ) |                 | $ | 10,474       |   |  | $     | 0 |  | $ | 0     |     |  | $ | 10,474
|Fund II-III Associates        |  |                       | 1,553  |   |                 |   | 0        |             |  |       | 0 |  |                       | 1,553    |   |                 |   | 820          |   |  |       | 0 |  |   | 0     |     |  |   | 820   
|Fund II-III-VI-VII Associates |  |                       | 0      |   |                 |   | 0        |             |  |       | 0 |  |                       | 0        |   |                 |   | (901         | ) |  |       | 0 |  |   | 7,254 | (1) |  |   | 6,353 
|                              |  |                       |        |   |                 |   |          |             |  |       |   |  |                       |          |   |                 |   |              |   |  |       |   |  |   |       |     |  |   |       
|                              |  | $                     | (3,978 | ) |                 | $ | (794,812 | )           |  | $     | 0 |  | $                     | (798,790 | ) |                 | $ | 10,393       |   |  | $     | 0 |  | $ | 7,254 |     |  | $ | 17,647
|                              |  |                       |        |   |                 |   |          |             |  |       |   |  |                       |          |   |                 |   |              |   |  |       |   |  |   |       |     |  |   |       



| | (1) | Represents additional gain recognized on the sale of the Holcomb Bridge Property, which
was deferred at closing related to a rental guarantee for certain space at the Holcomb Bridge Property.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due from Fund II and Fund
II-OW

As presented in the accompanying balance sheets, due from Fund II and Fund II-OW as of March 31, 2006 and December 31, 2005 represents
operating cash flow and net sale proceeds generated by Fund II and Fund II-OW, which is attributable to the Partnership.



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

Management and Leasing Fees

Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the
management and leasing of the Partnerships properties owned through Fund II and Fund II-OW equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time
lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in the case of
commercial properties leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. Management and leasing fees are paid
by the Joint Ventures and, accordingly, included in equity in loss of Fund II and Fund II-OW in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the
Joint Ventures is $972 and $991 for the three months ended March 31, 2006 and 2005, respectively.

Administration Reimbursements

Wells Capital, one of the General Partners, and Wells Management perform certain administrative services for the Partnership and Fund II and Fund II-OW, 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, included in equity loss of Fund II
and Fund -IIOW in the accompanying statements of operations. The Partnerships share of administrative costs reimbursed to Wells Capital and Wells Management by the Joint Ventures is $2,524 and $3,601 for the three months ended March 31,
2006 and 2005, respectively. In addition, Wells Capital pays for certain operating expenses of the Partnership (bill-backs) directly and invoices Fund II and Fund II-OW for the reimbursement thereof.

Economic Dependency

We have engaged Wells Capital and Wells
Management to provide certain essential services, including supervision of the management and leasing of our properties, asset acquisition and disposition services, as well as other administrative



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responsibilities for us including accounting services, investor communications and relations. These agreements are terminable by either party upon 60
days written notice. As a result of these relationships, we are dependent upon Wells Capital and Wells Management.

Wells Capital and Wells
Management are all owned and controlled by Wells Real Estate Funds, Inc. (WREF). The operations of Wells Capital and Wells Management represent substantially all of the business of WREF. Accordingly, we focus on the financial condition
of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF was to become unable to meet its obligations as they become due, we 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 of March 31, 2006, the General
Partners believe that WREF generates adequate cash flow from operations and has adequate liquidity available in the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.

Litigation against Related Parties

During early 2004, a putative
class action complaint was filed against, among others, Leo. F. Wells, III, one of our General Partners, Wells Capital, the corporate general partner of Wells Partners, our other general partner, and Wells Management (Hendry et al. v. Leo F.
Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791-2). The Court granted the plaintiffs motion to permit voluntary dismissal of this suit, and the case was subsequently dismissed without
prejudice. In November 2004, the same plaintiffs filed a second putative class action complaint against, among others, Mr. Wells, Wells Capital, and Wells Management (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett
County, Georgia Civil Action No. 04A-13051-6). The second action alleges, among other things, that: (i) Mr. Wells and Wells Capital breached their fiduciary duties to the limited partners of Wells Real Estate Fund I (Fund
I), a previously syndicated real estate partnership having common general partners, in connection with certain disclosures and prior actions relating to the distribution of net sale proceeds, (ii) the defendants breached an alleged
contract arising out of a June 2000 consent solicitation to the limited partners of Fund I relating to an alleged waiver of deferred management fees, and (iii) certain misrepresentations and omissions in an April 2002 consent solicitation to
the limited partners of Fund I caused that consent solicitation to be materially misleading. The plaintiffs seek, among other remedies, judgment against Mr. Wells and Wells Capital, jointly and severally, in an amount to be proven at trial;
punitive damages; disgorgement of fees earned by the General Partners; enforcement of the alleged contract relating to the alleged waiver of deferred management fees; and an award to the plaintiffs of their attorneys fees, costs, and expenses.
On January 28, 2005, the defendants filed motions for summary judgment and motions to dismiss the plaintiffs claims. Pursuant to orders entered July 1, 2005, the Court granted the defendants motions to dismiss and for summary
judgment on all counts in the complaint. Thus, this action has now been dismissed, subject to the plaintiffs right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the
Court to vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for reconsideration or notice of appeal. On February 15, 2006, the Court heard argument on the plaintiffs motion to vacate and to re-enter the
judgments previously entered on July 1, 2005. Following the argument, the Court stated orally from the bench that he would grant the motion, so the judgments could be re-entered to allow the plaintiffs thirty days within which to file a notice
of appeal. The Court has not yet entered an order granting this motion.

On or about August 8, 2005, the defendants filed a motion for attorneys
fees and expenses of litigation. On or about August 12, 2005, the plaintiffs filed a motion for attorneys fees and expenses of litigation as to one defense asserted by the defendants. On April 20, 2006, the Court held a hearing
addressing only the liability aspects of the defendants and the plaintiffs motions for attorneys fees and expenses. The Court has not yet ruled on either partys motion.



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|5. | SUBSEQUENT EVENT
|-- | ----------------

On May 10, 2006, Fund I and Fund II Tucker
sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a result of the sale, Fund I and Fund II Tucker received net sale proceeds of approximately $4,031,000, of which approximately $103,000
is allocable to the Partnership. Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000 in order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell, during the three months ended
March 31, 2006, and additionally recognized a gain on sale of approximately $10,000 upon closing the transaction. Approximately $(20,000) and $250 of the impairment loss and gain on sale are allocable to the Partnership, respectively. The gain
on sale may be adjusted as additional information becomes available in subsequent periods.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto. See also Cautionary Note Regarding Forward-Looking Statements preceding
Part I, as well as the notes to our financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2005.

Overview

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



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

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



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

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



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

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



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

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



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

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

Portfolio Overview

We are currently in the disposition-and-liquidation phase of our life cycle. Of the six assets in which we originally
owned interests, we have sold four assets including the office component of Heritage Place, which closed in May 2006. We continue to aggressively pursue leasing opportunities that will increase occupancy at the Louis Rose Building.

With a number of properties sold, our General Partners are currently reserving operating distributions to limited partners and net sale proceeds, held by Fund II and
Fund II-OW, to fund the re-leasing costs anticipated for the Louis Rose Building. Further, the General Partners anticipate continuing to reserve operating distributions primarily since the Louis Rose Building remains vacant. Once the outcome of the
re-leasing efforts is known, the General Partners will evaluate if distributions of net sale proceeds are appropriate.

Property Summary

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

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



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



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##### Table of Contents

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



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

Liquidity and Capital Resources

Overview

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

Short-Term Liquidity

We did not generate cash flow from operating
activities during the three months ended March 31, 2006 and 2005, as Fund II and Fund II-OW has continued 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 three months ended March 31, 2006 or 2005. The General Partners anticipate continuing to reserve operating distributions to limited partners, as we intend to fund our pro-rata share of
re-leasing and capital improvement costs at the Louis Rose Building and Boeing at the Atrium. Future operating distributions to limited partners will be largely dependent upon the amount of cash generated from the Joint Ventures, our expectations of
future cash flows, and determination of near-term cash needs for tenant re-leasing costs and other capital improvements for properties owned by the Joint Ventures.

During the remainder of 2006, we anticipate that we will be able to fund our proportionate share of the capital expenditures primarily with net sale proceeds held by Fund II and Fund II-OW.

Long-Term Liquidity

We expect that our future sources of capital
will be primarily derived from net proceeds generated from the selective and strategic sale of properties and operating cash flows generated from the Joint Ventures. Our future long-term liquidity requirements will include, but not be limited to,
funding tenant improvements, renovations, expansions, and other significant capital improvements necessary for properties owned through the Joint Ventures. Specifically, we anticipate funding the Partnerships proportionate share of anticipated
capital improvements and re-leasing costs at the Louis Rose Building and Boeing at the Atrium. Future cash flows from operating activities will be primarily affected by distributions received from the Joint Ventures, which are dependent upon the net
operating income generated by the Joint Ventures properties, less reserves for known capital expenditures.

We have encountered difficulties in
re-leasing the Louis Rose Building primarily due to the softening of the Charlotte office market and related Northeast submarket during the period following the expiration of the sole tenants lease on April 30, 2001. The Northeast
submarket of Charlotte continues to present challenges to landlords, primarily due to the



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##### Table of Contents

increasing availability of office space for lease, and low rental rates and concessions offered to prospective tenants. As of March 31, 2006, the
vacancy rate for the Northeast submarket of Charlotte is 25.9%, compared to the vacancy rate for Charlotte as a whole of 14.3%. Accordingly, we are uncertain as to when the Louis Rose Building will be re-leased, the level of rental rates which may
be achieved in connection with such re-leasing, or the amount of re-leasing costs we will be required to fund in connection with the potential leasing of this property.

Capital Resources

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

The Joint Ventures fund capital expenditures primarily related to building improvements for the purpose of maintaining the quality of our properties, and tenant improvements for the purpose of readying our properties for re-leasing. As
leases expire, we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those funded in connection
with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates. Any capital or other expenditures not provided for by the operations
of the Joint Ventures will be required to be funded by the Partnership and the respective joint venture partners on a pro-rata basis.

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

As of March 31, 2006, Fund II and Fund II-OW received, used, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



|                                              |  |                        |           |                                      |     |         |                                               |   |                          |  |                                                              |        |                                                                           |                                                                                                                          |  |   |   |  |   |        
|--------------------------------------------- |  | ---------------------- | --------- | ------------------------------------ | --- | ------- | --------------------------------------------- | - | ------------------------ |  | ------------------------------------------------------------ | ------ | ------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |  | - | - |  | - | -------
|Property Sold                                 |  | Total Net SaleProceeds |           | Partnerships ApproximateOwnership % |     |         | Net SaleProceeds Allocated to the Partnership |   | Use of Net Sale Proceeds |  | Net Sale Proceeds Distributed toPartners as ofMarch 31, 2006 |        | Undistributed NetSale ProceedsCurrently BeingReserved as ofMarch 31,
2006
|                                              |  |                        |           | Amount                               |     | Purpose |                                               |  
|                                              |  |                        |           |                                      |     |         |                                              
|Cherokee Commons(sold in 2001)                |  | $                      | 8,414,089 |                                      | 2.9 | %       |                                               | $ | 239,776                  |  | $                                                            | 77,421 |                                                                           |   Re-leasing of Boeing at the Atrium (2003 and 2002)   Funding for Fund I and Fund II Tucker operating expenses (2005) |  | $ | 0 |  | $ | 162,355
|                                              |  |                        |           |                                      |     |         |                                              
|Heritage Place  retail portion(sold in 2003) |  |                        | 3,207,708 |                                      | 2.6 | %       |                                               |   | 81,797                   |  |                                                              | 1,332  |                                                                           |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 0 |  |   | 80,465 
|                                              |  |                        |           |                                      |     |         |                                              
|880 Holcomb Bridge(sold in 2004)              |  |                        | 6,889,379 |                                      | 0.8 | %       |                                               |   | 53,737                   |  |                                                              | 297    |                                                                           |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 0 |  |   | 53,440 
|                                              |  |                        |           |                                      |     |         |                                              
|Brookwood Grill(sold in 2004)                 |  |                        | 2,318,115 |                                      | 3.3 | %       |                                               |   | 76,730                   |  |                                                              | 429    |                                                                           |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 0 |  |   | 76,301 
|                                              |  |                        |           |                                      |     |         |                                               |   |                          |  |                                                              |        |                                                                           |                                                                                                                          |  |   |   |  |   |        
|                                              |  |                        |           |                                      |     |         |                                              
|Total                                         |  |                        |           |                                      |     |         |                                               | $ | 452,040                  |  | $                                                            | 79,479 |                                                                           |                                                                                                                          |  | $ | 0 |  | $ | 372,561
|                                              |  |                        |           |                                      |     |         |                                               |   |                          |  |                                                              |        |                                                                           |                                                                                                                          |  |   |   |  |   |        



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##### Table of Contents

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

Results of Operations

Equity in loss of Fund II and Fund II-OW was $23,100 and $2,040 for the three months ended March 31, 2006 and 2005, respectively. The 2006 increase, as compared to
2005, is primarily attributable to (i) recognizing a $795,000 impairment loss at the office component of Heritage Place, (ii) an increase in administrative expenses related to increased reporting and regulatory requirements, and
(iii) a decrease in rental income and tenant reimbursements as a result of the decrease in occupancy at Heritage Place.

We expect future equity in
income of Joint Ventures to decrease as we sell additional properties in subsequent periods and incur additional increases in our administrative expenses in future periods resulting from increased costs relating to compliance with reporting and
regulatory requirements.

Inflation

We are exposed to
inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that would protect us from the impact of inflation. These provisions include rent
steps, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per-square-foot basis, or in some cases, annual reimbursement of operating expenses above a certain per-square-foot
allowance. However, due to the long-term nature of our leases, the leases may not readjust their reimbursement rates frequently enough to cover inflation.

Application of Critical Accounting Policies

Summary

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

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

Investment in Real Estate Assets

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



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

In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income
would be misstated.



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##### Table of Contents

Valuation of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest, either directly or through investments in the
joint ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by
determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted
future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value, as defined by SFAS No. 144, and recognizes an impairment loss. Estimated fair values are calculated based on the following
information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage
value. As of March 31, 2006, Fund I and Fund II Tucker recorded an impairment loss for the office component of Heritage Place of approximately $795,000, of which approximately $20,000 was allocated to the Partnership.

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

Related-Party Transactions

We have entered into agreements with
Wells Capital, Wells Management, an affiliate of our General Partners, and their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells Management, and their affiliates for asset management; the management and
leasing of our properties; administrative services relating to accounting, property management, and other partnership administration; and incur the related expenses. See Note 4 to our financial statements included in this report for a
description of these fees and expense reimbursements we have incurred.

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

The American Jobs Creation Act of 2004 added Section 470 to the Internal Revenue Code, which provides certain
limitations on the utilization of losses by investors that are allocable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. In March 2005, the Internal Revenue Service
(IRS) issued IRS Notice 2005-29, which announced that the IRS would not apply Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In
December 2005, the IRS issued IRS Notice 2006-2 extending the period for transitional relief through the 2005 tax year; however, it is important to note that IRS Notices 2005-29 and 2006-2 provide relief for partnerships only for tax years 2004 and
2005. Although the IRS has indicated that it is continuing to study the application of Section 470 to partnerships, such as the Partnership, unless further legislation is enacted to address this issue, or some other form of relief from the
provisions of Section 470 of the American Jobs Creation Act of 2004 is granted, beginning in tax year 2006, and thereafter, passive losses allocable to limited partners holding Class B Units may only be used to offset passive income generated
from the same property or within the same fund.

Subsequent Event

On May 10, 2006, Fund I and Fund II Tucker sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a result of the sale, Fund I and Fund II Tucker received
net sale proceeds of approximately $4,031,000, of which approximately $103,000 is allocable to the Partnership. Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000 in order to reduce the carrying value of



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Heritage Place to its estimated fair value, less costs to sell, during the three months ended March 31, 2006, and additionally recognized a gain on sale
of approximately $10,000 upon closing the transaction. Approximately $(20,000) and $250 of the impairment loss and gain on sale are allocable to the Partnership, respectively. The gain on sale may be adjusted as additional information becomes
available in subsequent periods.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

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



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

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

There were no significant changes in our internal control over financial reporting during the quarter ended March 31, 2006 that have materially affected, or are
likely to materially affect, our internal control over financial reporting.



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PART II.    OTHER INFORMATION



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

We are from time to time a party to other 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 March 31, 2006, requiring disclosure under Item 103 of Regulation S-K.



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

There have been no material changes from the risk
factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005.



|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 March 31, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



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



|(c) | We did not redeem any securities during the quarter ended March 31, 2006.
|--- | -------------------------------------------------------------------------



|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 March 31, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



|(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 March 31, 2006.



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



|(a) | During the quarter ended March 31, 2006, 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 First Quarter Form 10-Q attached hereto.



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SIGNATURES

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



|             |  |  |  |                                                                                                    |  |                            
|------------ |  |  |  | -------------------------------------------------------------------------------------------------- |  | ---------------------------
|             |  |  |  | WELLS REAL ESTATE FUND II-OW (Registrant)                                                         
|             |  |  | 
|             |  |  |  | By:                                                                                                |  | WELLS CAPITAL, INC.        
|             |  |  |  |                                                                                                    |  | (Corporate General Partner)
|             |  | 
|May 11, 2006 |  |  |  | /S/    LEO F. WELLS,
III                                                                          
|             |  |  |  | Leo F. Wells, III President, Principal
Executive Officer, and Sole Director of Wells Capital, Inc.
|             |  | 
|May 11, 2006 |  |  |  | /S/    DOUGLAS P.
WILLIAMS                                                                        
|             |  |  |  | Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.                            



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EXHIBIT INDEX

TO

FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



|            |  |                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                         
|            | 
|10.1        |  | Purchase and Sale Agreement for office portion of Heritage Place (previously filed with the Commission as Exhibit 10.3 to the Form 10-Q of Wells Real Estate Fund I for the period ending March
31, 2006, Commission File No. 0-14463, and hereby incorporated by this reference)                   
|            | 
|10.2        |  | First Amendment to Purchase and Sale Agreement for office portion of Heritage Place (previously filed with the Commission as Exhibit 10.4 to the Form 10-Q of Wells Real Estate Fund I for the
period ending March 31, 2006, Commission File No. 0-14463, and hereby incorporated by this reference)
|            | 
|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