##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



---



(Mark One)



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



For the quarterly period ended March 31, 2005 or



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



For the transition period from
 to



Commission file number 0-17876



---



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                         



---

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



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



Yes  x    No ̈



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



Yes ̈No  x



---



---

##### Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund II-OW (the
Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in
particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, will,
expect, intend, anticipate, estimate, believe, continue, or other similar words. Specifically, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements.



Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is
filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ
materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



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



General economic risks



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



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



Enterprise risks



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



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



Real estate risks



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



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



Page 2



---

##### Table of Contents

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



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



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



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



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



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



Other operational risks



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



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



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



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



Page 3



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                            |  |         
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                            |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                                                       |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsMarch 31, 2005 (unaudited) and December 31, 2004                                                            |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months Ended March 31, 2005 (unaudited) and 2004 (unaudited)                        |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2004 and the Three Months Ended March 31, 2005 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Three Months Ended March 31, 2005 (unaudited) and 2004 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                        |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 12      
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                                                                 |  | 21      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                    |  | 21      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                           
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                                                          |  | 22      
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 22      
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                            |  | 22      
|         |  |                       | 
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 22      
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                                                          |  | 22      
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                   |  | 22      



Page 4



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





BALANCE SHEETS



ASSETS



|                                           |  |                            |           |                   |   |          
|------------------------------------------ |  | -------------------------- | --------- | ----------------- | - | ---------
|                                           |  | (unaudited) March 31, 2005 |           | December 31, 2004
|Investment in Fund II and Fund II-OW       |  | $                          | 591,304   |                   | $ | 599,836  
|Due from Fund II and Fund II-OW            |  |                            | 406,367   |                   |   | 399,875  
|Cash and cash equivalents                  |  |                            | 5,342     |                   |   | 5,342    
|                                           |  |                            |           |                   |   |          
|Total assets                               |  | $                          | 1,003,013 |                   | $ | 1,005,053
|                                           |  |                            |           |                   |   |          
|                                          
|LIABILITIES AND PARTNERS CAPITAL         
|                                           |  |                           
|PARTNERS CAPITAL:                         |  |                            |           |                   |   |          
|Limited partners:                          |  |                            |           |                   |   |          
|Class A6,062 units issued and outstanding |  | $                          | 980,259   |                   | $ | 974,710  
|Class B1,626 units issued and outstanding |  |                            | 22,754    |                   |   | 30,343   
|General partners                           |  |                            | 0         |                   |   | 0        
|                                           |  |                            |           |                   |   |          
|Total partners capital                    |  |                            | 1,003,013 |                   |   | 1,005,053
|                                           |  |                            |           |                   |   |          
|Total liabilities and partners capital    |  | $                          | 1,003,013 |                   | $ | 1,005,053
|                                           |  |                            |           |                   |   |          



See accompanying notes.



Page 5



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





STATEMENTS OF OPERATIONS

(unaudited)



|                                                 |  |                              |        |   |      |   |        |  
|------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                 |  | Three Months Ended March 31, |       
|                                                 |  | 2005                         |        |   | 2004 |  
|EQUITY IN LOSS OF FUND II AND FUND II-OW         |  | $                            | (2,040 | ) |      | $ | (8,818 | )
|                                                 |  |                              |        |   |      |   |        |  
|NET LOSS                                         |  | $                            | (2,040 | ) |      | $ | (8,818 | )
|                                                 |  |                              |        |   |      |   |        |  
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS: |  |                              |        |   |      |   |        |  
|CLASS A                                          |  | $                            | 5,549  |   |      | $ | (8,818 | )
|                                                 |  |                              |        |   |      |   |        |  
|CLASS B                                          |  | $                            | (7,589 | ) |      | $ | 0      |  
|                                                 |  |                              |        |   |      |   |        |  
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:      |  |                              |        |   |      |   |        |  
|CLASS A                                          |  | $                            | 0.92   |   |      | $ | (1.45  | )
|                                                 |  |                              |        |   |      |   |        |  
|CLASS B                                          |  | $                            | (4.67  | ) |      | $ | 0.00   |  
|                                                 |  |                              |        |   |      |   |        |  



See accompanying notes.



Page 6



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





STATEMENTS OF PARTNERS CAPITAL



FOR THE YEAR ENDED DECEMBER 31, 2004

AND THREE MONTHS ENDED MARCH 31, 2005 (unaudited)



|                           |  |                  |  |         |                  |   |                         |       |         |   |        |   |  |   |   |  |   |           |  
|-------------------------- |  | ---------------- |  | ------- | ---------------- | - | ----------------------- | ----- | ------- | - | ------ | - |  | - | - |  | - | --------- | -
|                           |  | Limited Partners |  |         | General Partners |   | Total Partners Capital |      
|                           |  | Class A          |  |         | Class B          |   |                         |      
|                           |  | Units            |  | Amounts |                  |   | Units                   |       | Amounts |   |        |  
|BALANCE, December 31, 2003 |  | 6,062            |  | $       | 992,671          |   |                         | 1,626 |         | $ | 0      |   |  | $ | 0 |  | $ | 992,671   |  
|                           |  |                  |  |         |                  |  
|Net income (loss)          |  | 0                |  |         | (17,961          | ) |                         | 0     |         |   | 30,343 |   |  |   | 0 |  |   | 12,382    |  
|                           |  |                  |  |         |                  |   |                         |       |         |   |        |   |  |   |   |  |   |           |  
|BALANCE, December 31, 2004 |  | 6,062            |  |         | 974,710          |   |                         | 1,626 |         |   | 30,343 |   |  |   | 0 |  |   | 1,005,053 |  
|                           |  |                  |  |         |                  |  
|Net income (loss)          |  | 0                |  |         | 5,549            |   |                         | 0     |         |   | (7,589 | ) |  |   | 0 |  |   | (2,040    | )
|                           |  |                  |  |         |                  |   |                         |       |         |   |        |   |  |   |   |  |   |           |  
|BALANCE, March 31, 2005    |  | 6,062            |  | $       | 980,259          |   |                         | 1,626 |         | $ | 22,754 |   |  | $ | 0 |  | $ | 1,003,013 |  
|                           |  |                  |  |         |                  |   |                         |       |         |   |        |   |  |   |   |  |   |           |  



See accompanying notes.



Page 7



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                |  |                              |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | Three Months Ended March 31, |       
|                                                                                |  | 2005                         |        |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |  |                              |        |   |      |   |        |  
|Net loss                                                                        |  | $                            | (2,040 | ) |      | $ | (8,818 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                              |        |   |      |   |        |  
|Equity in loss of Fund II and Fund II-OW                                        |  |                              | 2,040  |   |      |   | 8,818  |  
|                                                                                |  |                              |        |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                              | 0      |   |      |   | 0      |  
|                                                                                |  |                             
|CASH AND CASH EQUIVALENTS, beginning of period                                  |  |                              | 5,342  |   |      |   | 6,161  |  
|                                                                                |  |                              |        |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                        |  | $                            | 5,342  |   |      | $ | 6,161  |  
|                                                                                |  |                              |        |   |      |   |        |  



See accompanying notes.



Page 8



---

##### Table of Contents

WELLS REAL ESTATE FUND II-OW





CONDENSED NOTES TO FINANCIAL STATEMENTS



MARCH 31, 2005 (unaudited)



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



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



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



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



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



| | (1) |  | The retail portion of this property (approximately 30%) was sold in April 2003.
| | --- |  | -------------------------------------------------------------------------------

| | (2) |  | These properties were sold in July 2004.
| | --- |  | ----------------------------------------



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



Page 9



---

##### Table of Contents

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, 2004.



On July 1,
2004, Fund II-III Associates and Fund II-III-VI-VII Associates, collectively, sold Brookwood Grill and the Holcomb Bridge Property to an unrelated third party for a gross sale price of $9,500,000. As a result of the sale of Brookwood Grill, the
Partnership received net sale proceeds of approximately $78,000 and was allocated a gain of approximately $26,000. As a result of the sale of the Holcomb Bridge Property, the Partnership received net sale proceeds of approximately $54,000 and was
allocated a gain of approximately $16,000, of which approximately $1,000 was deferred. The deferred gain represents the Partnerships pro rata allocation of maximum exposure under an eighteen-month rental guarantee provided to the purchaser in
connection with the sale. As of March 31,2005, the Partnership recognized approximately $150 of the deferred gain.



|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 present the results for such periods. Results for interim periods are not
necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the year ended December 31, 2004.



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.



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



Page 10



---

##### Table of Contents

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



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



Management and Leasing Fees



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, is entitled to compensation for the management and leasing of the
Partnerships properties owned through Fund II-IIOW Associates equal to (a) of the gross revenues collected monthly, 3% for management services and 3% 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 which are 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 Venture and,
accordingly, included in equity in loss of Fund II-IIOW Associates in the accompanying statements of operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Fund II-IIOW Associates is
$991 and $1,680 for the three months ended March 31, 2005 and 2004, respectively.



Administration Reimbursements



Wells Capital, one of the
General Partners, and Wells Management perform certain administrative services for the Partnership and Fund II-IIOW Associates, relating to accounting and other partnership administration, and incur the related expenses. Such expenses are allocated
among various other entities affiliated with the General Partners based on time spent on each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation of such expenses. The
administrative charges related to the Partnership are recorded by Fund II-IIOW Associates and, therefore, included in equity loss of Fund II-IIOW Associates in the accompanying statements of operations. Fund II-IIOW Associates reimbursed Wells
Capital and Wells Management $3,601 and $2,881 for the three months ended March 31, 2005 and 2004, respectively, on behalf of the Partnership.



|4. | INVESTMENTS IN JOINT VENTURES
|-- | -----------------------------



Basis of Presentation



The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for
any major decision or any action that would materially affect the Joint Ventures or their real property investments. Accordingly, the Partnerships investment in Fund II-IIOW Associates is recorded using the equity method of accounting, whereby
original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. For further information, refer to the financial statements and footnotes included in the
Partnerships Form 10-K for the year ended December 31, 2004.



Page 11



---

##### Table of Contents

Summary of OperationsFund II-IIOW Associates



Condensed financial information for Fund II-IIOW Associates for the three months ended March 31, 2005 and 2004, respectively, is presented
below:



|                        |  |                              |        |                              |   |        |  |   |         |   |  |   |          |  
|----------------------- |  | ---------------------------- | ------ | ---------------------------- | - | ------ |  | - | ------- | - |  | - | -------- | -
|                        |  | Total Revenues               |        | Net Loss                     |  
|                        |  | Three Months Ended March 31, |        | Three Months Ended March 31, |  
|                        |  | 2005                         |        | 2004                         |   | 2005   |  |   | 2004    |  
|Fund II-IIOW Associates |  | $                            | 35,513 |                              | $ | 10,781 |  | $ | (38,415 | ) |  | $ | (167,546 | )
|                        |  |                              |        |                              |   |        |  |   |         |   |  |   |          |  



Summary of OperationsFund
II-IIOW Associates Investments



Condensed financial information for
the Joint Ventures in which the Partnership holds interests through its ownership in Fund II-IIOW Associates for the three months ended March 31, 2005 and 2004, respectively, is presented below:



|                            |  |                              |         |                                         |   |         |                                    |      |                              |  |      |         |      |  |      |     |      |   |        |  |   |         |  |   |         |  
|--------------------------- |  | ---------------------------- | ------- | --------------------------------------- | - | ------- | ---------------------------------- | ---- | ---------------------------- |  | ---- | ------- | ---- |  | ---- | --- | ---- | - | ------ |  | - | ------- |  | - | ------- | -
|                            |  | Total Revenues               |         | Income (Loss) FromContinuing Operations |   |         | Income FromDiscontinued Operations |      | Net Income (Loss)            | 
|                            |  | Three Months Ended March 31, |         | Three Months Ended March 31,            |   |         | Three Months Ended March 31,       |      | Three Months Ended March 31, | 
|                            |  | 2005                         |         | 2004                                    |   | 2005    |                                    | 2004 |                              |  | 2005 |         | 2004 |  | 2005 |     | 2004 |  
|Fund I-II Tucker Associates |  | $                            | 173,786 |                                         | $ | 178,220 |                                    | $    | 9,951                        |  | $    | (28,520 | )    |  | $    | 0   |      | $ | 0      |  | $ | 9,951   |  | $ | (28,520 | )
|Fund II-III Associates      |  |                              | 456,928 |                                         |   | 446,104 |                                    |      | 115,975                      |  |      | 19,992  |      |  |      | 820 |      |   | 56,949 |  |   | 116,795 |  |   | 76,941  |  
|                            |  |                              |         |                                         |   |         |                                    |      |                              |  |      |         |      |  |      |     |      |   |        |  |   |         |  |   |         |  
|                            |  | $                            | 630,714 |                                         | $ | 624,324 |                                    | $    | 125,926                      |  | $    | (8,528  | )    |  | $    | 820 |      | $ | 56,949 |  | $ | 126,746 |  | $ | 48,421  |  
|                            |  |                              |         |                                         |   |         |                                    |      |                              |  |      |         |      |  |      |     |      |   |        |  |   |         |  |   |         |  



Summary of OperationsFund
II-III Associates Investments



Condensed financial information for
the joint venture in which the Partnership holds an interest through its ownership in Fund II-III Associates for the three months ended March 31, 2005 and 2004, respectively, is presented below:



|                              |  |                              |   |                                  |   |                                           |  |                              |       |      |   |   |      |   |      |   |      |   |        |  |   |     |  |   |       
|----------------------------- |  | ---------------------------- | - | -------------------------------- | - | ----------------------------------------- |  | ---------------------------- | ----- | ---- | - | - | ---- | - | ---- | - | ---- | - | ------ |  | - | --- |  | - | ------
|                              |  | Total Revenues               |   | Income FromContinuing Operations |   | Income (Loss) FromDiscontinued Operations |  | Net Income                  
|                              |  | Three Months Ended March 31, |   | Three Months Ended March 31,     |   | Three Months Ended March 31,              |  | Three Months Ended March 31,
|                              |  | 2005                         |   | 2004                             |   | 2005                                      |  | 2004                         |       | 2005 |   |   | 2004 |   | 2005 |   | 2004
|Fund II-III-VI-VII Associates |  | $                            | 0 |                                  | $ | 0                                         |  | $                            | 1,212 |      | $ | 0 |      | $ | (901 | ) |      | $ | 94,378 |  | $ | 311 |  | $ | 94,378
|                              |  |                              |   |                                  |   |                                           |  |                              |       |      |   |   |      |   |      |   |      |   |        |  |   |     |  |   |       



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



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



Overview



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



Page 12



---

##### Table of Contents

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



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

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



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

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



Portfolio Overview



We are currently in the disposition-and-liquidation phase of our life cycle. We have now sold three assets and a portion of Heritage Place. Our focus on the remaining assets involves leasing and marketing efforts that
we believe will result in the best disposition pricing for our investors. We continue to aggressively pursue leasing opportunities that will increase occupancy at Heritage Place and the Louis Rose Building.



With a number of properties sold, the General Partners are currently reserving operating cash
and net sale proceeds to fund the re-leasing costs anticipated for the Louis Rose Building and Heritage Place. Further, the General Partners anticipate continuing to reserve operating distributions until Louis Rose Building is re-leased. 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



Information related to the properties owned by the Joint Ventures follows:



| |  |  | The Louis Rose Building is currently vacant. We are aggressively working on re-leasing the building. We will continue to focus our efforts on re-leasing the Louis Rose Building,
which has remained vacant since the expiration of First Unions lease on April 30, 2001. Softening of the Charlotte office market and related Northeast submarket over the past three years has made the re-leasing of this building challenging.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Cherokee Commons property was sold in 2001, and the Partnership received net sale proceeds of approximately $240,000. A portion of the proceeds approximately $64,000 was used to
fund the Partnerships pro-rata share of re-leasing costs at the Boeing at the Atrium in 2002 and 2003. In March 2005, approximately $12,000 was used to fund operating expenses at Heritage Place. The remaining approximately $164,000 has been
reserved to fund the re-leasing costs for the Louis Rose Building, which is currently vacant, and Heritage Place.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 in 2003, and the Partnership received net sale proceeds of approximately $82,000. These proceeds have been reserved to fund the
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page 13



---

##### Table of Contents

| | re-leasing costs for the Louis Rose Building. The remaining office component at Heritage Place is currently 53% leased, and our leasing efforts continue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Boeing at the Atrium is currently 100% occupied by the Boeing/Shuttle Division of The Boeing Company.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Brookwood Grill was sold on July 1, 2004, and the Partnership received net sale proceeds of approximately $78,000. The General Partners are reviewing costs anticipated to re-lease
Louis Rose Building and Heritage Place to determine if all, or a portion, of these proceeds can be distributed in 2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Holcomb Bridge Property was sold on July 1, 2004, and the Partnership received net sale proceed of approximately $54,000. The General Partners are reviewing costs anticipated to
re-lease Louis Rose Building and Heritage Place to determine if all, or a portion, of these proceeds can be distributed in 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 buyers.



Industry Factors



Our results continue to be impacted by a number of factors influencing the real estate industry.



General Economic and Real Estate Market Commentary



Management reviews a number of economic forecasts and market commentaries in order to evaluate general economic conditions and formulate a view of the
current environments effect on the real estate markets in which we operate.



Management believes that the U.S. economy is continuing on the path of slow, but steady recovery. Job growth is improving, with 2.2 million jobs created in 2004, and with another 2.4 to 2.8 million projected to be
added in 2005. Gross Domestic Product growth and renewed business confidence are fueling the job growth. However, uncertainty still exists in the economy, primarily due to high oil prices, the war in Iraq, the trade deficit, and other global issues.



The U.S. office real estate market has begun to show modest
improvement. The strength of the overall economy is having a positive impact on office real estate fundamentals. Positive absorption of office space combined with a decline in new construction has contributed to the increase in office occupancy
rates for three consecutive quarters. Although occupancy rates have increased, management does not expect that they will rise by more than 200 basis points annually. As a result, management anticipates that it could be a minimum of two to three
years before vacancy rates reach the equilibrium level of ten to twelve percent. Average asking rates stabilized in the second half of 2004. Management believes that renewed employment growth should benefit the office market; however, the
uncertainty that still exists in the economy is causing many firms to continue to be more cautious with their investment and hiring decisions. Importantly, management believes the pace and strength of the recovery for office real estate will vary by
market. Market conditions vary widely by geographical region, metropolitan area, submarket, and property.



The real estate capital transaction market continues to be very active. Capitalization rates (cap rates) have continued to decline in spite of
the fact that the Federal Reserve (the Fed) increased the Federal Funds Rate five times in 2004. Management believes that the decline in cap rates is predominately driven by increased capital flows into real estate. The spread between
average cap rates and 10-year U.S. Treasuries narrowed in 2004; however, this was primarily due to a drop in cap rates rather than a rise in 10-year U.S. Treasuries. In managements opinion, absent a significant move in interest rates or a
significant decrease in the number of parties interested in acquiring real estate, cap rates are not expected to significantly increase from their current levels in 2005.



Page 14



---

##### Table of Contents

Real Estate Funds with Current Vacancy or Near-term Rollover Exposure



Real estate funds, such as the Partnership, that own interests in properties
with current vacancies or near-term tenant rollover may face a challenging leasing environment. The properties within these funds will generally face lower rents and higher concession packages to the tenants in order to re-lease vacant space.



From a valuation standpoint, it is generally preferable to
either renew an existing tenant lease or re-lease the property prior to marketing it for sale. Generally, buyers will heavily discount their offering prices to compensate for existing or pending vacancies.



Results of Operations



Equity in Loss of Fund II and Fund II-OW



Equity in loss of Fund II and Fund II-OW Associates was $(2,040)) and $(8,818) for the three months ended March 31, 2005 and 2004, respectively. The 2005 decrease in loss
is primarily due to (i) an increase in interest income as a result of holding net proceeds from the July 2004 sales of Brookwood Grill and the Holcomb Bridge Property during the first quarter of 2005, and (ii) a decline in depreciation expense as a
result of changing the useful life for all buildings owned through the Joint Ventures from 25 years to 40 years effective July 1, 2004, partially offset by (iii) forgone operating income resulting from the sale of the two aforementioned properties,
and (iv) an increase in administrative expenses recorded by Fund II-IIOW Associates resulting from increased reporting and regulatory requirements. We anticipate additional increases in expenses related to implementing and adhering to such reporting
and regulatory requirements on a going forward basis. Fund II-IIOW Associates pays for and recognizes all Partnership expenses.



Liquidity and Capital Resources



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



Short-Term Liquidity



During the three
months ended March 31, 2005 and 2004, respectively, we generated no net operating cash flows. Fund II-IIOW Associates continues to reserve operating distributions received from its investments in the Joint Ventures otherwise payable to the
Partnership in order to provide funding for the costs anticipated in connection with re-leasing the Louis Rose Building and Heritage Place. Accordingly, no operating distributions were paid to limited partners during the three months ended March 31,
2005. The General Partners anticipate continuing to reserve operating distributions to limited partners until the Louis Rose Building is re-leased and the related re-leasing costs are funded. 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.



Page 15



---

##### Table of Contents

We believe that the cash on hand and distributions due from the Joint Ventures are sufficient to cover our current
working capital needs. During the remainder of 2005, our General Partners anticipate that we will be able to fund our proportionate share of capital expenditures noted above.



Long-Term Liquidity



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



We have encountered problems re-leasing the Louis Rose Building primarily due to the
softening of the Charlotte office market and related Northeast submarket during the period following the expiration of First Unions lease on April 30, 2001. The Northeast submarket of Charlotte continues to face challenges as the result of new
office product deliveries, offering attractive rental rates and other concessions to potential tenants. Current vacancy in the submarket is 39.2%, compared to the vacancy rate for Charlotte as a whole of 17.3%. Accordingly, there is no guarantee
when the Louis Rose Building will be re-leased or the level of rental rates which may be achieved in connection therewith.



Capital Resources



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



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



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



Page 16



---

##### Table of Contents

As of March 31, 2005, Fund II-IIOW Associates received, used, and held net proceeds attributable to the Partnership from
the sale of properties as presented below:



|                                            |  |                   |           |                                     |     |         |                                             |   |                       |  |                                |        |                                               |                                                                                                                       |  |   |   |  |   |        
|------------------------------------------- |  | ----------------- | --------- | ----------------------------------- | --- | ------- | ------------------------------------------- | - | --------------------- |  | ------------------------------ | ------ | --------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- |  | - | - |  | - | -------
|Property Sold                               |  | Total NetProceeds |           | PartnershipsApproximateOwnership % |     |         | Net ProceedsAttributable to the Partnership |   | Net Proceeds Invested |  | Distributed toPartners to date |        | Undistributed NetProceeds as ofMarch 31, 2005
|                                            |  |                   |           | Amount                              |     | Purpose |                                             |  
|Cherokee Commons (sold in
2001)             |  | $                 | 8,414,089 |                                     | 2.9 | %       |                                             | $ | 239,776               |  | $                              | 75,763 |                                               |     Re-leasing of Boeing at the Atrium (2003)     Funding for Fund I-II Tucker Associates operating expenses (2005) |  | $ | 0 |  | $ | 164,013
|Heritage Placeretailportion (sold in 2003) |  |                   | 3,207,708 |                                     | 2.6 | %       |                                             |   | 81,797                |  |                                | 0      |                                               |                                                                                                                       |  |   | 0 |  |   | 81,797 
|880 HolcombBridge (sold in 2004)            |  |                   | 6,889,379 |                                     | 0.8 | %       |                                             |   | 53,737                |  |                                | 0      |                                               |                                                                                                                       |  |   | 0 |  |   | 53,737 
|Brookwood Grill (sold in
2004)              |  |                   | 2,346,693 |                                     | 3.3 | %       |                                             |   | 77,676                |  |                                | 0      |                                               |                                                                                                                       |  |   | 0 |  |   | 77,676 
|                                            |  |                   |           |                                     |     |         |                                             |   |                       |  |                                |        |                                               |                                                                                                                       |  |   |   |  |   |        
|Total                                       |  |                   |           |                                     |     |         |                                             | $ | 452,986               |  | $                              | 75,763 |                                               |                                                                                                                       |  | $ | 0 |  | $ | 377,223
|                                            |  |                   |           |                                     |     |         |                                             |   |                       |  |                                |        |                                               |                                                                                                                       |  |   |   |  |   |        



Rather than distributing to the
limited partners, the Partnerships share of the net proceeds generated from these sales being held in reserve at Fund II-IIOW Associates as the General Partners continue to evaluate the capital needs of the existing properties in which the
Partnership holds an interest in consideration of the best interests of the limited partners.



Related-Party Transactions



Related-Party Fees and Reimbursements



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



Economic Dependency



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



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



Page 17



---

##### Table of Contents

WREFs net income was approximately $5.5 million for the three months ended March 31, 2005. 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 of Wells Real Estate Investment Trust
II, Inc., an affiliated real estate investment trust for which Wells Capital serves as the advisor, and the volume of future acquisitions and dispositions of real estate assets by Wells-sponsored programs. As of March 31, 2005 and December 31, 2004,
WREF held cash balances of approximately $16.2 million and $6.3 million, respectively. WREF believes that it has adequate liquidity available in the form of cash on hand and current receivables necessary to meet its 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, and Wells Capital, our General Partners, and Wells Management. The Court granted the plaintiffs motion to permit voluntary dismissal of this suit, and it was 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. On January 28, 2005, the defendants filed motions to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed
briefs in opposition to the defendants motions to dismiss. The Court has not yet ruled on these pending motions. The details of both complaints are outlined below.



As a matter of background, on or about March 12, 2004, a putative class action complaint (the Original Complaint) was filed by
four individuals (the plaintiffs) against Wells Real Estate Fund I, and Wells Capital, and Leo F. Wells, III (collectively, the General Partners of Wells Real Estate Fund I), as well as Wells Management and Wells Investment
Securities, Inc. (WIS) (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2). Wells Real Estate Fund I is a public limited partnership. The plaintiffs filed the
Original Complaint purportedly on behalf of all limited partners holding B units of Wells Real Estate Fund I as of January 15, 2003. The Original Complaint alleged, among other things, that (a) the General Partners of Wells Real Estate Fund I, WIS,
and Wells Real Estate Fund I negligently and fraudulently made false statements and material omissions in connection with the initial sale (September 6, 1984September 5, 1986) of the B units to investors of Wells Real Estate Fund I by making
false statements and omissions in sales literature relating to the distribution of net sale proceeds to holders of B units, among other things; (b) the General Partners of Wells Real Estate Fund I and Wells Real Estate Fund I negligently and
fraudulently misrepresented and concealed disclosure of, among other things, alleged discrepancies between such statements and provisions in the partnership agreement for a period of time in order to delay such investors from taking any legal,
equitable, or other action to protect their investments in Wells Real Estate Fund I, among other reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners; and
(d) the General Partners of Wells Real Estate Fund I and Wells Real Estate Fund I breached fiduciary duties to the limited partners. On June 3, 2004, the Court granted the plaintiffs motion to permit voluntary dismissal, and the Original
Complaint was dismissed without prejudice.



On or about November 24, 2004, the
plaintiffs filed a second putative class action complaint (the Complaint) against Mr. Wells, Wells Capital, Wells Management, and Wells Real Estate Fund I (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett
County, Georgia, Civil Action No. 04A-13051 6) (the Hendry Action). The plaintiffs filed the Complaint purportedly on behalf of all limited partners holding B units of Wells Real Estate Fund I as of January 9, 2002. The Complaint
alleges, among other things, that the General Partners of Wells Real Estate Fund I breached their fiduciary duties to the limited partners by, among other things; (a) failing to timely disclose alleged inconsistencies between sales literature and
the partnership agreement relating to the distribution of net sale proceeds; (b) engaging in a scheme to fraudulently conceal alleged inconsistencies between sales literature and the partnership agreement relating to the distribution of net sale
proceeds; and (c) not accepting a settlement offer proposed by a holder of A units and a holder of A and B units in other litigation naming Wells Real Estate Fund I as a defendant, in which other litigation the court subsequently granted summary
judgment in favor of Wells Real Estate Fund I. The Complaint also alleges that misrepresentations and



Page 18



---

##### Table of Contents

omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be materially misleading. In addition, the
Complaint alleges, among other things, that the General Partners of Wells Real Estate Fund I and Wells Management breached an alleged contract arising out of a June 2000 consent solicitation to the limited partners relating to an alleged waiver of
deferred management fees.



The plaintiffs seek, among other remedies, the
following: judgment against the General Partners of Wells Real Estate Fund I, jointly and severally, in an amount to be proven at trial; punitive damages; disgorgement of fees earned by the General Partners directly or through their affiliates; a
declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of the June 2000 consent solicitation to waive Wells Managements deferred management fees;
and an award to plaintiffs of their attorneys fees, costs and expenses. The Complaint states that Wells Real Estate Fund I is named only as a necessary party defendant and that the plaintiffs seek no money from or relief at the expense of
Wells Real Estate Fund I. On January 28, 2005, the defendants filed motions to dismiss the plaintiffs claims. On March 31, 2005, the plaintiffs filed briefs in opposition to the defendants motions to dismiss. The Court has not yet ruled
on these pending motions. Due to the uncertainties inherent in the litigation process, it is not possible to predict the ultimate outcome of this matter at this time. However, an adverse outcome could adversely affect the ability of Wells Capital,
Wells Management, and Mr. Wells to fulfill their respective duties under the agreements and relationships they have with us.



The Hendry Action states that Wells Real Estate Fund I is named only as a necessary defendant and that the plaintiffs are seeking no money from or relief at the expense
of Wells Real Estate Fund I. Since the partnership agreement of Wells Real Estate Fund I contains no provision for advancing defense costs to the General Partners of Wells Real Estate Fund I in connection with litigation involving the partnership in
instances where the plaintiffs are seeking no monetary relief from the partnership, the General Partners of Wells Real Estate Fund I, currently Wells Capital, are funding the legal fees, costs, and expenses relating to this litigation. As of March
31, 2005, Wells Capital had incurred approximately $215,000 in legal fees, costs, and expenses related to defending the Hendry Action. At this time, management is unable to determine whether the likelihood of an unfavorable outcome is either
probable or remote.



Conflicts of Interest



Our General Partners are also general partners of other affiliated public limited
partnerships (the Wells Real Estate Funds). In addition, Well Capital sponsors and advises two affiliated real estate investment trusts (the REITs) in which it retains residual interests. As such, there may exist conflicts of
interest whereby the General Partners, in their capacity as general partners of other Wells Real Estate Funds or as the advisor to the REITs, may be in competition with us with respect to, among other things, locating suitable replacement tenants or
prospective acquirers for property dispositions.



Inflation



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



Application of Critical Accounting Policies



The
Partnerships accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making
estimates and assumptions. These judgments affect the reported amounts of assets and



Page 19



---

##### Table of Contents

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



Below is a discussion of the accounting policies that management
considers to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. Additional discussion of accounting policies that management considers to be significant,
including further discussion of the critical accounting policies described below, is presented in Note 1 to the Partnerships financial statements included in this report.



Investment in Real Estate Assets



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



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



Effective July 1, 2004, the Joint
Ventures extended the weighted -average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to our net income for the three months ended March 31, 2005. We believe that this change more
appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be
misstated.



Valuation of Real Estate Assets



We continually monitor events and changes in circumstances that could indicate that the
carrying amounts of the real estate assets in which we have an ownership interest, either directly or through investments in the Joint Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the
carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered through the undiscounted future
operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and
recognizes an impairment loss. We have determined that there has been no impairment in the carrying value of real estate assets held by the Partnership at March 31, 2005.



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



American Jobs Creation Act of 2004



The American Jobs Creation Act of 2004 (the Act) added Section 470 to the
Internal Revenue Code, which provides certain limitations on the utilization of losses allocable to leased property owned by a partnership



Page 20



---

##### Table of Contents

having both taxable and tax-exempt partners such as the Partnership. Currently, it is unclear as to how the transition rules and effective dates set forth in
the Act will apply to entities such as the Partnership. However, on March 11, 2005, the Internal Revenue Service issued IRS Notice 2005-29 announcing that the IRS will not apply Section 470 to partnerships for taxable year 2004 based solely on the
fact that a partnership had both taxable and tax-exempt partners. It is important to note that IRS Notice 2005-29 provides relief for partnerships for taxable year 2004 only. Accordingly, unless Congress passes corrective legislation which addresses
this issue or some other form of relief from the provisions of Section 470 of the Act is granted, based on a strict reading of the Act, beginning in 2005 and thereafter, future passive losses allocable to Class B limited partners may only be used to
offset passive income generated from the same property or within the same fund.



|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
|------- | -----------------------



The Partnership 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 the Partnerships disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities
Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were effective.



There were no significant changes in the Partnerships internal control over financial
reporting during the quarter ended March 31, 2005 that have materially affected, or are likely to materially affect, the Partnerships internal control over financial reporting.



Page 21



---

##### Table of Contents

PART II.    OTHER INFORMATION



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



We were not involved in any material legal proceedings during the quarter ended March 31, 2005 requiring disclosure under Item 103 of Regulation S-K.



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



|(a) |  | We did not sell any equity securities that were not registered under the Securities Act of 1933 during the quarter ended March 31, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------



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



|(c) |  | We did not redeem any securities during the quarter ended March 31, 2005.
|--- |  | -------------------------------------------------------------------------



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



We were not subject to any indebtedness, and therefore, we did not default respect to any indebtedness during the quarter ended March 31, 2005.



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



No matters were submitted to a vote of our limited partners during the quarter ended March 31, 2005.



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



Not applicable.



|ITEM 6. | EXHIBITS
|------- | --------



The Exhibits required to be filed with this report are set forth on the Exhibit Index to First Quarter Form 10-Q attached hereto.





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 13, 2005 |  |  |  | /s/    LEO F. WELLS, III                                                                          
|             |  |  |  | Leo F. Wells, III President, Principal
Executive Officer, and Sole Director of Wells Capital, Inc.
|             |  | 
|May 13, 2005 |  |  |  | /s/    DOUGLAS P. WILLIAMS                                                                        
|             |  |  |  | Douglas P. Williams Principal Financial
Officer of Wells Capital, Inc.                            



Page 22



---

##### Table of Contents

EXHIBIT INDEX

TO FIRST QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND II-OW



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