<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

                                   Form 10-Q

 
 
(Mark one)
 
[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ended   June 30, 1998                               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                      0-16518
                      ---------------------------------------------------------
 
                         Wells Real Estate Fund II-OW
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
 
           Georgia                                      58-1678709
-------------------------------            ------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

3885 Holcomb Bridge Road, Norcross, Georgia                30092
-------------------------------------------------------------------------------
(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 
     -------         -------
<PAGE>
 
                                   Form 10-Q
                                   ---------

                         Wells Real Estate Fund II-OW
                         ----------------------------

                                     INDEX
                                     -----

 
                                                                        Page No.

PART I.  FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
        Balance Sheets - June 30, 1998
         and December 31, 1997..............................................   3
 
        Statements of Income for the Three Months and Six Months
         Ended June 30, 1998 and 1997.......................................   4
 
        Statements of Partners' Capital for the Year Ended
         December 31, 1997 and the Six Months
         Ended June 30, 1998................................................   5
 
        Statements of Cash Flows for the Six Months
         Ended June 30, 1998 and 1997.......................................   6
 
        Condensed Notes to Financial Statements.............................   7
 
Item 2. Management's Discussion and Analysis of
         Financial Condition and Results of
         Operations.........................................................  11
 

PART II.  OTHER INFORMATION.................................................  19

                                       2
<PAGE>
 
                          WELLS REAL ESTATE FUND II-OW
                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)
                                        
                                 BALANCE SHEETS
 
 
             Assets                     June 30, 1998  December 31, 1997
             ------                     -------------  -----------------
 
Investment in joint venture (Note 2)       $1,276,402         $1,315,255
Cash and cash equivalents                         667                741
Due from affiliate                             22,621             18,109
                                           ----------         ----------
 
     Total assets                          $1,299,690         $1,334,105
                                           ==========         ==========

 Liabilities and Partners' Capital
 ---------------------------------
 
Liabilities:
 Accounts payable                          $      165         $      237
 Partnership distributions payable             22,724             18,213
                                           ----------         ----------
     Total liabilities                         22,889             18,450
                                           ----------         ----------
 
Partners' Capital:
 Limited Partners:
  Class A - 6,062 units                     1,276,801          1,315,655
  Class B - 1,626 units                             0                  0
                                           ----------         ----------
 
     Total partners' capital                1,276,801          1,315,655
                                           ----------         ----------
 
       Total liabilities and partners' 
          capital                          $1,299,690         $1,334,105
                                           ==========         ==========

           See accompanying condensed notes to financial statements.

                                       3
<PAGE>
 
                         WELLS REAL ESTATE FUND II-OW 
                    (A GEORGIA PUBLIC LIMITED PARTNERSHIP) 
                          STATEMENTS OF (LOSS) INCOME

<TABLE> 
<CAPTION> 
                                         Three Months Ended                 Six Months Ended
                                  ------------------------------    ------------------------------
                                  June 30, 1998    June 30, 1997    June 30, 1998    June 30, 1997
                                  -------------    -------------    -------------    ------------- 
<S>                               <C>              <C>              <C>              <C> 
Revenues:                                                                          
  Equity in (loss) income of                                                       
   joint ventures (Note 2)              $2,737           $(6,509)          $5,248         $(14,088)
                                        ------           -------           ------         --------
                                                                                   
Expenses:                                                                          
  Partnership administration                 0                 9                0                9
                                        ------           -------           ------         --------
  Net income (loss)                     $2,737           $(6,500)          $5,248         $(14,079)
                                        ======           =======           ======         ========
                                                                                   
Net income (loss) allocated to                                                     
  Class A Limited Partners              $2,738           $(6,500)          $5,248         $(14,079)
                                                                                   
Net loss allocated to Class                                                        
  B Limited Partners                    $ 0.00           $  0.00           $ 0.00         $   0.00
                                                                                   
Net income (loss) per Class A                                                      
  Limited Partner Unit                  $ 0.46           $ (1.07)          $ 0.87         $  (2.32)
                                                                                   
Net loss per Class B Limited                                                       
  Partner Unit                          $ 0.00           $  0.00           $ 0.00         $   0.00
                                                                                   
Cash distribution per Class A                                                      
  Limited Partner Unit                  $ 3.73           $  0.00           $ 7.27         $   0.00
</TABLE>

           See accompanying condensed notes to financial statements.

                                       4
<PAGE>
 
                          WELLS REAL ESTATE FUND II-OW

                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)
                                        
                        STATEMENTS OF PARTNERS' CAPITAL
                                        
          FOR THE YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED
                                 JUNE 30, 1998
                                        
<TABLE>
<CAPTION>
                                              LIMITED PARTNERS               
                                     -----------------------------------
                                           CLASS A           CLASS B         TOTAL 
                                     -------------------  --------------   PARTNERS' 
                                     UNITS    AMOUNTS     UNITS  AMOUNTS    CAPITAL
                                     -----  ------------  -----  -------  ------------
<S>                                  <C>    <C>           <C>    <C>       <C>
BALANCE, DECEMBER 31, 1996           6,062   $1,370,809   1,626       $0   $1,370,809
 
Net loss                                 0      (18,601)      0        0      (18,601)
Partnership distributions                0      (36,553)      0        0      (36,553)
                                     -----   ----------   -----       --   ----------
BALANCE, DECEMBER 31, 1997           6,062    1,315,655   1,626        0    1,315,655
 
Net income                               0        5,248       0        0        5,248
Partnership distributions                0      (44,102)      0        0      (44,102)
                                     -----   ----------   -----       --   ----------
BALANCE, JUNE 30, 1998               6,062   $1,276,801   1,626       $0   $1,276,801
                                     =====   ==========   =====       ==   ==========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       5
<PAGE>
 
                         WELLS REAL ESTATE FUND II-OW
                    (A GEORGIA PUBLIC LIMITED PARTNERSHIP)
                                        
                           STATEMENTS OF CASH FLOWS
                                        
<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                      ------------------------------
                                                                      June 30, 1998   June 30, 1997
                                                                      --------------  --------------
<S>                                                                   <C>             <C>
Cash flows from operating activities:
 Net income (loss)                                                         $  5,248        $(14,079)
 Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
   Equity in (income) loss of joint ventures                                 (5,248)         14,088
   Changes in assets and liabilities:
     Withholdings and accounts payable                                          (72)            (95)
                                                                           --------        --------
     Total adjustments                                                       (5,320)         14,183
                                                                           --------        --------
      Net cash provided by (used in)
       operating activities                                                     (72)            104
                                                                           --------        --------
 
Cash flow from investing activities:
 Investment in joint venture                                                      0         (11,073)
 Distributions received from joint venture                                   39,590          18,214
                                                                           --------        --------
                                                                             39,590           7,141
 
Cash flow from financing activities:
 Distributions to partners from accumulated earnings
                                                                            (39,591)         (8,473)
                                                                           --------        --------  
 
Net (decrease) in cash and cash equivalents                                     (73)         (1,228)
 
Cash and cash equivalents, beginning of year                                    741           2,074
                                                                           --------        --------
 
Cash and cash equivalents, end of period                                   $    668        $    846
                                                                           ========        ========
</TABLE>

           See accompanying condensed notes to financial statements.

                                       6
<PAGE>
 
                         WELLS REAL ESTATE FUND II-OW
                    (A Georgia Public Limited Partnership)

                    Condensed Notes to Financial Statements

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

     (a)  General
     ------------

     Wells  Real  Estate  Fund II-OW (the "Partnership")  is a  Georgia  public
     limited partnership having Leo F. Wells, III and Wells Capital, Inc., as
     General Partners.  The Partnership was formed on October 23, 1987, for the
     purpose of acquiring, developing, constructing, owning, operating,
     improving, leasing and otherwise managing for investment purposes income-
     producing commercial or industrial properties.

     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, and received gross proceeds of $1,922,000
     representing subscriptions from 219 Limited Partners, composed of two
     classes of limited partnership interests, Class A and Class B limited
     partnership units.

     The Partnership owns equity interests in properties through its ownership
     in the following joint ventures:  (i) Fund II-Fund II-OW Joint Venture, a
     joint venture between the Partnership and Wells Real Estate Fund II (the
     "Fund II-Fund II-OW Joint Venture"); (ii) Fund II-Fund III Joint Venture, a
     joint venture between the Fund II-Fund II-OW Joint Venture and Wells Real
     Estate Fund III, L.P. ("Fund II-Fund III Joint Venture"); (iii) Fund II-
     III-VI-VII Associates, a  joint venture between the Fund II-Fund III Joint
     Venture, Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII,
     L.P. ("Fund II, III, VI, VII Joint Venture"); (iv) Fund I-Fund II Joint
     Venture, a joint venture between the Fund II-Fund II-OW Joint Venture and
     Wells Real Estate Fund I ("the Tucker Joint Venture"); and (v) Fund I, II,
     II-OW, VI, VII Associates, a joint venture between Wells Real Estate Fund
     I, the Fund II-Fund II-OW Joint Venture, Wells Real Estate Fund VI, L.P.,
     and Wells Real Estate Fund VII, L.P. ("Fund I, II, II-OW, VI, VII Joint
     Venture").   Please refer to the Partnership's Form 10-K for the year ended
     December 31, 1997 for additional information on the joint ventures and
     properties in which the Partnership owns an interest.

     As of June 30, 1998, the Partnership owned interests in the following
     properties through its ownership of the foregoing joint ventures: (i) a
     two-story office building located in Charlotte, North Carolina ("First
     Union at Charlotte"); (ii) a four-story office building located in
     metropolitan Houston, Texas (the "Atrium"); (iii) a restaurant located in
     Fulton County, Georgia ("the Brookwood Grill"); (iv) an office/retail
     center developed in Fulton 

                                       7
<PAGE>
 
     County, Georgia ("Holcomb Bridge Road"); (v) a retail shopping and
     commercial office complex located in Tucker, Georgia ("Heritage Place at
     Tucker"); and (vi) a shopping center located in Cherokee County, Georgia
     ("Cherokee Commons"). All of the foregoing properties were acquired on an
     all cash basis. For further information regarding these joint ventures and
     properties, refer to the Partnership's Form 10-K for the year ended
     December 31, 1997.

     (b)  Basis of Presentation
     --------------------------

     The financial statements of Wells Real Estate Fund II-OW (the
     "Partnership") have been prepared in accordance with instructions to Form
     10-Q and do not include all of the information and footnotes required by
     generally accepted accounting principles for complete financial statements.
     These quarterly statements have not been examined by independent
     accountants, but in the opinion of the General Partners, the statements for
     the unaudited interim periods presented include all adjustments, which are
     of a normal and recurring nature, necessary to present a fair presentation
     of the results for such periods.  For further information, refer to the
     financial statements and footnotes included in the Partnership's Form 10-K
     for the year ended December 31, 1997.

(2)  Investment in Joint Ventures
     ----------------------------

     The Partnership owned interests in six properties as of June 30, 1998.  The
     Partnership does not have control over the operations of the joint
     ventures; however, it does exercise significant influence.  Accordingly,
     investment in joint ventures is recorded on the equity method.

                                       8
<PAGE>
 
Following are the financial statements for Fund II and II-OW:

                               FUND II AND II-OW
                           (A GEORGIA JOINT VENTURE)

                                BALANCE SHEETS
                                        
<TABLE>
<CAPTION>
                     Assets                          June 30, 1998  December 31, 1997
                     ------                          -------------  -----------------
<S>                                                  <C>            <C>
Real estate, at cost:                             
 Land                                                  $ 1,367,856        $ 1,367,856
 Building and improvements, less accumulated     
 depreciation of $2,439,951 in 1998 and          
 $2,256,118 in 1997                                      5,331,167          5,515,000
                                                       -----------        -----------
                                                 
     Total real estate assets                            6,699,023          6,882,856
                                                       -----------        -----------
                                                 
Investment in joint ventures                            17,216,093         17,734,845
Cash and cash equivalents                                   72,451             84,392
Due from affiliates                                        349,229            248,623
Accounts receivable                                         59,088             84,207
Prepaid expenses and other assets                           52,209             61,183
                                                       -----------        -----------
                                                 
     Total assets                                      $24,448,093        $25,096,106
                                                       ===========        ===========
                                                 
       Liabilities and Partners' Capital                
       ---------------------------------
                                                 
Liabilities:                                     
 Partnership distributions payable                     $   426,004        $   341,034
 Due to affiliates                                           3,288              4,561
                                                       -----------        -----------
                                                 
     Total liabilities                                     429,292            345,595
                                                       -----------        -----------
                                                 
Partners' capital:                               
 Wells Real Estate Fund II                              22,742,399         23,435,256
 Wells Real Estate Fund II-OW                            1,276,402          1,315,255
                                                       -----------        -----------
                                                 
     Total partners' capital                            24,018,801         24,750,511
                                                       -----------        -----------
                                                 
     Total liabilities and partners' capital           $24,448,093        $25,096,106
                                                       ===========        ===========
</TABLE>
           See accompanying condensed notes to financial statements.

                                       9
<PAGE>
 
                               FUND II AND II-OW
                           (A GEORGIA JOINT VENTURE)

                          STATEMENTS OF (LOSS) INCOME

<TABLE>
<CAPTION>
                                           Three Months Ended               Six Months Ended
                                      -----------------------------   -----------------------------
                                      June 30, 1998   June 30, 1997   June 30, 1998   June 30, 1997
                                      -------------   -------------   -------------   -------------
<S>                                   <C>             <C>             <C>             <C>
Revenues:
 Rental income                            $114,717        $ 114,717        $229,434       $ 229,434
 Equity in (loss) income of joint
  ventures                                  84,001          (89,663)        148,340        (211,275)
 
 Interest income                               114              119             244             221
                                          --------        ---------        --------       ---------
                                           198,832           25,173         378,018          18,380
                                          --------        ---------        --------       ---------
Expenses:
 Management and leasing fees                 6,883            6,883          13,766          13,766
 Lease acquisition costs                     4,588            4,589           9,177           9,178
 Operating costs-rental property             2,972            3,925           6,826           4,908
 Depreciation                               91,916           91,916         183,833         183,833
 Legal and accounting                       21,574           21,313          33,595          33,958
 Computer costs                              1,309            1,651           3,384           4,444
 Partnership administration                 18,032           17,467          28,602          33,594
                                          --------        ---------        --------       ---------
                                           147,274          147,744         279,183         283,681
                                          --------        ---------        --------       ---------
 
Net income (loss)                         $ 51,558        $(122,571)       $ 98,835       $(265,301)
                                          ========        =========        ========       =========
 
Net income (loss) allocated to
 Wells Real Estate Fund II                $ 48,821        $(116,062)       $ 93,587       $(251,213)
 
Net income (loss) allocated to Wells
 Real Estate Fund II-OW                   $  2,737        $  (6,508)       $  5,248       $ (14,087)
</TABLE>

                                       10
<PAGE>
 
     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 of the Partnership and notes thereto.
     This Report contains forward-looking statements, within the meaning of
     Section 27A of the Securities Act of 1933 and 21E of the Securities
     Exchange Act of 1934, including discussion and analysis of the financial
     condition of the Partnership, anticipated capital expenditures required to
     complete certain projects, amounts of cash distributions anticipated to be
     distributed to Limited Partners in the future and certain other matters.
     Readers of this Report should be aware that there are various factors that
     could cause actual results to differ materially from any forward-looking
     statement made in the Report, which include construction costs which may
     exceed estimates, construction delays, lease-up risks, inability to obtain
     new tenants upon the expiration of existing leases, and the potential need
     to fund tenant improvements or other capital expenditures out of operating
     cash flow.

     Results of Operations and Changes in Financial Conditions
     ---------------------------------------------------------

     General
     -------

     As of June 30, 1998, the developed properties owned by the Fund II-Fund II-
     OW Joint Venture were 95% occupied, as compared to 92% occupied as of June
     30, 1997.  The increase in the occupied percentages for 1998 compared to
     1997 is due to the increased occupancy of  the 880 Holcomb Bridge Road
     property.

     The increase in gross revenues of the Partnership to $2,737 for the three
     months ended June 30, 1998, as compared to $(6,509) for the three months
     ended June 30, 1997 and $5,248 for the six months ended June 30, 1998, as
     compared to $(14,079) for the same period of 1997, is due to the occupancy
     of The Atrium by Boeing Company in May 1997.  Administrative expenses of
     the Partnership which are incurred at the joint venture level, remained
     relatively stable for the three months ended June 30, 1998, but decreased
     for the six months ended June 30, 1998, compared to the same period of
     1997, due primarily to decreases in professional fees, and other
     administrative expenses.

     The Partnership's cash flow from investing activities and cash flow from
     financing activities increased in 1998, compared to 1997, due to the
     increase in distributions from joint ventures and subsequent distributions
     to limited partners as a result of  the new lease at The Atrium.  Since all
     cash received from joint ventures is distributed currently, cash and cash
     equivalents remain stable.

     Distributions accrued to the Partnership from Fund II-Fund II-OW Joint
     Venture for the six month periods ended June 30, 1998 and June 30, 1997
     were $44,102 and $10,591, respectively.

                                       11
<PAGE>
 
     The Partnership made cash distributions to the Limited Partners holding
     Class A Units for the second quarter of 1998 in the amount of $3.73 per
     Unit.  No cash distributions were made to Limited Partners holding Class A
     Units for second quarter 1997, due to the reserve required to fund tenant
     improvements at The Atrium. No cash distributions were made by the
     Partnership to the Limited Partners holding Class B Units.

     As of June 30, 1998, the Fund II-Fund II-OW Joint Venture had used all of
     the remaining funds available for investment in properties.

     The General Partners have verified that all operational computer systems
     are year 2000 compliant.  This includes systems supporting accounting,
     property management and investor services.  Also, as part of this review,
     all building control systems have been verified as compliant.  The current
     line of business applications are based on compliant operating systems and
     database servers.  All of these products are scheduled for additional
     upgrades before the year 2000.  Therefore, it is not anticipated that the
     year 2000 will have significant impact on operations.

     RECENT ACCOUNTING PRONOUNCEMENTS
     --------------------------------

     Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
     Comprehensive Income", requires certain transactions (e.g., unrealized
     gains/losses on available for sale securities) that are not reflected in
     net income to be displayed as other comprehensive income.  The Statement
     also requires an entity to report total comprehensive income (i.e., net
     income plus other comprehensive income) for every period in which an income
     statement is presented.  SFAS No. 130 is effective for annual and interim
     periods beginning after December 15, 1997.  None of the transactions
     required to be reported in other comprehensive income pertain to the
     Partnership; consequently, adoption of this Statement had no impact on the
     partnership's disclosures.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>
 
PROPERTY OPERATIONS
-------------------

As of June 30, 1998, the Partnership owned interests in the following properties
through the Fund II-Fund II-OW Joint Venture:

First Union at Charlotte /Fund II and II-OW Joint Venture
---------------------------------------------------------
 
<TABLE>
<CAPTION>
                                          Three Months Ended                      Six Months Ended
                                    -------------------------------       -------------------------------
                                    June 30, 1998     June 30, 1997       June 30, 1998     June 30, 1997
                                    -------------     -------------       -------------     -------------
<S>                                 <C>               <C>                 <C>               <C>
Revenues:
 Rental income                           $114,717          $114,717            $229,434          $229,434

Expenses:
 Depreciation                              91,916            91,916             183,833           183,833
 Management & leasing expenses             11,472            11,471              22,944            22,943
 Other operating expenses                   2,954             3,925               6,678             4,908
                                         --------          --------            --------          --------
                                          106,342           107,312             213,455           211,684
                                         --------          --------            --------          --------

Net  income                              $  8,375          $  7,405            $ 15,979          $ 17,750
                                         ========          ========            ========          ========

Occupied %                                  100.0%            100.0%              100.0%            100.0%

Partnership Ownership %                       5.3%              5.3%                5.3%              5.3%

Cash generated to the Fund II-
 Fund II-OW Joint Venture*               $117,594          $108,465            $228,938          $214,261

Net income generated to the Fund II-
 Fund II-OW Joint Venture*                $  8,375          $  7,405            $ 15,979          $ 17,750
</TABLE>


*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Property operations remained stable for the three and six months ended June 30,
1998 and 1997.  Cash generated to the Joint Venture for the three months and six
months ended June 30, 1998 increased over the same periods of 1997, due to an
increase in rental income billed to the tenant (rental income is straight lined
for financial statement reporting).

                                       13
<PAGE>
 
Boeing at the Atrium/Fund II and Fund III Joint Venture
-------------------------------------------------------

<TABLE>
<CAPTION>
                                        Three Months Ended                  Six Months Ended
                                  ------------------------------      ------------------------------
                                  June 30, 1998    June 30, 1997      June 30, 1998    June 30, 1997
                                  -------------    -------------      -------------    -------------
<S>                               <C>              <C>                <C>              <C>
Revenues:
 Rental income                         $367,536        $ 189,696          $ 735,072        $ 189,696
 Interest income                         13,280              100             13,280            2,617
                                       --------        ---------          ---------        ---------
                                        380,816          189,796            748,352          192,313
                                       --------        ---------          ---------        ---------
Expenses:
 Depreciation                           216,930          168,643            433,860          337,285
 Management & leasing expenses           44,679           29,010             89,167           29,010
 Other operating expenses               183,393          191,232            341,824          289,199
                                       --------        ---------          ---------        ---------
                                        445,002          388,885            864,851          655,494
                                       --------        ---------          ---------        ---------

Net  loss                              $(64,186)       $(199,089)         $(116,499)       $(463,181)
                                       ========        =========          =========        =========

Occupied %                                100.0%           100.0%             100.0%           100.0%

Partnership Ownership %                     3.2%             3.2%               3.2%             3.2%

Cash distributed to the Fund II-
 Fund II-OW Joint Venture              $105,670        $       0          $ 218,619        $       0

Net loss allocated to the Fund II
 -Fund II-OW Joint Venture             $(39,346)       $(122,042)         $ (71,414)       $(295,286)

</TABLE>

Rental income increased for the three months and six months ended June 30, 1998,
compared to the same period in 1997, due to the vacancy of the Atrium for the
first four and a half months of 1997.

Depreciation, management and leasing, and other expenses have increased in 1998
compared to 1997 with the occupancy of the building by Boeing.  Cash generated
to the Partnership increased, due primarily to the increase in rental revenues
and reimbursement of tenant improvements of approximately $12,000 received from
Boeing.

                                       14
<PAGE>
 
The Brookwood Grill Property/Fund II and Fund III Joint Venture
---------------------------------------------------------------

<TABLE>
<CAPTION>
                                             Three Months Ended                   Six Months Ended
                                       ------------------------------      ------------------------------
                                       June 30, 1998    June 30, 1997      June 30, 1998    June 30, 1997
                                       -------------    -------------      -------------    -------------
<S>                                    <C>              <C>                <C>              <C>
Revenues:
 Rental income                              $ 56,037          $56,187           $112,375         $112,731
 Equity in income of joint venture            16,943            7,498             33,074           18,355
                                            --------          -------           --------         --------
                                              72,980           63,685            145,449          131,086
Expenses:
 Depreciation                                 13,503           13,503             27,006           27,006
 Management & leasing expenses                 6,492            7,284             13,525           14,045
 Other operating expenses                    (23,721)          13,872            (18,492)          16,131
                                            --------          -------           --------         --------
                                              (3,726)          34,659             22,039           57,182
                                            --------          -------           --------         --------

Net income                                  $ 76,706          $29,026           $123,410         $ 73,904
                                            ========          =======           ========         ========

Occupied %                                     100.0%           100.0%             100.0%           100.0%

Partnership Ownership %                          3.3%             3.3%               3.3%             3.3%

Cash distributed to the
 Fund II-Fund II-OW Joint Venture           $ 76,364          $43,413           $134,015         $ 90,544

Net income allocated to the
 Fund II-Fund II-OW Joint Venture           $ 47,826          $18,097           $ 76,946         $ 46,079
</TABLE>

Although rental income remained stable, total revenues increased for the three
and six month periods ended June 30, 1998, as compared to the same periods in
1997, due to the increased equity in income from the Fund II, III, VI, and VII
Joint Venture, as the Holcomb Bridge Property became 100% occupied.  Operating
expenses decreased for the three months ended June 30, 1998, as compared to the
same period in 1997, due primarily to the billing of reimbursements during the
second quarter in 1998, as compared to billing in the first quarter of 1997.
Year-to-date operating expenses decreased in 1998, as compared to 1997, due
primarily to a change in method of billing water reimbursements to the tenant
which will result in the tenant being charged for a greater share.

                                       15
<PAGE>
 
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
----------------------------------------------------------------

<TABLE>
<CAPTION>
                                        Three Months Ended                 Six Months Ended
                                  ------------------------------    ------------------------------
                                  June 30, 1998    June 30, 1997    June 30, 1998    June 30, 1997
                                  -------------    -------------    -------------    -------------
<S>                               <C>              <C>              <C>              <C>
Revenues:
 Rental income                         $208,645         $135,912         $421,880         $296,097

Expenses:
 Depreciation                            94,129           69,982          188,033          136,112
 Management & leasing expenses           29,888           22,483           59,252           43,063
 Other operating expenses                13,797           13,633           36,830           43,940
                                       --------         --------         --------         --------
                                        137,814          106,098          284,115          223,115
                                       --------         --------         --------         --------

Net income                             $ 70,831         $ 29,814         $137,765         $ 72,982
                                       ========         ========         ========         ========

Occupied %                                100.0%            72.7%           100.0%            72.7%

Partnership Ownership %                      .8%              .8%              .8%              .8%

Cash distributed to the
 Fund II-Fund III Joint Venture        $ 41,990         $ 25,828         $ 83,158         $ 53,324

Net income allocated to the
 Fund II-Fund III Joint Venture        $ 16,943         $  7,498         $ 33,074         $ 18,355
</TABLE>

In January 1995, the Fund II-Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road (the "Holcomb Bridge Road
Property") to the Fund II, III, VI, VII Joint Venture.  Development has been
completed on two buildings with a total of approximately 49,500 square feet.

As of June 30, 1998, fourteen tenants are occupying approximately 49,500 square
feet of space in the retail and office building under leases of varying lengths.
Increases in revenues, total expenses and net income for the quarter and six
months ended June 30, 1998, compared to the same period of 1997, are due to the
property being 100% occupied as of June 30, 1998, as compared to the same period
of 1997.

The Partnership's ownership percentage in the Fund II,III,VI,VII Joint Venture
decreased to 14.2% in 1998, as compared to 14.9% in 1997, due to additional
funding by Wells Fund VI and Wells Fund VII.

                                       16
<PAGE>
 
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
----------------------------------------------------------------
<TABLE>
<CAPTION>
                                        Three Months Ended                 Six Months Ended
                                  -------------------------------    -----------------------------
                                  June 30, 1998    June 30, 1997    June 30, 1998   June 30, 1997
                                  -------------    -------------    -------------   -------------
<S>                               <C>              <C>              <C>             <C>
Revenues:
 Rental income                         $311,526         $267,465         $611,887        $529,331
 Interest income                            135              133              272             262
                                       --------         --------         --------        --------
                                        311,661          267,598          612,159         529,593
Expenses:
 Depreciation                           107,288          104,097          214,576         201,765
 Management & leasing expenses           34,645           44,142           77,233          64,332
 Other operating expenses               116,379          144,379          225,974         301,787
                                       --------         --------         --------        --------
                                        258,312          292,618          517,783         567,884
                                       --------         --------         --------        --------

Net (loss) income                      $ 53,349         $(25,020)        $ 94,376        $(38,291)
                                       ========         ========         ========        ========

Occupied %                                 82.0%            75.0%            82.0%           75.0%

Partnership Ownership %                     2.4%             2.4%             2.4%            2.4%

Cash distributed to the
 Fund II-Fund II-OW Joint Venture*     $ 51,429         $ 25,432         $ 95,993        $ 61,315
                                       

Net (loss) income allocated to the
 Fund II-Fund II-OW Joint
 Venture                               $ 23,959         $(11,237)        $ 42,384        $(17,197)
</TABLE>
 
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income increased in 1998 from 1997, due primarily to the increase in
occupancy from 75% to 82%.  Management and leasing expenses increased over prior
year, due to increased occupancy and revenues.  Other operating expenses
decreased, due to a significant decrease in landscaping expenses and plumbing
and roofing repairs.

                                       17
<PAGE>
 
Cherokee Property - Fund I, II, II-OW, VI, VII Joint Venture
------------------------------------------------------------
<TABLE>
<CAPTION>
                                          Three Months Ended              Six Months Ended
                                  ------------------------------    -------------------------------
                                  June 30, 1998    June 30, 1997    June 30, 1998    June 30, 1997
                                  -------------    -------------    -------------    -------------
<S>                               <C>              <C>              <C>              <C>
Revenues:
 Rental income                         $225,705         $215,973         $454,682         $433,412
 Interest income                             19               19               41               37
                                       --------         --------         --------         --------
                                        225,724          215,992          454,723          433,449
Expenses:
 Depreciation                           110,564          109,697          221,127          217,222
 Management & leasing expenses           18,737           19,323           44,488           50,864
 Other operating expenses                 1,919           40,203            5,050           64,322
                                       --------         --------         --------         --------
                                        131,220          169,223          270,665          332,408
                                       --------         --------         --------         --------

Net income                             $ 94,504         $ 46,769         $184,058         $101,041
                                       ========         ========         ========         ========

Occupied %                                 91.0%            92.0%            91.0%            92.0%

Partnership Ownership %                     2.9%             2.9%             2.9%             2.9%

Cash distributed to the
 Fund II-Fund II-OW Joint Venture*     $115,766         $ 84,542         $218,466         $184,265
                                       

Net income allocated to the
 Fund II-Fund II-OW Joint
 Venture*                              $ 51,563         $ 25,518         $100,424         $ 55,129
</TABLE>
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.

Rental income increased in 1998 over 1997, due primarily to the one time
adjustment made in 1997 to the straight line rent schedule.  Management and
leasing expenses decreased in 1998, as compared to 1997, due to decreased
leasing commissions.  The decrease in operating expenses in 1998, as compared to
1997, are due to decreased expenditures for tenant improvements, common area
expenses, and legal fees.

                                       18
<PAGE>
 
                          PART  II - OTHER INFORMATION
                          ----------------------------

Item 6(b).  No reports on Form 8-K were filed during the second quarter of 1998.

                                   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)
Dated:  August 10, 1998                    By: /s/Leo F. Wells, III
                                           ---------------------------------
                                           Leo F. Wells, III, as Individual
                                           General Partner and as President,
                                           Sole Director and Chief Financial
                                           Officer of Wells Capital, Inc.
                                           the Corporate General Partner
 

                                       19