UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x ~~Quarterly~~QUARTERLY ~~report~~REPORT ~~pursuant~~PURSUANT toTO ~~Section~~SECTION 13 orOR 15(d) ofOF ~~the~~THE ~~Securities~~SECURITIES ~~Exchange~~EXCHANGE ~~Act~~ACT ofOF 1934

For the quarterly period ended ~~June 30~~March 31, ~~2004~~2007 or

¨ ~~Transition~~TRANSITION ~~report~~REPORT ~~pursuant~~PURSUANT toTO ~~Section~~SECTION 13 orOR 15(d) ofOF ~~the~~THE ~~Securities~~SECURITIES ~~Exchange~~EXCHANGE ~~Act~~ACT ofOF 1934

For the transition period from to

Commission file number 0-14463

WELLS REAL ESTATE FUND I

(Exact name of registrant as specified in its charter)

Georgia		58-1565512
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
6200 The Corners Pkwy.,Norcross, Georgia		30092-3365
6200 The Corners Pkwy., Norcross, Georgia		30092-3365
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code		(770) 449-7800

N/A

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

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

~~Yes x No ¨~~Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

~~Indicate~~Large ~~by check mark whether the registrant is an~~ accelerated filer ¨ Accelerated ~~(as defined in Rule 12b~~filer ¨ Non-2accelerated offiler x ~~the Exchange Act).~~

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

~~Readers~~Any ~~are~~such ~~cautioned~~forward-looking ~~not~~statements are subject to ~~place~~unknown ~~undue~~risks, ~~reliance~~uncertainties, onand ~~these~~other ~~forward-looking statements,~~factors ~~which~~and ~~speak~~are ~~only~~based ason a number of ~~the~~assumptions ~~date~~involving ~~that~~judgments ~~this~~with ~~report~~respect isto, ~~filed~~among ~~with~~other ~~the~~things, ~~Securities~~future economic, competitive, and ~~Exchange~~market ~~Commission.~~conditions, ~~Neither~~all ~~the~~of ~~Partnership~~which ~~nor~~are ~~the~~difficult ~~general~~or impossible ~~partners~~to ~~make~~predict ~~any~~accurately. ~~representations~~To orthe ~~warranties~~extent ~~(expressed~~that orour ~~implied)~~assumptions ~~about~~differ ~~the~~from ~~accuracy~~actual ~~of any~~results, our ability to meet such forward-looking statements., ~~Actual~~including ~~results~~our ~~could~~ability ~~differ~~to ~~materially~~generate positive cash flow from ~~any~~operations, ~~forward-looking~~provide ~~statements~~distributions ~~contained~~to partners, inand ~~this~~maintain ~~Form~~the ~~10-Q~~value of our real estate properties, ~~and~~may webe dosignificantly ~~not~~hindered. ~~intend~~See toItem 1A. ~~publicly~~in ~~update~~the orPartnership’s ~~revise~~Annual ~~any~~Report ~~forward~~on Form 10-~~looking~~K ~~statements~~for the year ended December 31, ~~whether~~2006 asfor a ~~result~~discussion of ~~new~~some of the risks and ~~information~~uncertainties, ~~future~~although ~~events~~not all risks and uncertainties, orwhich ~~otherwise~~could cause actual results to differ materially from those presented in our forward-looking statements.

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;

• Adverse economic conditions affecting the particular industry of one or more of our tenants.

Real estate risks inherent in properties owned directly and through joint ventures

• Ability to achieve appropriate occupancy levels resulting in sufficient rental amounts;

• 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;

• Tenant ability or willingness to satisfy obligations relating to our existing lease agreements;

• Potential need to fund tenant improvements, lease-up costs, or other capital expenditures out of operating cash flow;

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

Page 2

•WELLS ~~Ability~~REAL toESTATE ~~secure~~FUND ~~adequate~~I ~~insurance~~AND atSUBSIDIARY ~~reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts;~~

• TABLE ~~Discovery~~OF ofCONTENTS ~~previously undetected environmentally hazardous or other undetected adverse conditions;~~

• Unexpected costs of capital expenditures related to tenant build-out projects or other unforeseen capital expenditures;


			Page No.

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Balance Sheets – March 31, 2007 (unaudited) and December 31, 2006	5

		Statements of Operations for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)	6

		Statements of Partners’ Capital for the Year Ended December 31, 2006 and the Three Months Ended March 31, 2007 (unaudited)	7

		Statements of Cash Flows for the Three Months Ended March 31, 2007 (unaudited) and 2006 (unaudited)	8

		Condensed Notes to Financial Statements (unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

	Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	23

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Submission of Matters to a Vote of Security Holders	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	25

• Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any continuing obligations.

Other operational risks

• Our dependency on Wells Capital, Inc. (“Wells Capital”), our corporate general partner, its key personnel, and its affiliates for various administrative services;

• Wells Capital’s ability to attract and retain high-quality personnel who can provide acceptable service levels to us and generate economies of scale for us over time;

• Increases in our operating expenses, including increased expenses associated with litigation involving the Partnership and operating as a public company in the current regulatory environment;

• Changes in governmental, tax, real estate, environmental, and zoning laws and regulations and the related costs of compliance;

• Our ability to prove compliance with any governmental, tax, real estate, environmental, and zoning in the event that any such position is questioned by the respective authority; 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

~~WELLS~~PART ~~REAL ESTATE FUND~~ I~~, L~~.P. FINANCIAL INFORMATION

~~TABLE~~ITEM OF1. ~~CONTENTS~~FINANCIAL STATEMENTS

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets—June 30, 2004 (unaudited) and December 31, 2003	5
		Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited)	6
		Consolidated Statements of Partners’ Capital for the Year Ended December 31, 2003 and the Six Months Ended June 30, 2004 (unaudited)	7
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited)	8
		Condensed Notes to Consolidated Financial Statements (unaudited)	9
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures about Market Risks	21
	Item 4.	Controls and Procedures	21
PART II.	OTHER INFORMATION		22

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

The accompanying financial statements should be read in conjunction with the notes to the Partnership’s financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included both in this report on Form 10-Q and in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2006. The Partnership’s results of operations for the three months ended March 31, 2007 are not necessarily indicative of the operating results expected for the full year.

Page 4

WELLS REAL ESTATE FUND I AND SUBSIDIARY

~~CONSOLIDATED~~ BALANCE SHEETS

ASSETS

	June 30, 2004 (unaudited)		December 31,2003
	(Unaudited)March 31,2007		December 31,2006
Real estate, at cost:
Assets held for sale, net	$	0	$	3,014,662
Land	$	1,238,819	$	1,440,608
Investment in joint venture		1,200		0
Building and improvements, less accumulated depreciation of $6,621,087 and $7,054,414 as of December 31, 2004 and 2003, respectively		3,906,231		4,561,192
Cash and cash equivalents		10,017,143		6,438,572
Total real estate assets		5,145,050		6,001,800
Tenant receivables, net		9,051		93,005
Investment in joint venture		2,188,955		2,263,584
Other assets		45,181		51,610
Cash and cash equivalents		12,440,150		11,792,983
Total assets	$	10,072,575	$	9,597,849
Accounts receivable, net		139,861		102,518
Due from joint ventures		0		17,616
Prepaid expenses and other assets		164,709		121,111
Deferred lease acquisition costs		120,258		140,160
Total assets	$	20,198,983	$	20,439,772
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Accounts payable, accrued expenses, and refundable security deposits	$	297,482	$	303,958
Deferred rental income		10,059		0
Partnership distributions payable		165,689		164,908
Due to affiliate		2,088,168		2,058,935
Minority interest		71,091		34,777
Total liabilities		2,632,489		2,562,578
Partners’ capital:
Limited partners:
Class A—98,716 units outstanding		17,473,523		17,877,194
Class B—42,568 units outstanding		92,971		0
General partners		0		0
Total partners’ capital		17,566,494		17,877,194
Total liabilities and partners’ capital	$	20,198,983	$	20,439,772

LIABILITIES AND PARTNERS’ CAPITAL


LIABILITIES:
Accounts payable, accrued expenses, and accrued capital expenditures	$	30,168	$	70,545
Deferred income		0		35,640
Due to affiliates		27,474		17,406
Due to joint venture		0		2,211

Total liabilities		57,642		125,802

PARTNERS’ CAPITAL:
Limited partners:
Class A – 98,716 units issued and outstanding		9,137,655		8,781,994
Class B – 42,568 units issued and outstanding		875,576		689,109
General partners		1,702		944

Total partners’ capital		10,014,933		9,472,047

Total liabilities and partners’ capital	$	10,072,575	$	9,597,849

See accompanying notes.

Page 5

WELLS REAL ESTATE FUND I AND SUBSIDIARY

~~CONSOLIDATED~~ STATEMENTS OF OPERATIONS

(unaudited)


	(Unaudited) Three Months Ended March 31,
	2007		2006

REVENUES:
Interest and other income	$	113,554	$	40,455

EXPENSES:
General and administrative		64,926		158,420
Equity in loss of joint venture		1,779		416,635

Total expenses		66,705		575,055

INCOME (LOSS) FROM CONTINUING OPERATIONS		46,849		(534,600	)

DISCONTINUED OPERATIONS:
Operating income		28,998		77,783
Gain on sale of real estate assets		467,039		0

INCOME FROM DISCONTINUED OPERATIONS		496,037		77,783

NET INCOME (LOSS)	$	542,886	$	(456,817	)


NET INCOME (LOSS) ALLOCATED TO:
Class A limited partners:
Income (loss) from continuing operations	$	46,381	$	(534,600	)
Income from discontinued operations		309,280		77,783

Net income (loss) allocated to Class A limited partners	$	355,661	$	(456,817	)

Class B limited partners:
Income from continuing operations	$	0	$	0
Income from discontinued operations		186,467		0

Net income allocated to Class B limited partners	$	186,467	$	0

General partners:
Income from continuing operations	$	468	$	0
Income from discontinued operations		290		0

Net income allocated to General partners	$	758	$	0


NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
Class A units:
Income (loss) from continuing operations		$0.47		$(5.42	)
Income from discontinued operations		$3.13		$ 0.79

Net income (loss) per Class A limited partner unit		$3.60		$(4.63	)

Class B units:
Income from continuing operations		$0.00		$ 0.00
Income from discontinued operations		$4.38		$ 0.00

Net income per Class B limited partner unit		$4.38		$ 0.00

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
REVENUES:
Rental income	$	252,820		$	247,256		$	501,478		$	494,772
Tenant reimbursements		38,768			18,557			66,917			55,835
Interest income		18,998			34,147			40,784			76,765
Other income		0			1,352			0			3,530
Total revenues		310,586			301,312			609,179			630,902
EXPENSES:
Legal and accounting		211,913			252,735			531,312			303,212
Operating costs—rental properties		148,429			101,492			267,581			204,541
Depreciation		136,462			132,695			273,331			268,495
Partnership administration		70,674			40,473			97,755			72,259
Management and leasing fees		24,855			25,093			51,897			49,359
Other general and administrative		1,149			3,226			2,052			4,919
Total expenses		593,482			555,714			1,223,928			902,785
EQUITY IN INCOME (LOSS) OF JOINT VENTURE (Note 2)		(13,158	)		128,190			(27,963	)		176,130
LOSS BEFORE MINORITY INTEREST		(296,054	)		(126,212	)		(642,712	)		(95,753	)
MINORITY INTEREST		(36,851	)		627			(37,095	)		722
NET LOSS FROM CONTINUING OPERATIONS		(332,905	)		(125,585	)		(679,807	)		(95,031	)
DISCONTINUED OPERATIONS:
Operating income (loss)		17,312			(6,241	)		19,746			(7,180	)
Gain on sale		349,361			0			349,361			0
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		366,673			(6,241	)		369,107			(7,180	)
NET INCOME (LOSS)	$	33,768		$	(131,826	)	$	(310,700	)	$	(102,211	)
INCOME (LOSS) FROM CONTINUING OPERATIONS ALLOCATED TO:
CLASS A LIMITED PARTNERS	$	(426,225	)	$	(135,949	)	$	(784,484	)	$	(117,333	)
CLASS B LIMITED PARTNERS	$	93,320		$	10,364		$	104,677		$	22,302
INCOME (LOSS) FROM DISCONTINUED OPERATIONS ALLOCATED TO:
CLASS A LIMITED PARTNERS	$	367,022		$	4,123		$	380,813		$	15,122
CLASS B LIMITED PARTNERS	$	(349	)	$	(10,364	)	$	(11,706	)	$	(22,302	)
INCOME (LOSS) FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
CLASS A	$	(4.32	)	$	(1.38	)	$	(7.95	)	$	(1.19	)
CLASS B	$	2.19		$	0.24		$	2.46		$	0.52
INCOME (LOSS) FROM DISCONTINUED OPERATIONS PER LIMITED PARTNER UNIT:
CLASS A	$	3.72		$	0.04		$	3.86		$	0.15
CLASS B	$	(0.01	)	$	(0.24	)	$	(0.27	)	$	(0.52	)
DISTRIBUTION OF OPERATING CASH PER LIMITED PARTNER UNIT:
CLASS A	$	0.00		$	0.00		$	0.00		$	2.50
CLASS B	$	0.00		$	0.00		$	0.00		$	0.00

See accompanying notes.

Page 6

WELLS REAL ESTATE FUND I AND SUBSIDIARY

~~CONSOLIDATED~~ STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, ~~2003~~2006

AND THE ~~SIX~~THREE MONTHS ENDED ~~JUNE~~MARCH 3031, ~~2004~~2007 (UNAUDITED)

	Limited Partners								~~General Partners~~	General Partners		~~TotalPartners’ Capital~~	Total Partners’ Capital
	Class A				Class B
	Units	~~Amounts~~Amount			Units	~~Amounts~~Amount
BALANCE, December 31, 2002	98,716	$	18,632,747		42,568	$	0		$	0		$	18,632,747
BALANCE, December 31, 2005	98,716	$	11,435,151		42,568	$	0			$	0		$	11,435,151
Net loss	0		(508,763	)	0		0			0			(508,763	)
Net income	0		722,963		0		712,994				944			1,436,901
Distributions of operating cash flow	0		(246,790	)	0		0			0			(246,790	)
Distributions of net sale proceeds($34.20 and $0.56 per Class A and Class B Unit, respectively)	0		(3,376,120	)	0		(23,885	)			0			(3,400,005	)
BALANCE, December 31, 2003	98,716		17,877,194		42,568		0			0			17,877,194
BALANCE, December 31, 2006	98,716		8,781,994		42,568		689,109				944			9,472,047
Net income (loss)	0		(403,671	)	0		92,971			0			(310,700	)
Net income	0		355,661		0		186,467				758			542,886
BALANCE, June 30, 2004	98,716	$	17,473,523		42,568	$	92,971		$	0		$	17,566,494
BALANCE, March 31, 2007	98,716	$	9,137,655		42,568	$	875,576			$	1,702		$	10,014,933

See accompanying notes.

Page 7

WELLS REAL ESTATE FUND I AND SUBSIDIARY

~~CONSOLIDATED~~ STATEMENTS OF CASH FLOWS

(unaudited)


	(Unaudited) Three Months Ended March 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	542,886		$	(456,817	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of real estate assets		(467,039	)		0
Depreciation		0			69,636
Amortization		2,061			7,191
Equity in loss of joint venture		1,779			416,635
Changes in assets and liabilities:
Decrease (increase) in tenant receivables, net		84,280			(4,713	)
Increase in other assets		(13,434	)		(30,629	)
Decrease in accounts payable and accrued expenses		(16,607	)		(100,962	)
(Decrease) increase in deferred income		(35,640	)		7,871
Increase (decrease) in due to affiliates		10,068			(4,945	)

Net cash provided by (used in) operating activities		108,354			(96,733	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from the sale of real estate assets		3,475,407			0
Investment in real estate assets		0			(82,265	)
Deferred leasing costs paid		0			(1,114	)
Investment in joint venture		(5,190	)		0

Net cash provided by (used in) investing activities		3,470,217			(83,379	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,578,571			(180,112	)

CASH AND CASH EQUIVALENTS, beginning of period		6,438,572			3,942,166

CASH AND CASH EQUIVALENTS, end of period	$	10,017,143		$	3,762,054


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrued capital expenditures	$	0		$	5,021

Write-off of fully amortized deferred leasing costs	$	0		$	486

	Six Months Ended June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$	(679,807	)	$	(95,031	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Equity in income (loss) of joint ventures		27,963			(176,130	)
Depreciation		273,331			268,495
Amortization of deferred lease acquisition costs		15,215			18,516
Minority interest		37,095			(722	)
Operating distributions received from joint ventures		64,282			188,697
Changes in assets and liabilities:
Accounts receivable, net		(59,793	)		(34,064	)
Prepaid expenses and other assets		(43,598	)		(4,535	)
Accounts payable, accrued expenses, and refundable security deposits		(6,476	)		124,261
Deferred rental income		10,059			0
Due to affiliate		29,233			28,643
Total adjustments		347,311			413,161
Net cash (used in) provided by continuing operations		(332,496	)		318,130
Net cash provided by discontinued operations		31,452			15,122
Net cash (used in) provided by operating activities		(301,044	)		333,252
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sale proceeds received from joint ventures		0			1,637,297
Net proceeds from sale of real estate assets		953,670			0
Investment in real estate		(5,459	)		(47,707	)
Net cash provided by investing activities		948,211			1,589,590
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership distributions paid		0			(493,565	)
Minority interest distributions paid for discontinued operations		0			(8,781	)
Net cash used in financing activities		0			(502,346	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		647,167			1,420,496
CASH AND CASH EQUIVALENTS, beginning of period		11,792,983			10,404,816
CASH AND CASH EQUIVALENTS, end of period	$	12,440,150		$	11,825,312
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Partnership distributions payable	$	781		$	164,935

See accompanying notes.

Page 8

WELLS REAL ESTATE FUND I AND SUBSIDIARY

CONDENSED NOTES TO ~~CONSOLIDATED~~ FINANCIAL STATEMENTS

~~JUNE~~MARCH 3031, ~~2004~~2007 (unaudited)

1. ~~SUMMARY~~ORGANIZATION OFAND ~~SIGNIFICANT ACCOUNTING POLICIES~~BUSINESS

Wells Real Estate Fund I (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, Inc. (“Wells Capital”), a Georgia corporation, serving as its general partners (collectively, the “General Partners”). Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. Leo F. Wells, III is the president and sole director of Wells Capital and the president, sole director, and sole owner of Wells Real Estate Funds, Inc. The Partnership was formed on April 26, 1984 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing, and managing income-producing commercial 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) add or 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 has equal voting rights regardless of class.

~~Wells~~On ~~Real Estate Fund I (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells~~September 6, ~~III and Wells Capital~~1984, ~~a Georgia corporation, serving as its general partners (collectively,~~ the ~~“General~~ ~~Partners”). The~~ Partnership ~~was~~commenced ~~formed~~an onoffering ~~April 26, 1984 for the purpose~~ of ~~acquiring,~~up ~~developing,~~to ~~constructing~~$50, ~~owning~~000,000 ~~operating, improving, leasing, and managing income-producing commercial properties for investment purposes. The Partnership has two classes~~ of ~~limited partnership interests,~~ Class A ~~and~~or Class B limited ~~Units.~~partnership ~~Limited~~units ~~partners~~($250.00 ~~may~~per ~~vote~~unit) pursuant to, ~~among other things, (~~a) ~~amend~~Registration ~~the~~Statement ~~partnership~~filed ~~agreement,~~on ~~subject~~Form toS-11 ~~certain~~under ~~limitations;~~the ~~(b)~~Securities ~~change~~Act ~~the~~of ~~business~~1933. ~~purpose~~The ~~or investment~~Partnership ~~objectives~~commenced ofactive ~~the~~operations ~~Partnership;~~upon receiving and ~~(c)~~accepting ~~add~~subscriptions orfor ~~remove~~5,000 aunits ~~general~~on February 15, ~~partner~~1985. AThe ~~majority~~offering ~~vote~~was terminated on ~~any~~September 5, of1986, ~~the~~at ~~above-described~~which ~~matters~~time ~~will bind~~ the Partnership ~~without~~had ~~the~~sold ~~concurrence~~approximately of98,716 ~~the~~Class A ~~General~~Units ~~Partners.~~and ~~Each~~42,568 ~~limited~~Class ~~partnership~~B ~~unit generally~~Units ~~has~~representing ~~equal~~capital ~~voting~~contributions ~~rights regardless~~ of ~~class~~$35,321,000.

OnDuring ~~September~~the 6,periods ~~1984~~presented, the Partnership ~~commenced~~owned adirect ~~public~~interests ~~offering~~in ~~of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under~~ the ~~Securities~~following ~~Act~~properties: of 1933. The Partnership terminated its offering on September 5, 1986, upon receiving and accepting gross proceeds of $35,321,000 for a total of 141,284 Class A and Class B limited partner units from 4,895 limited partners at $250 per unit.

As1. ~~of June 30, 2004, the Partnership owned interests in the following two properties directly: (i) an approximately 27% condominium interest in~~ Paces Pavilion~~, a medical office building located in Atlanta, Georgia, and~~ (ii1) ~~Black Oak Plaza, a shopping center located in Knoxville, Tennessee.~~

~~During~~A ~~the~~medical ~~periods~~office ~~presented,~~building ~~the~~located ~~Partnership~~in ~~also~~Atlanta, ~~owned~~Georgia ~~interests~~ in which the Partnership ~~following~~owns ~~two~~a ~~properties~~condominium ~~through~~interest ~~the~~of ~~affiliated~~approximately ~~joint~~27% ~~ventures~~of ~~listed~~the ~~below:~~property.

Joint Venture	Joint Venture Partners	Properties
Wells-Baker Associates	• Wells Real Estate Fund I • Wells & Associates, Inc.*	1. Peachtree Place A commercial office building located in Norcross, Georgia
Fund I and Fund II Tucker (“Fund I-II Tucker Associates”)	• Wells Real Estate Fund I • Fund II and Fund II-OW **	2. Heritage Place A commercial office complex located in Tucker, Georgia

2.	Black Oak Plaza⁽²⁾

*A ~~Wells~~retail &shopping ~~Associates,~~center ~~Inc.~~located isin ~~affiliated~~Knoxville, ~~with the Partnership through common management~~Tennessee.

** Fund II and Fund II-OW (~~“Fund II-IIOW Associates”~~1) isThis aproperty ~~joint~~was ~~venture~~sold ~~between~~in ~~Wells~~November ~~Real Estate Fund II and Wells Real Estate Fund II-OW~~2006.

~~Each~~(2) ofThis ~~the~~property ~~aforementioned properties~~ was ~~acquired~~sold ~~on an all-cash basis. The investment objectives of each of the joint venture partners listed~~ in ~~the~~January ~~above table are substantially identical to those of the Partnership~~2007. Approval of 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. For further information regarding the Joint Ventures and foregoing properties, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2003.

During the periods presented, the Partnership owned interests in the following joint venture and property:

Joint Venture

Joint Venture Partners

Properties

Fund I and Fund II Tucker

• Wells Real Estate Fund I

• Fund II and Fund II-OW⁽¹⁾

1. Heritage Place⁽²⁾

A commercial office complex located in Tucker, Georgia

⁽¹⁾

Fund II and Fund II-OW is a joint venture between Wells Real Estate Fund II and Wells Real Estate Fund II-OW.

⁽²⁾

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

Wells Real Estate Fund II and Wells Real Estate Fund II-OW are affiliated with the Partnership through common general partners. Each of the properties described above was acquired on an all-cash basis. For further information regarding Fund I and Fund II Tucker and foregoing properties, refer to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2006.

Page 9

On ~~April 7~~May 10, ~~2003~~2006, Fund I- and Fund II Tucker ~~Associates~~ sold the ~~retail~~office ~~portion~~component of Heritage Place, ~~which comprises approximately 30% of the total premises,~~ to an unrelated third party for a gross ~~selling~~sale price of $34,~~400~~215,000, excluding closing costs. As a result of ~~this~~the sale, ~~the~~Fund ~~Partnership~~I and Fund II Tucker received net ~~sales~~sale proceeds of approximately $14,~~665~~028,000, of which approximately $2,091,000 was distributed to the Partnership. As of March 31, 2006, Fund I and aFund ~~gain~~II Tucker recognized an impairment loss of approximately $~~152~~795,000 ~~was~~in ~~allocated~~order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell, and recognized an additional loss on sale of approximately $10,000. Approximately $413,000 and $5,000 of the impairment loss and loss on sale were allocable to the Partnership, respectively.

On ~~June 18~~ November 6, ~~2004~~2006, ~~Wells-Baker~~the ~~Associates~~Partnership sold ~~Peachtree~~Paces ~~Place~~ Pavilion to an unrelated third party for a gross ~~selling~~sale price of $14,~~030~~300,000, excluding closing costs. As a result of ~~this~~the sale, the Partnership received net sale proceeds of approximately $~~858~~4,~~000~~066,000 and recognized a gain of approximately $~~314~~1,817,000 ~~was allocated to the Partnership~~.

~~(b)~~On ~~Basis~~January 25, 2007, the Partnership sold Black Oak Plaza to an unrelated third party for a gross sale price of ~~Presentation~~$3,700,000, excluding closing costs. As a result of the sale, the Partnership received net sale proceeds of approximately $3,475,000 and recognized a gain of approximately $463,000.

~~The consolidated financial statements include the accounts of the Partnership and Wells-Baker Associates~~2. ~~The~~SUMMARY ~~Partnership’s~~OF ~~interest~~SIGNIFICANT inACCOUNTING Wells-Baker Associates was approximately 90% for each of the periods presented. All significant intercompany balances have been eliminated in consolidation. Minority interest represents Wells & Associates, Inc.’s interest in Wells-Baker Associates of approximately 10% for each of the periods presented. POLICIES

~~The~~Basis ~~consolidated 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,~~Presentation do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“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 those periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the consolidated financial statements and footnotes included in the Partnership’s Form 10-K for the year ended December 31, 2003.

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (c“SEC”), ~~Allocations~~including the instructions to Form 10-Q and Article 10 of ~~Net~~Regulation ~~Income~~S-X, ~~Net~~and ~~Loss~~in accordance with such rules and regulations, do not include all of the information and ~~Gain~~footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and consistently present the results for those periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the consolidated financial statements and footnotes included in the Partnership’s Annual Report on ~~Sale~~Form 10-K for the year ended December 31, 2006.

~~For~~The Partnership’s policy is to adopt the liquidation ~~purpose~~basis of ~~determining~~accounting ~~allocations~~once ~~per~~ the ~~partnership~~liquidation ~~agreement,~~of ~~net~~the ~~income~~Partnership is ~~defined~~imminent, ~~generally~~which asthe ~~net~~Partnership ~~income~~has ~~recognized~~defined byas ~~the~~beginning ~~Partnership,~~on ~~excluding deductions~~the ~~for~~first ~~depreciation,~~day ~~amortization,~~of ~~and~~the ~~cost~~quarter ~~recovery~~following ~~and~~the ~~gain~~completion onof the sale of all real estate assets. ~~Net~~On ~~income~~January 25, ~~as defined~~ 2007, of the Partnership issold ~~generally~~the ~~allocated~~remaining ~~each~~property ~~year~~ in the ~~same~~portfolio, ~~proportions~~Black ~~that~~Oak ~~net~~Plaza. ~~cash~~Accordingly, ~~from~~the ~~operations~~Partnership is ~~distributed~~planning to adopt the ~~partners~~ liquidation basis of accounting effective April 1, 2007. ToUnder the ~~extent~~liquidation ~~the~~basis ~~Partnership’s~~of ~~net~~accounting, assets ~~income~~and inliabilities ~~any~~will ~~year~~be ~~exceeds~~stated at their estimated net ~~cash~~realizable ~~from~~values ~~operations~~and net settlement amounts, itrespectively, ~~will~~and bestatements ~~allocated~~of ~~99%~~operations toand ~~the~~statements ~~limited~~of ~~partners~~cash ~~and~~flows 1%will tono ~~the~~longer ~~General~~be ~~Partners~~presented.

~~Net~~Investment loss, depreciation, and amortization deductions for each fiscal year are allocated as follows: (a) 99% to the Class B limited partners 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~~Joint ~~capital~~Venture ~~account in an amount not to exceed such positive balance; and (c) thereafter to the General Partners.~~

~~Under~~The ~~the~~Partnership ~~partnership~~has ~~agreement,~~evaluated ~~gain on the sale or exchange of the~~its ~~Partnership’s~~investment ~~properties~~in isFund ~~allocated~~I asand ~~follows:~~Fund ~~(a)~~II ~~first,~~Tucker toand ~~partners~~concluded ~~having~~that ~~negative~~it ~~capital~~is ~~accounts,~~not ifa ~~any,~~variable-interest ~~until~~entity ~~all~~under ~~negative~~the ~~capital~~provisions ~~accounts~~of ~~have~~Financial ~~been~~Accounting ~~restored~~Standards toBoard ~~zero;~~Interpretation (b“FIN”) ~~then~~No. 46(R), toConsolidation ~~the~~of ~~limited~~Variable ~~partners~~Interest Entities, inwhich ~~proportion~~supersedes toFIN No. 46 and tois ~~the extent~~an interpretation of ~~the~~Accounting ~~excess~~Research ofBulletin (i“ARB”) ~~each limited partner’s adjusted capital contribution~~No. 51, ~~plus~~Consolidated aFinancial ~~cumulative~~Statements. ~~15%~~The ~~per~~Partnership ~~annum~~does ~~return~~not onhave ~~his~~control ~~adjusted~~over ~~capital~~the ~~contribution~~operations ~~(16%~~of ~~for~~Fund ~~investments~~I ~~made~~and Fund ~~before~~II ~~December~~Tucker; 31however, ~~1984),~~it ~~less~~does ~~the~~exercise ~~sum~~significant ofinfluence. ~~all~~Approval ~~prior distributions~~by ofthe ~~cash~~Partnership ~~flow~~as ~~from~~well ~~operations~~as ~~previously~~the ~~made~~other tojoint ~~such~~venture ~~limited~~partners ~~partner,~~is ~~over~~required ~~(ii)~~for ~~such~~any ~~limited~~major ~~partner’s~~decision ~~capital~~or ~~account~~any ~~balance~~action asthat ofwould ~~the~~materially ~~sale~~affect ~~date;~~Fund ~~(c)~~I ~~then~~and toFund ~~the~~II ~~General~~Tucker, ~~Partners~~or inits real ~~proportion~~property toinvestments. ~~and~~Accordingly, toupon applying the ~~extent~~provisions of ~~the~~Statement ~~excess~~ of Financial Accounting Standard (i“SFAS”) ~~each~~No. 94, ~~General~~Consolidation ~~Partner’s~~of ~~adjusted~~All ~~capital~~Majority-Owned ~~contribution~~Subsidiaries, ~~less~~ARB ~~the~~No. 51, ~~sum~~and Statement of ~~all~~Position No. 78-9, ~~prior~~Accounting ~~distributions~~for ofInvestments ~~cash~~In ~~flow~~Real ~~from~~Estate ~~operations~~Ventures, ~~previously~~the ~~made~~Partnership toaccounts ~~such~~for ~~General~~its ~~Partners,~~investments ~~over~~in ~~(ii)~~Fund ~~such~~I ~~General~~and ~~Partner’s~~Fund ~~capital~~II ~~account~~Tucker ~~balance~~using asthe ofequity ~~the sale~~method ~~date;~~of ~~and~~accounting, ~~(d)~~whereby ~~thereafter~~original ~~85%~~investments toare ~~the~~recorded ~~limited~~at ~~partners~~cost and subsequently ~~15%~~adjusted tofor ~~the~~contributions, ~~General Partners.~~

Page 10

distributions, and net income (dloss) ~~Distribution~~attributable to the Partnership. Pursuant to the terms of ~~Net~~the ~~Cash~~joint ~~From~~venture ~~Operations~~agreement, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. The Partnership is obligated to fund its pro rata share of Fund I and Fund II Tucker’s deficit balances, and these amounts are included in due to joint venture in the accompanying balance sheets. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

~~Net~~Other ~~cash~~Assets ~~from operations, if available, is generally distributed quarterly to the limited partners as follows:~~

•As ~~First~~of March 31, to2007 ~~the~~and ~~Class~~December 31, A2006, other ~~limited~~assets ~~partners~~is ~~until~~comprised ~~each~~of ~~limited~~the ~~partner~~following ~~has~~items: ~~received distributions equal to a 9% per annum return on his respective adjusted capital contributions, as defined.~~

• Second, to the Class B limited partners until each limited partner has received distributions equal to a 9% per annum return on his respective adjusted capital contributions, as defined.


	March 31, 2007		December 31, 2006
Interest receivable	$	43,446	$	28,051
Prepaid property insurance		1,735		2,878
Refundable security deposits		0		19,863
Other		0		818

Total	$	45,181	$	51,610

Interest receivable represents interest earned during the period presented, which will be received in the following month. Prepaid property insurance is recognized in the period in which the coverage is provided. Refundable security deposits represent cash deposits received from tenants. Pursuant to the respective leases, the Partnership may apply such balances towards unpaid receivable balances or property damages, where applicable, or is obligated to refund the remaining balances to the tenants upon the expiration of their related lease term. Balances without a future economic benefit are written off as they are identified.

Distribution of Net Cash from Operations

As more fully described in the partnership agreement, net cash from operations, if available, is generally distributed quarterly to the limited partners as follows:

•

First, to the Class A limited partners until such limited partners have received distributions equal to a 9% per annum return on their respective adjusted capital contributions, as defined.

•

Second, to the Class B limited partners until such limited partners have received distributions equal to a 9% per annum return on their respective adjusted capital contributions, as defined.

•

Third, to the General Partners until they have received 10% of total distributions for such year.

•

Fourth, to the limited partners and the General Partners allocated on a basis of 90% and 10%, respectively.

~~(e)~~Distribution ~~Reclassifications~~of Net Sale Proceeds

~~Certain~~As ~~prior~~more ~~year~~fully ~~amounts~~described ~~have~~in ~~been~~the partnership ~~reclassified~~agreement, after satisfying all debts and liabilities and establishing reserves deemed reasonably necessary in the sole discretion of the General Partners, net proceeds from the sale of the Partnership’s properties are to ~~conform~~be distributed to partners in accordance with their respective positive tax capital account balances after the ~~current~~allocation ~~year~~of ~~financial~~any ~~statement~~gain ~~presentation~~on sale.

2.Allocations of ~~INVESTMENT~~Net INIncome, ~~JOINT~~Net ~~VENTURE~~Loss, and Gain on Sale

~~(a)~~For ~~Basis~~the purpose of ~~Presentation~~determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, cost recovery, and the gain

The Partnership does not have control over the operations of Fund I-II Tucker Associates; however, it does exercise significant influence. Accordingly, the Partnership’s investment in Fund I-II Tucker 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 consolidated financial statements and footnotes included in the Partnership’s Form 10-K for the year ended December 31, 2003.

(b) Summary of Operations

The following information summarizes the operations of Fund I-II Tucker Associates for the three months and six months ended June 30, 2004 and 2003, respectively:

	Total Revenues				Loss From Continuing Operations						Income FromDiscontinuedOperations			Net Income (Loss)
	Three Months EndedJune 30,				Three Months EndedJune 30,						Three Months EndedJune 30,			Three Months Ended June 30,
	2004		2003		2004			2003			2004	2003		2004			2003
Fund I-II Tucker Associates	$	175,353	$	177,603	$	(25,348	)	$	(22,389	)	$0	$	269,336	$	(25,348	)	$	246,947
	Total Revenues				Loss From Continuing Operations						Income FromDiscontinuedOperations			Net Income (Loss)
	Six Months Ended June 30,				Six Months Ended June 30,						Six Months EndedJune 30			Six Months Ended June 30,
	2004		2003		2004			2003			2004	2003		2004			2003
Fund I-II Tucker Associates	$	353,573	$	378,257	$	(53,868	)	$	(139,033	)	$0	$	478,333	$	(53,868	)	$	339,300

Page 11

3 on the sale of assets. ~~RELATED-PARTY~~Net ~~TRANSACTIONS~~income, as defined, of the Partnership is generally allocated each year in the same proportion that net cash from operations is distributed to the partners.

As more fully described in the partnership agreement, net loss, depreciation, and amortization deductions for each fiscal year will be allocated as follows: (a) 99% ~~Management~~to the Class B limited partners and ~~Leasing~~1% ~~Fees~~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.

~~Wells~~As ~~Management~~more ~~Company,~~fully ~~Inc.~~described ~~(“Wells~~in ~~Management”), an affiliate of~~ the ~~General~~partnership ~~Partners~~agreement, gain ison ~~entitled to compensation for~~ the ~~management~~sale ~~and~~or ~~leasing~~exchange of the Partnership’s properties ~~owned~~is ~~through~~generally ~~joint~~allocated ~~ventures~~as ~~equal~~follows: to (a) first, ofto ~~the~~partners ~~gross~~having ~~revenues~~negative ~~collected~~capital ~~monthly~~accounts, 3%if ofany, ~~the~~until ~~gross~~all ~~revenues~~negative ~~for~~capital ~~management~~accounts ~~and~~have 3%been ofrestored to zero; (b) then, to the ~~gross~~limited ~~revenues~~partners, ~~for~~in ~~leasing~~proportion ~~(aggregate~~to ~~maximum~~and ofto ~~6%)~~the ~~plus~~extent aof ~~separate~~the ~~fee~~amount ~~for~~by which (i) the ~~one-time~~ ~~lease-up~~excess of ~~newly~~each ~~constructed~~limited ~~properties~~partner’s incapital ancontribution ~~amount~~over ~~not~~all toprior ~~exceed~~distributions ~~the~~to ~~fee~~such ~~customarily~~limited ~~charged~~partner inunder ~~arm’s-length~~certain ~~transactions~~partnership byagreement provisions, ~~others~~plus ~~rendering~~an ~~similar~~amount ~~services~~equal into ~~the~~such ~~same~~limited ~~geographic~~partner’s ~~area~~cumulative ~~for~~distribution, ~~similar~~less ~~properties~~the orsum ~~(b)~~of inall ~~the~~prior ~~case~~distributions of ~~commercial~~ ~~properties~~cash ~~which~~available ~~are~~for ~~leased~~distribution onpreviously amade ~~long-term~~to ~~net~~such ~~basis~~limited partner, exceeds (~~ten~~ii) such orlimited partner’s ~~more~~adjusted ~~years),~~capital 1%account balance as of the ~~gross~~sale ~~revenues~~date; ~~except~~(c) then, ~~for~~to ~~initial~~the ~~leasing~~General ~~fees~~Partners, ~~equal~~in proportion to 3%and to the extent of the ~~gross~~amount ~~revenues~~by ~~over~~which (i) the ~~first~~excess ~~five~~of ~~years~~each of the ~~lease~~General ~~term.~~Partner’s ~~The~~adjusted ~~on-site management and~~capital ~~leasing~~contribution ofover ~~Black~~all ~~Oak~~prior ~~Plaza~~distributions ~~has~~to ~~been~~such ~~performed~~General byPartner anunder ~~independent~~certain ~~third-party~~partnership ~~property~~agreement ~~management~~provisions, ~~company~~exceeds ~~since~~(ii) such ~~the~~General ~~third~~Partner’s ~~quarter~~adjusted ofcapital ~~1998.~~account 3%balance as of ~~gross~~the ~~revenues~~sale ~~from~~date; ~~this~~and ~~property~~(d) thereafter, ~~are~~85% ~~payable~~ to the limited ~~third-party~~partners ~~management company,~~ and ~~the~~15% ~~balance is due~~ to ~~Wells~~the ~~Management~~General Partners.

~~Wells~~Reclassifications Management has elected to defer the current receipt of management and leasing fees and initial lease-up costs due from the Partnership with respect to the properties owned by the Partnership directly and through its interest in joint ventures. Accordingly, such fees are expensed as incurred and recorded as due to affiliate in the accompanying consolidated balance sheets. As of June 30, 2004, the Partnership owed aggregate management and leasing fees to Wells Management of $2,855,974, of which $2,088,168 is recorded as due to affiliate and $767,806 is attributable to the Partnership’s interest in Fund I-II Tucker Associates and, therefore, included in investment in joint ventures in the respective accompanying consolidated balance sheet. As of December 31, 2003, the Partnership owed aggregate management and leasing fees to Wells Management of $2,816,703, of which $2,058,935 is recorded as due to affiliate and $757,768 is attributable to the Partnership’s interest in Fund I-II Tucker Associates and, therefore, included in investment in joint ventures in the respective accompanying consolidated balance sheet.

~~(b)~~Certain ~~Administration~~prior ~~Reimbursements~~year amounts have been reclassified to conform with the current year financial statement presentation.

~~Wells~~Recent ~~Capital,~~Accounting ~~one~~Pronouncements of the General Partners, and its affiliates perform certain administrative services for the Partnership, such as accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated among various other entities affiliated with the General Partners (“Wells Real Estate Funds”) based on time spent on each fund by individual administrative personnel. In the opinion of management, this allocation is a reasonable estimation of such expenses. The Partnership and properties consolidated by the Partnership reimbursed Wells Capital $73,284 and $30,651 for the three months ended June 30, 2004 and 2003, respectively, and $129,374 and $75,587 for the six months ended June 30, 2004 and 2003, respectively, for these services and expenses.

In September 2006, the Financial Accounting Standards Board (c“FASB”) ~~Conflicts~~issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under GAAP, including amending SFAS No. 144, Accounting for the Impairment or Disposal of ~~Interest~~Long-Lived Assets. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be effective for the Partnership beginning January 1, 2008. The Partnership is currently assessing provisions and evaluating the financial impact of SFAS No. 157 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

~~The~~In ~~General~~July ~~Partners~~2006, ~~are~~the ~~also~~FASB ~~general~~issued ~~partners~~FIN ofNo. ~~other~~48, ~~Wells~~Accounting ~~Real~~for ~~Estate~~Uncertainty ~~Funds.~~in AsIncome ~~such~~Taxes, ~~there~~an ~~may~~interpretation ~~exist~~of ~~conflicts~~SFAS ofNo. ~~interest~~109, Accounting ~~where~~for Income Taxes, which clarifies the ~~General~~relevant ~~Partners~~criteria inand ~~their capacity~~approach asfor ~~general~~the ~~partners~~recognition, ofderecognition, ~~other~~and ~~Wells~~measurement ~~Real~~of ~~Estate~~uncertain ~~Funds~~tax ~~may~~positions. beFIN inNo. ~~competition~~48 ~~with~~was effective for the Partnership inbeginning ~~connection~~January ~~with~~1, ~~property~~2007. ~~acquisitions~~The adoption orof ~~for~~this ~~tenants~~pronouncement inhas ~~similar~~not ~~geographic~~had ~~markets~~a material impact on the Partnership’s financial statements.

3.	INVESTMENT IN JOINT VENTURE

Impairment of Real Estate Assets

The Partnership continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned through the Partnership’s investment in Fund I and Fund II Tucker may not be recoverable pursuant to Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, and SFAS No. 144. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition for assets held for use, or

Page 12

with the estimated fair values for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value.

Fund I and Fund II Tucker considers real estate assets to be held for sale, as defined by SFAS No. 144, at the point at which a sale contract is executed. During first quarter 2006, Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000, of which approximately $413,000 is allocable to the Partnership, to reduce the carrying value of Heritage Place to its fair value, less costs to sell. This impairment was prompted by a change in management’s intended holding period for this asset. This impairment loss is included in loss from discontinued operations for the three months ended March 31, 2006 in the Summary of Financial Information table below.

Summary of Financial Information

Effective July 1, 2006, the first day of the quarter following the completion of the sale of all real estate assets, Fund I and Fund II Tucker adopted the liquidation basis of accounting, under which assets and liabilities are stated at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and statements of cash flows are no longer presented. Accordingly, condensed financial information for Fund I and Fund II Tucker for the three months ended March 31, 2006 is presented below:


	Total Revenues	Loss From Continuing Operations	Loss From Discontinued Operations	Net Loss
	Three Months Ended March 31, 2006	Three Months Ended March 31, 2006	Three Months Ended March 31, 2006	Three Months Ended March 31, 2006
Fund I and Fund II Tucker	$929	$(2,267)	$(800,343)	$(802,610)

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


	Three Months Ended March 31, 2006
	Operating Loss	Impairment Loss	Gain on Sale	Total
Fund I and Fund II Tucker	$(5,531)	$(794,812)	$0	$(800,343)

4.	DISCONTINUED OPERATIONS

~~The~~On ~~Partnership adopted SFAS No. 144 effective January 1~~December 22, ~~2002~~2006, ~~which~~the ~~requires,~~Partnership entered ~~among~~into ~~other~~a ~~things,~~contract ~~that~~to ~~the~~sell ~~operating~~Black ~~results~~Oak ofPlaza ~~real~~to ~~estate~~an ~~assets~~unrelated ~~sold~~third orparty. ~~held~~The ~~for~~ sale ~~subsequent~~ toclosed ~~January~~on 1January 25, ~~2002~~2007 befor ~~included~~a ingross ~~discontinued~~sale ~~operations~~price inof ~~the~~$3.7 ~~statements~~million, exclusive of ~~operations~~closing ~~for~~costs. ~~all~~Accordingly, ~~periods~~the ~~presented,~~assets ~~and~~related to ~~classify~~Black ~~the~~Oak ~~carrying~~Plaza ~~value~~are classified ~~of such assets~~ as held for sale ~~for~~as ~~all~~of ~~periods~~December 31, ~~presented~~2006. ~~Peachtree~~The ~~Place~~details ~~was~~comprising ~~sold~~assets ~~on June~~held ~~18,~~for ~~2004.~~sale are provided below:

Condensed financial information for Peachtree Place included in discontinued operations in the accompanying statements of operations, is summarized below (unaudited):


	December 31, 2006
Real estate assets held for sale, net:
Land	$	737,770
Building and improvements, less accumulated depreciation of $3,520,444 as of December 31, 2006		2,114,775

Total real estate assets held for sale, net	$	2,852,545

	Three Months EndedJune 30,					Six Months Ended June 30,
	2004		2003			2004		2003
Total property revenues	$	48,003	$	27,979		$	95,604	$	61,562
Operating costs—rental property		28,278		21,014			60,204		41,037
Depreciation		0		10,883			10,888		20,365
Management and leasing fees		2,064		2,142			3,948		5,403
Amortization of deferred lease acquisition costs		349		181			818		1,937
Total expenses		30,691		34,220			75,858		68,742
Operating income (loss)		17,312		(6,241	)		19,746		(7,180	)
Gain on sale		349,361		0			349,361		0
Operating income (loss) from discontinued operations	$	366,673	$	(6,241	)	$	369,107	$	(7,180	)

5. CONTINGENCIES

On January 17, 2003, the Partnership was served with a putative class action by a limited partner holding Class B units, on behalf of all limited partners holding Class B units as of January 15, 2003, that seeks equitable relief with regard to the rights and obligations of all the Partnership’s limited partners and general partners under the partnership agreement. This litigation was filed in the Superior Court of Gwinnett County, Georgia (Roy Johnston v. Wells Real Estate Fund I, Civil Action No. 03-A00525-6) (the “Johnston Action”). The plaintiff in the Johnston Action generally alleges that the terms of the partnership agreement, as it relates to the allocation and distribution of net sale proceeds, are inconsistent with the original intent of the parties. The plaintiff alleges that the original intent was that limited partners holding Class B units would have a priority in payment of cash distributions of net sale proceeds to bring them even with the amount of cash distributions previously made to limited partners holding Class A units. The Johnston Action seeks, among other things, to have the Partnership’s partnership agreement equitably reformed consistent with the alleged original intent or, in the alternative, to have the investments made by limited partners holding Class B units equitably rescinded, and requests an injunction prohibiting the General Partners of the Partnership from distributing net sales proceeds until the resolution of the action.

On May 7, 2004, the Court granted summary judgment in favor of the Partnership on grounds of statutes of limitation and laches. On May 24, 2004, the Partnership filed a motion to recover its attorneys’ fees and expenses of litigation from plaintiff and his counsel. On or about June 4, 2004, another defendant in the Johnston Action moved the Court to award attorneys’ fees from the Partnership in the form of five percent of the Partnership’s net sale proceeds. The Partnership has opposed that motion. Also on or about June 4, 2004, the plaintiff filed a Notice of Appeal with respect to the May 7, 2004 Orders granting summary judgment. Pursuant to Statement of Financial

Page 13

Accounting Standard No. 5 and the General Partners’ estimate of our current exposure under the Johnston Action, no reserves have been provided for in the accompanying financial statements.


	December 31, 2006
Other assets held for sale, net:
Tenant receivables, net	$	35,774
Deferred leasing costs, less accumulated amortization of $41,220 as of December 31, 2006		126,343

Total other assets held for sale, net	$	162,117

~~On or~~In ~~about~~accordance ~~March~~with ~~12,~~SFAS ~~2004~~No. 144, ~~a putative class action complaint (~~the ~~“Complaint”) was filed by four individuals (the “plaintiffs”) against the~~ Partnership ~~and~~has ~~our~~classified ~~General Partners, Leo F. Wells, III and Wells Capital, as well as Wells Investment Securities, Inc. and Wells Management (collectively,~~ the ~~“Wells~~results ~~Defendants”) (Hendry et al. v. Leo F. Wells, III et al., Superior Court~~ of ~~Gwinnett~~operations ~~County,~~related ~~Georgia,~~to ~~Civil~~Black Oak ~~Action~~Plaza ~~No.~~which ~~04-A-2791~~was ~~2).~~sold ~~The plaintiffs filed the Complaint purportedly~~ on ~~behalf of all limited partners holding B units of the Partnership as of~~ January 15 25, ~~2003.~~2007 ~~The Complaint alleges, among other things, that (a) Mr. Wells, Wells Capital, Wells Investment Securities, Inc.,~~ and ~~the~~Paces ~~Partnership negligently~~Pavilion ~~and~~which ~~fraudulently~~was ~~made~~sold ~~false~~on ~~statements and material omissions in connection with the initial sale (September~~ November 6, ~~1984—September 5~~2006, ~~1986)~~as ofdiscontinued ~~the~~operations Bin ~~units to investors of~~ the ~~Partnership~~accompanying ~~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) Mr~~operations. ~~Wells,~~The ~~Wells~~details ~~Capital,~~comprising ~~and~~income the Partnership 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~~discontinued ~~any~~operations ~~legal, equitable, or other action to protect their investments in the Partnership, among~~are ~~other~~presented ~~reasons;~~below: (c) Mr. Wells and Wells Management breached an alleged contract arising out of consent solicitations to the limited partners; and (d) Mr. Wells, Wells Capital, and the Partnership breached fiduciary duties to the limited partners.

The plaintiffs seek, among other remedies, the following: rescission of all purported class members’ purchases of B units and an order for a full refund of all money paid for such units together with interest; judgment against the Wells Defendants, jointly and severally, in an amount to be proven at trial; punitive damages; a declaration that the consent obtained as a result of an April 2002 consent solicitation is null and void; judicial dissolution of the Partnership and the appointment of a receiver to wind up and terminate the Partnership; and an award to plaintiffs of their attorneys’ fees, costs, and expenses.


	(Unaudited) Three Months Ended March 31,
	2007		2006
REVENUES:
Rental income	$	43,749	$	259,078
Reimbursement income		12,966		44,161
Interest and other income		60		0

Total revenues		56,775		303,239

EXPENSES:
Property operating costs		2,680		99,537
Management and leasing fees		3,497		17,138
Depreciation		0		69,636
Amortization		2,061		7,191
Bad debt expense		14,395		9,526
General and administrative		5,144		22,428

Total expenses		27,777		225,456

Real estate operating income		28,998		77,783

GAIN ON SALE OF REAL ESTATE ASSETS		467,039		0

INCOME FROM DISCONTINUED OPERATIONS	$	496,037	$	77,783

~~On or about May 19, 2004, plaintiffs filed a Motion to Permit Voluntary Dismissal~~5. OnRELATED-PARTY May 20, 2004, the Wells Defendants filed a Notice of Consent to plaintiffs’ Motion to Permit Voluntary Dismissal. By Order dated June 3, 2004, the Court granted plaintiffs’ Motion to Permit Voluntary Dismissal, and ordered their Complaint dismissed without prejudice. TRANSACTIONS

~~On June 18, 2004, the defendants, including Wells~~ Management, ~~filed a motion to recover attorneys’ fees~~ and ~~expenses~~Leasing ~~of litigation from the plaintiffs and their~~Fees ~~counsel. The Court held a hearing on part, but not all, of the issues raised in that motion on August 3, 2004, and took the matter under advisement without ruling on any part of the motion.~~

~~ITEM~~The 2Partnership entered into a property management and leasing agreement with Wells Management Company, Inc. ~~MANAGEMENT~~(“Wells Management”), an affiliate of the General Partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Partnership’Ss ~~DISCUSSION~~properties, ~~AND~~owned ~~ANALYSIS~~directly OFor ~~FINANCIAL~~through ~~CONDITION~~Fund ~~AND~~I ~~RESULTS~~and Fund OFII ~~OPERATIONS~~Tucker, equal to (a) the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties, which is assessed periodically based on market studies, or (b) in the case of commercial properties leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. The Partnership’s share of management and leasing fees and lease acquisition costs incurred from properties owned directly and through Fund I and Fund II Tucker is $3,038 and $19,495 for the three months ended March 31, 2007 and 2006, respectively.

The following discussion and analysis should be read in conjunction with the Partnership’s accompanying consolidated financial statements and notes thereto.

(a) Overview

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

• Fundraising phase

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

Page 14

•Administrative ~~Investing~~Reimbursements ~~phase~~

~~The~~Wells ~~period~~Capital ~~during~~and ~~which~~Wells Management perform certain administrative services for the Partnership, ~~invests~~relating to accounting, property management, and other partnership administration, and incur the ~~capital~~related ~~raised~~expenses. ~~during~~Such expenses are allocated among other entities affiliated with the ~~fundraising~~General ~~phase~~Partners based on estimates of the amount of time spent on the respective entities by individual personnel. In the opinion of the General Partners, ~~less~~this ~~upfront~~allocation ~~fees~~is a reasonable estimation of such expenses. The Partnership reimbursed Wells Capital and Wells Management for administrative expenses of $42,244 ~~into~~and $39,553 for the ~~acquisition~~three months ended March 31, 2007 and 2006, respectively. In addition, Wells Capital pays for certain operating expenses of ~~real~~the ~~estate~~Partnership ~~assets~~(“bill-backs”) directly and invoices the Partnership for the reimbursement thereof. As of March 31, 2007 and December 31, 2006, the due to affiliates balances represent administrative reimbursements and bill-backs due to Wells Management and/or Wells Capital.

•Due ~~Holding~~to ~~phase~~Affiliates

~~The~~As ~~period~~of ~~during~~March 31, ~~which~~2007 ~~real estate~~and ~~assets~~December 31, ~~are~~2006, ~~owned~~due ~~and~~to ~~operated~~affiliates bywas comprised of the ~~Partnership~~following ~~during~~amounts ~~the~~due ~~initial~~to ~~lease~~Wells ~~terms~~Management ofand/or ~~the~~Wells ~~tenants~~Capital:

• Positioning-for-sale phase


	March 31, 2007		December 31, 2006
Administrative reimbursements	$	27,194	$	15,719
Management and leasing fees		280		1,687

	$	27,474	$	17,406

~~The~~Economic ~~period~~Dependency 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.

•We ~~Disposition~~have engaged Wells Capital and ~~Liquidation~~Wells ~~phase~~Management to provide certain essential services for us, including supervision of the management and leasing of our properties, asset acquisition and disposition services, as well as other administrative responsibilities, including accounting services and investor communications and relations. These agreements are terminable by either party upon 60 days’ written notice. As a result of these relationships, we are dependent upon Wells Capital and Wells Management.

~~The~~Wells ~~period~~Capital and Wells Management are all owned and controlled by Wells Real Estate Funds, Inc. (“WREF”). ~~during~~The ~~which~~operations of Wells Capital and Wells Management represent substantially all of the ~~Partnership~~business ~~sells~~of ~~its~~WREF. ~~real~~Accordingly, ~~estate~~we ~~investments~~focus on the financial condition of WREF when assessing the financial condition of Wells Capital and ~~distributes~~Wells ~~net~~Management. ~~sales~~In ~~proceeds~~the event that WREF were to ~~the~~become ~~partners~~unable to meet its obligations as they become due, we might be required to find alternative service providers.

~~Portfolio~~Future ~~Overview~~net income generated by WREF will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs. As of March 31, 2007, the General Partners believe that WREF generates adequate cash flow from operations and has adequate liquidity available in the form of cash on hand and current receivables necessary to meet its current and future obligations as they become due.

~~The~~Assertion ~~Partnership~~of ~~has~~Legal ~~moved~~Action ~~from~~Against ~~the positioning~~Related-~~for-sale~~Parties phase into the disposition and liquidation phase of its life cycle. We have now sold three assets and a portion of another. Our focus on the remaining assets involves leasing and marketing efforts that we believe will result in the best disposition pricing for our investors.

~~The~~On ~~sale~~March 12, of2007, ~~the~~a ~~remaining~~stockholder ~~building~~of atWells ~~Peachtree~~Real ~~Place~~Estate onInvestment ~~June 18~~Trust, ~~2004,~~Inc. (“Wells ~~was~~REIT”) filed a ~~highlight~~purported ~~for~~class ~~the~~action ~~Partnership~~and derivative complaint, ~~which~~Washtenaw ~~held~~County anEmployees’ ~~approximate~~Retirement ~~90%~~System ~~interest~~v. Wells Real Estate Investment Trust, Inc., et al., in the ~~asset.~~United ~~The sale~~States isDistrict ~~evidence~~Court for the District of Maryland against, among others, Wells REIT, Leo. F. Wells, III and Wells Capital, our ~~continuing~~General ~~efforts~~Partners, tocertain ~~liquidate~~affiliates of WREF, the ~~portfolio.~~directors of Wells REIT, and certain individuals who formerly served as officers and directors of Wells REIT

With a number of properties sold, the General Partners are currently reserving operating cash and net sales proceeds to fund the re-leasing costs anticipated at the Black Oak Plaza and Heritage Place properties. Further, the General Partners anticipate continuing to hold operating distributions until occupancy in these properties increases.

As of June 30, 2004, current Class A unit holders have received cumulative net operating cash flows of approximately $22.1 million, as compared to approximately $24.7 million originally invested, or approximately 89% of the dollars invested since inception. No operating distributions have been made to the General Partners, in line with the partnership agreement.

Property Summary

• The Black Oak Plaza shopping center is currently approximately 65% leased, and leasing efforts at the center continue.

• The Cherokee Commons property was sold in 2001.

• The Crowe’s Crossing property was sold in 2001.

• Heritage Place originally included both an office component and a retail shopping center. The retail shopping center, which represented approximately 30% of the premises, was sold in 2003. The remaining office component at Heritage Place is currently approximately 57% leased and leasing efforts continue.

• The Paces Pavilion building continues to operate at approximately 93% occupancy level.

Page 15

• prior to the closing of the internalization transaction on April 16, 2007. The ~~Peachtree~~complaint ~~Place~~alleges ~~property~~violations ~~originally~~of ~~included~~the ~~two~~federal ~~buildings~~proxy rules based on allegations that the proxy statement of Wells REIT filed with the SEC on February 26, 2007 contains false and misleading statements and omits to state material facts and breaches of fiduciary duty arising from the Wells REIT internalization transaction and the related proxy statement. ~~One~~The ~~building~~complaint seeks, among other things, unspecified monetary damages. On April 9, 2007, the District Court denied the plaintiff’s motion for an order enjoining the internalization transaction. On April 17, 2007, the Court granted the defendants’ motion to transfer venue to the United States District Court for the Northern District of Georgia, and the case was ~~sold~~docketed in ~~2000~~the Northern District of Georgia on April 24, 2007. Our ~~The~~General ~~remaining~~Partners ~~building~~intend ~~sold~~to invigorously ~~June~~defend ~~2004~~this action. Any financial loss incurred by Wells Capital or its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.

~~In our attempts to position our remaining properties for sale, we will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases~~6. InCOMMITMENTS ~~doing~~AND so, we seek to maximize returns to the limited partners by negotiating long-term leases at market rental rates while attempting to minimize downtime, re-leasing expenditures, ongoing property level costs, and portfolio costs. As we continue to operate in the disposition and liquidation phase, we will focus on locating suitable buyers, and negotiating purchase and sale contracts that will attempt to maximize the total return to the limited partners, and minimize contingencies and our post-closing involvement with the buyer. CONTINGENCIES

~~Industry~~On ~~Factors~~or about November 24, 2004, four individuals (the “plaintiffs”) filed a putative class action complaint (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”) against the Partnership, the General Partners, and Wells Management. The Hendry Action states that the Partnership is named only as an allegedly necessary party defendant and that the plaintiffs seek no money from or relief at the expense of the Partnership. As of March 31, 2007, Wells Capital had incurred approximately $883,000 in legal fees, costs, and expenses related to defending against the Hendry Action. The indemnification provisions of the partnership agreement require the Partnership to indemnify the General Partners for their costs of defending the Hendry Action under certain circumstances upon the conclusion of this litigation. At this time, management is unable to determine whether the likelihood of an unfavorable outcome is either probable or remote. Accordingly, no reserves have been provided for in the accompanying financial statements.

~~Our~~The ~~results~~plaintiffs ~~continue~~filed the Hendry Action purportedly on behalf of all limited partners of the Partnership holding Class B Units as of January 9, 2002. The Hendry Action alleges, among other things, that the General Partners 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 Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant, in which the Court subsequently granted summary judgment in favor of the Partnership. The Hendry Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be ~~impacted~~materially misleading. In addition, the Hendry Action alleges that the General Partners 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 the Partnership, 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 ~~number~~declaration that the consent obtained as a result of ~~factors~~an ~~influencing~~April 2002 consent solicitation is null and void; enforcement of an alleged contract arising out of the ~~real~~June ~~estate~~2000 ~~industry~~consent solicitation to allegedly waive Wells Management’s deferred management fees; and an award to the plaintiffs of their attorneys’ fees, costs, and expenses.

~~General~~On ~~Economic~~January 28, 2005, the defendants filed motions for summary judgment and ~~Real~~motions ~~Estate~~to ~~Market~~dismiss ~~Commentary~~the plaintiffs’ claims. On March 31, 2005, the plaintiffs filed briefs in opposition to the defendants’ motions. Pursuant to Orders entered July 1, 2005, the Court granted the defendants’ motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action was at the time dismissed, subject to plaintiffs’ right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal. After both sides had filed briefs in support of their respective positions, on February 15, 2006, the Court heard argument on plaintiffs’ motion to vacate and to re-enter the judgments previously entered on July 1, 2005.

The U.S. economy appears to be on the road to recovery. The economy has shown signs of growth recently, as companies have recommenced making investments in new employees. Job growth is the most significant demand driver for office markets. Market fundamentals are improving, and new office jobs are slowly being created. In general, the real estate office market lags behind the overall economic recovery and, therefore, recovery is not expected until late 2004 or 2005 at the earliest, and then will vary by market.

Overall, real estate market fundamentals are weak; however, capital continues to flow into this asset class. The increase in capital drives the prices of many properties upward and investor returns downward. There is a significant pricing differential in the underwriting parameters of well-leased assets with credit tenants and those with either existing vacancies or substantial near-term tenant rollover. Properties with long-term leases to strong credit tenants have seen an increase in value.

The office market has significant excess space. Vacancy levels are believed to have peaked and are expected to trend downward moderately through the end of 2004. There is some encouraging news in that construction continues to taper off and has come to a complete halt in many markets. As a result of the slowdown in new construction and the modest decline in sublease space, net absorption has turned positive. Many industry professionals believe office market fundamentals have bottomed-out; however, a recovery cannot be expected until job growth and corresponding demand for office space continues to increase.

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

Real estate funds, such as the Partnership, that invest in properties with current vacancies or near-term tenant rollover may face a challenging leasing environment. In connection with re-leasing vacant space, the properties within these funds are generally encountering lower market rental rates and higher concession packages to tenants.

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 price to compensate for the existing or pending vacancies.

Page 16

~~(b)~~On ~~Results~~or about August 8, 2005, the defendants filed a motion for attorneys’ fees and expenses of ~~Operations~~litigation. On or about August 12, 2005, the plaintiffs filed a motion for attorneys’ fees and expenses of litigation as to one of the defenses asserted by defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects on the defendants’ and plaintiffs’ motions for attorneys’ fees and expenses. By Orders entered May 24, 2006, the Court denied the plaintiffs’ and the defendants’ motions to recover attorneys’ fees and expenses of litigation. Also by Orders entered May 24, 2006, the Court re-entered its July 1, 2005 judgments granting the Wells defendants’ motions to dismiss and for summary judgment on all counts in the complaint, so as to allow the plaintiffs 30 days within which to file a notice of appeal. On or about June 21, 2006, the plaintiffs filed a notice of appeal with respect to the Court’s Order granting the defendants’ motions to dismiss and for summary judgment. On July 5, 2006, the defendants filed a notice of cross appeal with respect to the Court’s Order denying the defendants’ motion for attorneys’ fees and expenses of litigation. On August 18, 2006, the appeal and cross appeal were docketed in the Georgia Court of Appeals. It is not known when the Court of Appeals will rule on the appeal and cross appeal.

~~Revenues~~7. ofSUBSEQUENT ~~the Partnership~~ EVENT

~~Revenues~~The sales of the ~~Partnership~~office ~~were~~component ~~$310~~of Heritage Place,~~586~~ ~~and~~Paces ~~$301~~Pavilion,~~312~~ ~~for~~and ~~the~~Black ~~three~~Oak ~~months~~Plaza ~~ended~~generated ~~June~~aggregate ~~30,~~net ~~2004~~sale ~~and~~proceeds ~~2003,~~to ~~respectively,~~the ~~and~~Partnership ~~$609,179~~of ~~and~~approximately $~~630~~9,~~902~~632,000, ~~for~~of ~~the~~which ~~six~~approximately ~~months ended June 30~~$289,000 ~~2004~~has ~~and~~previously ~~2003,~~been ~~respectively.~~distributed ~~The~~to ~~increase in revenues for~~ the ~~three~~limited ~~months~~partners ~~ended~~through ~~June 30~~March 31, ~~2004,~~2007. asThe General ~~compared~~Partners tohave ~~the~~determined ~~three~~that ~~months~~reserves ~~ended~~of ~~June~~approximately 30$2, ~~2003~~143,000 iswill ~~primarily~~be ~~due~~required to anfund ~~increase~~any inadditional ~~reimbursement~~operating ~~billings~~costs toor ~~tenants~~indemnification ofobligations ~~Peachtree~~in ~~Place. Tenants~~connection ~~are~~with ~~billed~~the ~~for~~litigation ~~operating~~discussed ~~cost~~herein. ~~reimbursements~~In ataccordance ~~estimated~~with ~~amounts,~~the ~~which~~terms ~~are~~of ~~reconciled~~the partnership asagreement, ~~tenants are billed (credited) for~~ the ~~net~~General ~~annual~~Partners ~~under~~distributed ~~(over) billings in~~ the ~~following~~residual ~~year. The~~ net ~~decrease~~sale proceeds in ~~revenues~~May ~~for~~2007 ~~the~~of ~~six~~approximately ~~months ended June 30~~$7, ~~2004~~200,000 ~~as compared~~ to the ~~six~~limited ~~months~~partners ~~ended~~of ~~June~~record 30as of March 31, ~~2003~~2007, iswhich, ~~primarily~~under ~~due~~the toterms ~~a decline in interest income as a result~~ of ~~earning~~the ~~interest~~partnership onagreement, ~~net~~does ~~property~~not include ~~sale~~limited ~~proceeds~~partners atacquiring aunits ~~lower~~after ~~rate in 2004~~December 31, ~~as compared to 2003~~2006.

~~Equity~~ITEM in2. ~~Income~~MANAGEMENT’S ~~(Loss)~~DISCUSSION ofAND ~~Joint~~ANALYSIS ~~Venture~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Equity~~The infollowing ~~income~~discussion ~~(loss) of joint venture was $(13,158)~~ and ~~$128,190~~analysis ~~for~~should ~~the~~be ~~three~~read ~~months ended~~in ~~June~~conjunction ~~30,~~with ~~2004 and 2003, respectively, and $(27,963) and $176,130 for~~ the ~~six~~accompanying ~~months~~financial ~~ended~~statements ~~June 30, 2004~~ and ~~2003,~~notes ~~respectively~~thereto. ~~The~~See ~~2004~~also ~~decreases~~“Cautionary ~~are~~Note ~~primarily~~Regarding ~~due~~Forward-Looking toStatements” ~~(i)~~preceding Part ~~foregone~~I, ~~income~~as ~~resulting~~well ~~from~~as the ~~sale~~notes ofto ~~the~~our ~~retail~~financial ~~portion~~statements ~~of Heritage~~and ~~Place~~Management’s inDiscussion ~~the~~and ~~second~~Analysis ~~quarter~~ of ~~2003,~~Financial ~~(ii)~~Condition anand ~~increase~~Results ~~in bad debt expense recognized for tenants~~ of ~~Heritage~~Operations ~~Place,~~provided ~~and (iii) an increase~~ in ~~administrative~~our ~~expenses,~~Annual ~~partially~~Report ~~offset~~on byForm ~~(iv)~~10-K ~~the~~for ~~gain recognized from~~ the ~~sale~~year ofended ~~the~~December 31, ~~retail portion of Heritage Place~~2006. ~~We expect equity in losses of joint venture to continue until occupancy increases for Heritage Place.~~

~~Expenses~~Overview ~~of the Partnership~~

~~Total~~Management ~~expenses~~believes ofthat the Partnership ~~were~~typically operates ~~$593,482~~through ~~and $555,714 for~~ the ~~three~~following ~~months~~five ~~ended~~key ~~June~~life ~~30,~~cycle ~~2004 and 2003, respectively, and $1,223,928 and $902,785 for the six months ended June 30, 2004 and 2003, respectively~~phases. The ~~2004~~duration ~~increases~~of ~~are~~each ~~primarily~~phase ~~attributable~~is todependent ~~additional~~upon ~~(i)~~various ~~legal~~economic, ~~costs related to defending the litigation discussed in Part II~~industry, ~~Item 1~~market, ofand ~~this~~other ~~report;~~internal/external ~~(ii)~~factors. ~~bad~~Some ~~debt~~overlap ~~expense~~naturally ~~recognized~~exists ~~for tenants~~in ofthe ~~Paces~~transition ~~Pavilion;~~from ~~(iii)~~one ~~costs~~phase ~~related~~ to ~~evaluating various re-leasing and exit strategies for~~ the ~~remainder of the Partnership’s portfolio; and (iv) increased partnership administration expenses associated with increased reporting and~~ ~~regulatory requirements~~next. ~~We anticipate additional increases related to implementing and adhering to such reporting and regulatory requirements going forward.~~

~~(c)~~• ~~Liquidity~~Fundraising ~~and Capital Resources~~phase

~~Our~~The ~~operating strategy entails funding expenses related to the recurring operations of the properties and the portfolio with operating cash flows, including distributions~~period ~~received~~during ~~from~~which ~~Joint Ventures, and assessing~~ the ~~amount~~Partnership ofis ~~remaining~~raising ~~cash flows that will be required to fund known re-leasing costs and other~~ capital ~~improvements.~~through ~~Any residual operating cash flows are considered available for distribution to~~ the ~~limited~~ ~~partners~~sale and ~~are~~issuance ~~generally paid quarterly. As a result, the ongoing monitoring~~ of ~~the~~limited ~~Partnership’s~~partner ~~cash~~units ~~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~~public; ~~of our tenants to honor lease payments and our ability to re-lease space on~~

~~favorable~~• ~~terms~~Investing ~~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.~~ phase

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

•

Holding phase

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

•

Positioning-for-sale phase

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

Page 17

~~Short~~• Disposition-~~Term~~and-liquidation ~~Liquidity~~ phase

~~Cash~~The ~~used~~period induring ~~operating~~which ~~activities, including operating distributions received from Fund I-II Tucker Associates, was approximately $(301,000) for~~ the ~~six~~Partnership ~~months~~sells ~~ended~~its ~~June~~real ~~30,~~estate ~~2004~~investments, asdistributes ~~compared~~net tosale ~~cash~~proceeds ~~provided by operating activities of approximately $333,000 for the six months ended June 30, 2003. Cash flows from operating activities decreased significantly from 2003~~ to ~~2004 as a result of~~ the ~~sale of the retail portion of Heritage Place in April 2003. Cash flows from investing activities for 2004 resulted primarily from the June 2004 sale of Peachtree Place~~partners, ~~which generated approximately $954~~liquidates,~~000~~ inand ~~net~~terminates ~~proceeds, of which approximately $858,000 are attributable to~~ the Partnership.

WePortfolio ~~believe~~Overview that the cash on hand, including net proceeds from the sale of properties, is sufficient to cover the Partnership’s working capital needs, including liabilities of approximately $2,600,000, as of June 30, 2004.

~~Long~~We are in the disposition-~~Term~~and-liquidation ~~Liquidity~~phase of our life cycle. We have now sold all of our properties with the sale of Black Oak Plaza in January 2007. This marks the conclusion of this investment program, originally launched in 1984. As a result of the sale of all of the properties, we will focus resources on concluding all of the Partnership’s activities and dissolving the Partnership upon resolution of certain litigation related to partnership matters (See Part II, Item 1, Legal Proceedings).

We ~~expect~~distributed ~~that~~net ~~our~~sale ~~future~~proceeds ~~sources~~from ofthe ~~capital~~sales ~~will~~of bethe ~~primarily~~office ~~derived~~component ~~from~~of ~~net~~Heritage ~~proceeds generated~~Place, ~~from~~Paces ~~the~~Pavilion, ~~selective~~ and ~~strategic~~Black ~~sale~~Oak Plaza of ~~properties~~approximately ~~and~~$7,200,000 ~~operating~~to ~~cash~~limited ~~flows~~partners ~~generated~~in ~~from~~May ~~joint ventures~~2007. Our ~~future~~General ~~long-term~~Partners ~~liquidity~~are currently ~~requirements~~reserving ~~will~~the ~~include,~~remaining ~~but~~net ~~not~~sale beproceeds ~~limited~~and operating cash flows to, ~~tenant~~limited ~~improvements,~~partners ~~renovations,~~in ~~expansions,~~order ~~and other~~to ~~significant~~fund ~~capital~~any ~~improvements~~additional ~~necessary~~legal ~~for~~costs ~~properties~~or ~~owned~~indemnification ~~directly~~obligations ~~and~~in ~~through~~connection ~~Fund~~with ~~I-II~~the ~~Tucker~~litigation ~~Associates.~~discussed Weherein, ~~expect~~and toany ~~continue~~remaining expenses toand ~~use~~obligations ~~substantially~~of ~~all~~the ~~future~~Partnership ~~net~~associated ~~cash~~with ~~flows~~its ~~from~~final ~~operations,~~dissolution. ~~which~~The ~~includes~~dissolution ~~distributions~~expenses ~~received~~include, ~~from Fund~~but ~~I-II~~are ~~Tucker~~not ~~Associates~~limited to, ~~less~~legal ~~expenses~~fees, ~~related~~audit toand ~~the~~tax ~~recurring~~fees, ~~operations~~printing ofand ~~the~~postage ~~properties~~costs, ~~reserves~~potential ~~for~~liabilities ~~known~~under ~~capital~~the ~~expenditures~~final purchase and sale agreements, and ~~portfolio~~other administrative expenses. ~~such~~We asexpect ~~legal~~that ~~costs,~~a tofinal ~~pay~~distribution ~~operating~~of ~~distributions~~any tounused ~~the~~reserves will be made to limited partners as soon as practical.

~~Capital~~Property ~~Resources~~Summary

~~The~~As ~~Partnership~~we ismove anfurther ~~investment~~into ~~vehicle formed for~~ the ~~purpose of acquiring, owning,~~ disposition-and ~~operating income~~-~~producing~~liquidation ~~real properties and has invested all of the partners’ original capital contributions. Thus~~phase, ~~it is unlikely that~~ we will ~~acquire~~focus ~~interests~~resources ~~in any additional properties. Historically, our investment strategy has~~on ~~generally~~concluding ~~involved~~all ~~acquiring~~of ~~properties~~the ~~that~~Partnership’s ~~are~~activities ~~pre-leased~~and todissolving ~~creditworthy~~the ~~tenants~~Partnership onas ansoon ~~all-cash~~as ~~basis through joint ventures with affiliated partnerships~~practical.

WeInformation ~~incur~~relating ~~capital~~to ~~expenditures primarily in~~ the ~~form of 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~~owned, ~~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~~previously ~~less capital than those funded in connection with new leases. However~~owned, ~~external~~by ~~conditions, such as~~ the ~~supply~~Partnership ofor ~~and~~its ~~demand~~joint ~~for~~ventures ~~comparable~~is ~~space~~provided ~~available~~below: ~~within a given market, drive capital costs as well as rental rates.~~

~~Operating~~• ~~cash~~Crowe’s ~~flows,~~Crossing ifwas ~~available,~~sold ~~are~~on ~~generally~~January ~~distributed from the Joint Ventures to the Partnership during the second month following each calendar quarter-end. However~~11, ~~the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures~~2001. Our cash management policy typically includes first utilizing current period operating cash flow 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.

•

Cherokee Commons was sold on October 1, 2001.

•

Peachtree Place originally included two buildings. One building was sold on August 31, 2000 and the second building was sold on June 18, 2004.

•

Heritage Place originally included both an office component and a retail shopping center. The retail center, which represented approximately 30% of the premises, was sold on April 7, 2003. The remaining office component was sold on May 10, 2006.

•

Paces Pavilion was sold on November 6, 2006.

•

Black Oak Plaza was sold on January 25, 2007.

Liquidity and Capital Resources

Overview

Our operating strategy entailed funding expenses related to the recurring operations of the properties owned by the Partnership, directly and through Fund I and Fund II Tucker, with operating cash flows and assessing the amount of remaining cash flows that would have been required to fund known re-leasing costs, other capital improvements, and portfolio expenses. Any residual operating cash flows were generally considered available for distribution to the Class A limited partners. Unless distributions of operating cash flows were reserved, distributions were generally paid to the limited partners quarterly. As a result, the ongoing monitoring of our cash position is critical to ensure that adequate liquidity and capital resources are available.

Page 18

AsShort-Term ofLiquidity ~~June 30, 2004, the Partnership has received, used, and held net proceeds from the sale of properties as presented below:~~

	Total Net Proceeds		Partnership’sApproximate Ownership %		Net Proceeds Attributableto the Partnership		Net Proceeds Invested		Distributed to Partners to date	UndistributedNet Proceedsas of June 30, 2004
Property Sold							Amount	Purpose
Peachtree Place (partial sale in 2000)	$	633,695	100	%	$	633,695	$0	—	$0	$	633,695
Crowe’s Crossing (sold 2001)		6,486,652	100	%		6,486,652	0	—	0		6,486,652
Cherokee Commons (sold 2001)		8,414,089	25.3	%		2,126,109	0	—	0		2,126,109
Heritage Place retail portion (sold 2003)		3,207,708	51.9	%		1,665,121	0	—	0		1,665,121
Peachtree Place (remainder sold 2004)		953,670	90.0	%		857,826	0	—	0		857,826
Total					$	11,769,403	$0		$0	$	11,769,403

We generated net cash flows from operating activities of approximately $108,000 for the three months ended March 31, 2007. We are holding such net operating cash flows in reserve to fund future legal costs or indemnification obligations, that may arise from the litigation discussed in Part II, Item 1 herein, and expenses anticipated in connection with the final dissolution of the Partnership. We do not expect to receive future operating distributions from Fund I and Fund II Tucker, as the remaining portion of Heritage Place was sold in May 2006, or to pay any additional operating distributions to the limited partners. During 2007, our primary source of cash flow was net proceeds of approximately $9.3 million received from the sale of properties owned directly and through Fund I and Fund II Tucker, of which approximately $3.5 million was received in the first quarter of 2007 from the sale of Black Oak Plaza.

InWe ~~accordance~~believe ~~with~~that ~~Section~~the ~~9.3~~cash ofon ~~the partnership agreement~~hand, ~~except~~including ~~for reinvestment of~~ net ~~sale~~ proceeds asfrom ~~provided in Section 11.3(g) (as amended), and after~~ the ~~payment~~sale ~~or reserves allowed for Partnership debts and liabilities (including without limitation the deferred management fees owed to Wells Management in the amount~~ of ~~approximately $2~~properties,~~860,000),~~ ~~and~~is ~~after~~sufficient ~~the~~to ~~establishment~~cover ofour ~~reserves~~working ~~which~~capital ~~the General Partners~~needs, inincluding ~~their~~liabilities ~~sole discretion, deem reasonably necessary, as~~ of ~~June 30, 2004, there were net sales proceeds in~~ ~~the amount of~~ approximately $758,000~~,000~~ ~~available~~as ~~for~~of ~~distribution to limited partners~~March 31, ~~which sum is being held in a separate, interest-bearing bank account~~2007. AsWe ~~more~~anticipate ~~fully set forth therein, Section 9.3 of the partnership agreement provides~~ that ~~the net~~we ~~sales~~will ~~proceeds are to~~ be ~~distributed~~able “to ~~each~~fund ~~Partner~~any inadditional ~~accordance~~legal ~~with~~costs ~~the~~or ~~positive~~indemnification ~~balance~~obligations arising in ~~his~~connection ~~Capital~~with ~~Account as of~~ the ~~date~~litigation ofdiscussed ~~distribution under this Section 9.3 (after allocation of the Gain on Sale as provided~~ in ~~Section~~Part ~~10.4 hereof).” Due to pending litigation~~II, ~~however,~~Item ~~the~~I ~~Partnership~~herein iswith ~~not in a position to distribute~~ net ~~sales~~ sale proceeds ~~until~~currently ~~final~~held ~~resolution of the litigation described~~ in ~~Part II, Item 1~~reserve.

~~(d) Related~~Long-~~Party~~Term ~~Transactions~~Liquidity

~~The~~We ~~Partnership and its joint ventures~~ have ~~entered~~sold ~~into~~all ~~agreements~~of ~~with Wells Capital and its affiliates, whereby~~ the ~~Partnership~~real orestate ~~its~~assets ~~joint~~in ~~ventures~~which ~~pay~~we ~~certain~~owned ~~fees or~~interests ~~reimbursements~~and todo ~~Wells~~not ~~Capital~~anticipate oracquiring ~~its~~additional ~~affiliates~~properties. ~~for~~Accordingly, ~~property~~we ~~management~~expect ~~and~~that ~~leasing~~our ~~fees,~~future ~~and~~source ~~reimbursement~~ of ~~operating~~capital ~~and~~will ~~administrative~~primarily ~~costs.~~include ~~See~~net ~~Note~~proceeds 3that tohave ~~the Partnership’s consolidated financial statements included in this report~~been ~~for~~previously agenerated ~~discussion~~from of the ~~various~~sale ~~related-party~~of ~~transactions,~~our ~~agreements~~properties ~~and~~as ~~fees~~previously described.

(e) 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 would protect the Partnership 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 the Partnership would be able to replace existing leases with new leases at higher base rental rates.

Page 19

~~(f)~~Capital ~~Application~~Resources ~~of Critical Accounting Policies~~

The Partnership’s ~~accounting~~is ~~policies~~an ~~have~~investment ~~been~~vehicle ~~established~~formed tofor ~~conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in~~ the ~~application~~purpose of ~~accounting~~acquiring, ~~policies~~owning, ~~including making estimates~~ and ~~assumptions.~~operating ~~These~~income-producing ~~judgments~~real ~~affect~~properties, ~~the~~or ~~reported~~investing ~~amounts~~in ofjoint ~~assets~~ventures ~~and~~formed ~~liabilities~~for ~~and~~the ~~disclosure~~same ofpurpose, ~~contingent assets~~ and ~~liabilities~~has atinvested ~~the~~all ~~dates~~ of the partners’ ~~financial~~original ~~statements~~net ~~and~~offering ~~the~~proceeds ~~reported~~available ~~amounts~~for ofinvestment. ~~revenue~~We ~~and~~anticipate ~~expenses~~using ~~during~~net ~~the~~property ~~reporting~~sale ~~periods.~~proceeds Ifin ~~management’s~~order ~~judgment~~to orfund ~~interpretation~~any ofadditional ~~the~~legal ~~facts~~costs ~~and~~or ~~circumstances~~indemnification ~~relating~~obligations toin ~~various~~connection ~~transactions~~with ~~had~~the ~~been~~litigation ~~different~~discussed herein, itand isany ~~possible~~remaining ~~that~~expenses ~~different~~and ~~accounting~~obligations ~~policies~~of ~~would~~the ~~have~~partnership ~~been~~associated ~~applied,~~with ~~thus~~its ~~resulting~~final indissolution. aAs ~~different presentation~~ of ~~the~~March 31, ~~financial statements. Additionally~~2007, ~~other~~we ~~companies~~had ~~may~~received, ~~utilize~~used, ~~different~~distributed, ~~estimates~~and ~~that~~held ~~may~~net ~~impact~~sale ~~comparability~~proceeds ofallocated to the Partnership~~’s results~~ offrom ~~operations~~the tosale ~~those~~ of ~~companies~~properties inas ~~similar~~presented ~~businesses.~~ below:

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.


	Net Sale Proceeds	Partnership’s Approximate Ownership %		Net Sale Proceeds Allocated to the Partnership		Use of Net Sale Proceeds			Net Sale Proceeds Distributed to Partners as of March 31, 2007		Undistributed Net Sale Proceeds Being Reserved as of March 31, 2007
Property Sold	Net Sale Proceeds	Partnership’s Approximate Ownership %		Net Sale Proceeds Allocated to the Partnership		Amount		Purpose
Peachtree Place (partial sale in 2000)	$704,496	90.0	%	$	633,695	$	633,695	• Payment of deferred management fee	$	0	$	0

Crowe’s Crossing (sold in 2001)	$6,486,652	100	%		6,486,652		1,481,087	• Payment of deferred management fee		5,005,565		0

Cherokee Commons (sold in 2001)	$8,414,089	25.3	%		2,126,109		23,331	• Payment of deferred management fee		2,102,778		0

Heritage Place retail portion (sold in 2003)	$3,207,708	51.9	%		1,665,121		266,967	• Payment of deferred management fee		1,398,154		0

Peachtree Place (remainder sold in 2004)	$953,670	90.0	%		857,826		253,200	• Payment of deferred management fee		604,626		0

Heritage Place office portion (sold in 2006)	$4,028,043	51.9	%		2,090,957		0			288,880		1,802,077

Paces Pavilion (sold in 2006)	$4,065,700	100	%		4,065,700		0			0		4,065,700

Black Oak Plaza (sold in 2007)	$3,475,407	100	%		3,475,407		0			0		3,475,407


Total				$	21,401,467	$	2,658,280		$	9,400,003	$	9,343,184

~~Investment~~Our General Partners have reserved net sale proceeds of approximately $2.1 million to fund any additional legal costs or indemnification obligations in ~~Real~~connection ~~Estate~~with ~~Assets~~the litigation discussed herein, and any remaining expenses and obligations of the Partnership associated with its final dissolution. Accordingly, in May 2007, net sale proceeds of approximately $7.2 million from the sales of the office component of Heritage Place, Paces Pavilion, and Black Oak Plaza were distributed to the limited partners of record as of March 31, 2007, which, under the terms of the partnership agreement, does not include limited partners acquiring units after December 31, 2006.

~~Management~~Results ~~is required to make subjective assessments as to the useful lives~~ of ~~its depreciable~~Operations assets. Management considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Partnership’s assets by class are as follows:

Buildings		25 years
Building improvements		Remaining useful life of the building
Land improvements		20 years
Tenant improvements		Lease term

Comparison of the three months ended March 31, 2006 versus the three months ended March 31, 2007

InContinuing ~~the~~Operations ~~event that management uses inappropriate useful lives or methods for depreciation, the Partnership’s net income would be misstated.~~

~~Valuation~~Interest and other income increased from $40,455 for the three months ended March 31, 2006 to $113,554 for the three months ended March 31, 2007, primarily as a result of ~~Real~~(i) an ~~Estate~~increase ~~Assets~~in the average net proceeds held during the respective periods as a result of the May 2006 sale of the office portion of Heritage Place, the

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in 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. Management has determined that there has been no impairment in the carrying value of real estate assets held by the Partnership as of June 30, 2004.

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.

Page 20

~~ITEM~~ November 32006 sale of Paces Pavilion, and the January 2007 sale of Black Oak Plaza, and (ii) an increase in the daily interest yield. ~~QUANTITATIVE~~Future ~~AND~~levels ~~QUALITATIVE~~of interest ~~DISCLOSURES~~income ~~ABOUT~~are ~~MARKET~~expected ~~RISKS~~to decrease as a result of the May 2007 distribution of net sale proceeds.

~~Since~~General and administrative costs decreased from $158,420 for the ~~Partnership~~three ~~does~~months ~~not~~ended ~~borrow~~March 31, ~~any~~2006 ~~money~~to $64,926 ~~make~~for ~~any~~the ~~foreign~~three ~~investments~~months ended March 31, or2007, ~~invest~~primarily inas ~~any~~a ~~market~~result ~~risk-sensitive~~of ~~instruments,~~a itdecline isin ~~not~~legal ~~subject~~fees due to ~~risks~~resolving ~~relating~~certain tolitigation involving the Partnership and a decline in other ~~interest~~administrative ~~rates,~~costs ~~foreign~~due ~~current~~to ~~exchange~~the ~~rate~~decrease ~~fluctuations,~~in orsize of the ~~other~~Partnership’s ~~market~~portfolio. ~~risks~~General ~~contemplated~~and byadministrative ~~Item~~costs ~~305~~are expected to decrease in future periods relative to the reduction in the size of ~~Regulation~~the ~~S-K~~portfolio.

~~ITEM~~Equity 4in loss of joint venture decreased from $416,635 for the three months ended March 31, 2006 to $1,779 for the three months ended March 31, 2007, primarily as a result of recognizing an impairment loss on Heritage Place in the first quarter of 2006. ~~CONTROLS~~We ~~AND~~expect ~~PROCEDURES~~equity in loss of joint venture to cease in the near-term as a result of selling all of the real estate assets owned through Fund I and Fund II Tucker.

~~The~~Discontinued ~~Partnership~~Operations carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of the Partnership, 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~~In ~~were~~accordance nowith ~~significant~~SFAS ~~changes~~No. 144, inwe have classified the ~~Partnership’s~~operations ~~internal~~of ~~control~~real ~~over~~estate ~~financial reporting~~assets ~~that~~as ~~has~~discontinued ~~materially~~operations ~~affected~~for all periods presented. Income from discontinued operations increased from $77,783 orfor isthe three ~~reasonably~~months ~~likely~~ended March 31, 2006 to ~~materially~~$496,037 ~~affect~~for the three months ended March 31, 2007, primarily as a result of recognizing the ~~Partnership’s~~gain ~~internal~~on ~~control~~the ~~over~~sale ~~financial~~of ~~reporting~~Black Oak Plaza in January 2007. We expect future income from discontinued operations to decline as a result of selling all of the real estate assets owned directly by the Partnership.

Application of Critical Accounting Policies

Summary

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

Below is a discussion of the accounting policies used by the Partnership and Fund I and Fund II Tucker, which were considered to be critical in that they may have required complex judgment in their application or have required estimates about matters that were inherently uncertain.

Investment in Real Estate Assets

We were required to make subjective assessments as to the useful lives of our depreciable assets. We considered the period of future benefit of the assets to determine the appropriate useful lives. These assessments had a direct impact on net income. The estimated useful lives of the Partnership’s and Fund I and Fund II Tucker’s assets by class were as follows:


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

In the event that we used inappropriate useful lives or methods for depreciation, our net income would have been misstated.

Page 21

Valuation of Real Estate Assets

We monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets in which we have had an ownership interest, either directly or through investments in Fund I and Fund II Tucker, may not have been recoverable. When indicators of potential impairment were present which indicated that the carrying amounts of real estate assets may not have been recoverable, management assessed the recoverability of the real estate assets by determining whether the carrying value of the real estate assets would been recovered through the undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows did not exceed the carrying value, management adjusted the real estate assets to the fair value, as defined by SFAS No. 144, and recognized an impairment loss. Estimated fair values were calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. In the first quarter of 2006, Fund I and Fund II Tucker recognized an impairment loss of approximately $795,000, of which approximately $413,000 was allocated to the Partnership in order to reduce the carrying value of the office component of Heritage Place to its fair value, less costs to sell, as a result of a change in management’s intended holding period for this asset.

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 have resulted in an incorrect assessment of the property’s future cash flows and fair value, and could have resulted in the overstatement of the carrying value of real estate assets owned by the Partnership or Fund I and Fund II Tucker and net income of the Partnership.

Related-Party Transactions

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

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

The American Jobs Creation Act of 2004 added Section 470 to the Internal Revenue Code, which provides for certain limitations on the utilization of losses by investors that are attributable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. If Section 470 were deemed to apply to the Partnership, passive losses allocable to limited partners holding Class B Units could only be utilized to offset passive income generated from the same property or potentially from properties owned by the same partnership. In March 2005, the IRS announced that it would not apply Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS extended the period for transitional relief through the 2005 tax year, and in December 2006, the IRS again extended the period for transitional relief through all tax years beginning prior to January 1, 2007. In addition, pursuant to Section 403(ff) of the Gulf Opportunity Zone Act of 2005, the effective date provisions regarding the applicability of Section 470 were amended to provide that, in the case of leased property treated as tax-exempt use property by reason of its being owned by a partnership having both taxable and tax-exempt partners, Section 470 will apply only to property acquired after March 12, 2004. Since the Partnership acquired all of its properties prior to March 12, 2004, and is not expected to acquire interests in any additional properties in the future, we do not believe that the provisions of Section 470 should apply to limit the utilization of losses attributable to the properties owned by the Partnership; however, due to the uncertainties and lack of guidance relating to this provision, it is unclear as to whether the acquisition of a limited partnership

Page 22

interest in the Partnership after the March 12, 2004 effective date may be deemed to be an acquisition of property within the meaning of the effective date provisions of Section 470.

Subsequent Event

The sales of the office component of Heritage Place, Paces Pavilion, and Black Oak Plaza generated aggregate net sale proceeds to the Partnership of approximately $9,632,000, of which approximately $289,000 had previously been distributed to the limited partners through March 31, 2007. The General Partners have determined that reserves of approximately $2,143,000 will be required to fund any additional operating costs or indemnification obligations in connection with the litigation discussed herein. In accordance with the terms of the partnership agreement, the General Partners distributed the residual net sale proceeds in May 2007 of approximately $7,200,000 to the limited partners of record as of March 31, 2007, which, under the terms of the partnership agreement, does not include limited partners acquiring units after December 31, 2006.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.

CONTROLS AND PROCEDURES

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

There were no significant changes in our internal control over financial reporting during the quarter ended March 31, 2007 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On ~~January~~or 17about November 24, ~~2003~~2004, four individuals (the ~~Partnership~~“plaintiffs”) ~~was~~filed ~~served with~~ a putative class action bycomplaint a(Hendry ~~limited~~et ~~partner~~al. ~~holding~~v. ~~Class~~Leo BF. ~~units~~Wells, onIII ~~behalf~~et ~~of all limited partners holding Class B units as of January 15~~al., 2003, that seeks equitable relief with regard to the rights and obligations of all the Partnership’s limited partners and general partners under the partnership agreement. This litigation was filed in the Superior Court of Gwinnett County, Georgia ~~(Roy Johnston v. Wells Real Estate Fund I~~, Civil Action No. 03 04A-~~A00525~~13051-6), (the “~~Johnston~~Hendry Action”). against ~~The plaintiff in~~ the ~~Johnston~~Partnership, ~~Action generally alleges that~~ the ~~terms~~General ~~of the partnership agreement~~Partners, ~~as it relates to the allocation~~ and ~~distribution~~ ofWells ~~net~~Management. ~~sale~~The ~~proceeds,~~Hendry ~~are~~Action ~~inconsistent~~states ~~with~~that the ~~original~~Partnership ~~intent~~is ofnamed ~~the~~only ~~parties.~~as ~~The~~an ~~plaintiff~~allegedly ~~alleges~~necessary ~~that~~party ~~the~~defendant ~~original~~and ~~intent was~~ that ~~limited~~the ~~partners~~plaintiffs ~~holding~~seek ~~Class~~no Bmoney ~~units~~from ~~would~~or ~~have~~relief aat ~~priority~~the inexpense ~~payment~~ of ~~cash~~the Partnership. ~~distributions~~As of ~~net sale~~March 31, ~~proceeds~~2007, toWells ~~bring~~Capital ~~them~~had ~~even~~incurred ~~with~~approximately ~~the~~$883,000 ~~amount~~in oflegal ~~cash~~fees, ~~distributions~~costs, ~~previously~~and ~~made~~expenses related to ~~limited~~defending ~~partners~~against ~~holding~~the ~~Class~~Hendry ~~A units~~Action. The ~~Johnston~~indemnification ~~Action~~provisions ~~seeks,~~of ~~among~~the ~~other~~partnership ~~things,~~agreement require the Partnership to ~~have~~indemnify the ~~Partnership’s~~General ~~partnership~~Partners ~~agreement~~for ~~equitably~~their ~~reformed consistent~~costs ~~with~~of defending the ~~alleged~~Hendry ~~original~~Action ~~intent~~under ~~or,~~certain incircumstances upon the ~~alternative,~~conclusion toof ~~have~~this ~~the~~litigation. ~~investments~~At ~~made~~this bytime, ~~limited~~management ~~partners~~is ~~holding~~unable ~~Class~~to Bdetermine ~~units~~whether ~~equitably~~the ~~rescinded,~~likelihood ~~and~~of ~~requests~~ an ~~injunction~~unfavorable outcome ~~prohibiting~~is ~~the~~either ~~General~~probable ~~Partners~~or ofremote. ~~the~~Accordingly, ~~Partnership~~no ~~from distributing~~reserves ~~net~~have ~~sales~~been ~~proceeds~~provided ~~until~~for in the ~~resolution~~accompanying offinancial ~~the action~~statements.

OnPage ~~May~~23 7, 2004, the Court granted summary judgment in favor of the Partnership on grounds of statutes of limitation and laches. On May 24, 2004, the Partnership filed a motion to recover its attorneys’ fees and expenses of litigation from plaintiff and his counsel. On or about June 4, 2004, another defendant in the Johnston Action moved the Court to award attorneys’ fees from the Partnership in the form of five percent of the Partnership’s net sale proceeds. The Partnership has opposed that motion. Also on or about June 4, 2004, the plaintiff filed a Notice of Appeal with respect to the May 7, 2004 Orders granting summary judgment. Pursuant to Statement of Financial Accounting Standard No. 5 and the General Partners’ estimate of our current exposure under the Johnston Action, no reserves have been provided for in the accompanying financial statements.

On or about March 12, 2004, a putative class action complaint (the “Complaint”) was filed by four individuals (the “plaintiffs”) against the Partnership and our General Partners, Leo F. Wells, III and Wells Capital, as well as Wells Investment Securities, Inc. and Wells Management (collectively, the “Wells Defendants”) (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2). The plaintiffs filed the Complaint purportedly on behalf of all limited partners holding B units of the Partnership as of January 15, 2003. The Complaint alleges, among other things, that (a) Mr. Wells, Wells Capital, Wells Investment Securities, Inc., and the Partnership 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 the Partnership 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) Mr. Wells, Wells Capital, and the Partnership 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 the Partnership, among other reasons; (c) Mr. Wells and Wells Management breached an alleged contract arising out of consent solicitations to the limited partners; and (d) Mr. Wells, Wells Capital, and the Partnership breached fiduciary duties to the limited partners.

On or about May 19, 2004, plaintiffs filed a Motion to Permit Voluntary Dismissal. On May 20, 2004, the Wells Defendants filed a Notice of Consent to plaintiffs’ Motion to Permit Voluntary Dismissal. By Order dated June 3, 2004, the Court granted plaintiffs’ Motion to Permit Voluntary Dismissal, and ordered their Complaint dismissed without prejudice.

On June 18, 2004, the defendants, including Wells Management, filed a motion to recover attorneys’ fees and expenses of litigation from the plaintiffs and their counsel. The Court held a hearing on part, but not all, of the issues raised in that motion on August 3, 2004, and took the matter under advisement without ruling on any part of the motion.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The Exhibits to this report are set forth on Exhibit Index to Second Quarter Form 10-Q attached hereto.

(b) No reports on Form 8-K were filed with the Commission during the second quarter of 2004.

Page 22

The plaintiffs filed the Hendry Action purportedly on behalf of all limited partners of the Partnership holding Class B Units as of January 9, 2002. The Hendry Action alleges, among other things, that the General Partners 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 Class A Units and a holder of Class A and Class B Units in other litigation naming the Partnership as a defendant, in which the Court subsequently granted summary judgment in favor of the Partnership. The Hendry Action also alleges that misrepresentations and omissions in an April 2002 consent solicitation to the limited partners caused that consent solicitation to be materially misleading. In addition, the Hendry Action alleges that the General Partners 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 the Partnership, 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 allegedly waive Wells Management’s deferred management fees; and an award to the plaintiffs of their attorneys’ fees, costs, and expenses.

On January 28, 2005, the defendants filed motions for summary judgment and motions to dismiss the plaintiffs’ claims. On March 31, 2005, the plaintiffs filed briefs in opposition to the defendants’ motions. Pursuant to Orders entered July 1, 2005, the Court granted the defendants’ motions to dismiss and for summary judgment on all counts in the complaint. Thus, this action was at the time dismissed, subject to plaintiffs’ right to file a notice of appeal within the required time period. On August 3, 2005, the plaintiffs filed a motion requesting the Court to vacate and re-enter the orders to give the plaintiffs an opportunity to file a motion for the reconsideration or notice of appeal. After both sides had filed briefs in support of their respective positions, on February 15, 2006, the Court heard argument on plaintiffs’ motion to vacate and to re-enter the judgments previously entered on July 1, 2005.

On or about August 8, 2005, the defendants filed a motion for attorneys’ fees and expenses of litigation. On or about August 12, 2005, the plaintiffs filed a motion for attorneys’ fees and expenses of litigation as to one of the defenses asserted by defendants. On April 20, 2006, the Court held a hearing addressing only the liability aspects on the defendants’ and plaintiffs’ motions for attorneys’ fees and expenses. By Orders entered May 24, 2006, the Court denied the plaintiffs’ and the defendants’ motions to recover attorneys’ fees and expenses of litigation. Also by Orders entered May 24, 2006, the Court re-entered its July 1, 2005 judgments granting the Wells defendants’ motions to dismiss and for summary judgment on all counts in the complaint, so as to allow the plaintiffs 30 days within which to file a notice of appeal. On or about June 21, 2006, the plaintiffs filed a notice of appeal with respect to the Court’s Order granting the defendants’ motions to dismiss and for summary judgment. On July 5, 2006, the defendants filed a notice of cross appeal with respect to the Court’s Order denying the defendants’ motion for attorneys’ fees and expenses of litigation. On August 18, 2006, the appeal and cross appeal were docketed in the Georgia Court of Appeals. It is not known when the Court of Appeals will rule on the appeal and cross appeal.

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006.

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, 2007.

(b)	Not applicable.

(c)	We did not redeem any securities during the quarter ended March 31, 2007.

Page 24

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

(a)	We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended March 31, 2007.

(b)	Not applicable.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our limited partners during the quarter ended March 31, 2007.

ITEM 5.

OTHER INFORMATION

(a)	During the quarter ended March 31, 2007, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.

(b)	Not applicable.

ITEM 6.

EXHIBITS

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

Page 25

SIGNATURES

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

	WELLS REAL ESTATE FUND I (Registrant)	~~WELLS REAL ESTATE FUND I (Registrant)~~
		By: WELLS CAPITAL, INC. (Corporate General Partner)
	By:	WELLS CAPITAL, INC.
August 12, 2004		/s/ LEO F. WELLS, III Leo F. Wells, III President
		(Corporate General Partner)
August 12, 2004		/s/ DOUGLAS P. WILLIAMS Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.
May 11, 2007	/S/ LEO F. WELLS, III
	Leo F. Wells, III President, Principal Executive Officer,and Sole Director of Wells Capital, Inc.
May 11, 2007	/S/ DOUGLAS P. WILLIAMS
	Douglas P. Williams Principal Financial Officer of Wells Capital, Inc.

Page 2326

EXHIBIT INDEX

TO FIRST QUARTER FORM 10-Q

SECOND QUARTER FORM 10-Q

WELLS REAL ESTATE FUND I

Exhibit No.		Description
10.1		Purchase and Sale Agreement for Peachtree Place
*10.1		Purchase and Sale Agreement for sale of Black Oak Plaza (Exhibit 10(y) to Form 10-K of Wells Real Estate Fund I for the year ended December 31, 2006, Commission File No. 0-14463)
*10.2		First Amendment to Purchase and Sale Agreement for sale of Black Oak Plaza (Exhibit 10(z) to Form 10-K of Wells Real Estate Fund I for the year ended December 31, 2006, Commission File No. 0-14463)
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	previously filed and incorporated herein by reference

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