WELLS REAL ESTATE FUND XI L P - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]

For the fiscal year ended December 31, 2001 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from to ___________________ To ___________________

Commission file number 0-25731
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Wells Real Estate Fund XI, L.P.
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(Exact name of registrant as specified in its charter)

Georgia 58-2250094
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

6200 The Corners Parkway, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:

Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:

Class A Units
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(Title of Class)

Class B Units
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(Title of Class)

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
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Aggregate market value of the voting stock held by nonaffiliates: Not Applicable
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PART I

ITEM 1. BUSINESS

General

Wells Real Estate Fund XI, L.P. (the "Partnership") is a Georgia public limited
partnership with Leo F. Wells, III and Wells Partners, L.P. ("Wells Partners"),
a Georgia nonpublic limited partnership, serving as General Partners. The
Partnership was formed on June 20, 1996 for the purpose of acquiring,
developing, owning, operating, improving, leasing, and otherwise managing income
producing commercial properties for investment purposes. Limited partners have
the right to change their prior elections to have some or all of their units
treated as Class A Units or Class B Units one time during each quarterly
accounting period. 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.

On December 31, 1997, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10 per unit) pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933. The
Partnership commenced active operations on March 3, 1998 when it received and
accepted subscriptions for 125,000 units. The offer terminated on December 30,
1998 at which time the Partnership had sold 1,302,942 Class A Units and 350,338
Class B Units, held by a total of 1,250 and 95 Class A and Class B Limited
Partners, respectively, for total Limited Partner capital contributions of
$16,532,802. As of December 31, 2001, the Partnership had paid a total of
$578,648 in acquisition and advisory fees and expenses, $2,066,600 in selling
commissions and organization and offering expenses, invested $3,357,436 in the
Fund IX-X-XI-REIT Joint Venture, invested $2,398,767 in the Fund X-XI Joint
Venture, and invested $8,131,351 in the Fund XI-XII-REIT Joint Venture.

Employees

The Company has no direct employees. The employees of Wells Capital, Inc. and
Wells Management Company, Inc. perform a full range of real estate services
including leasing and property management, accounting, asset management and
investor relations for the Company.

Insurance

Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned by the Partnership through investments in the joint ventures described in
Item 2. In the opinion of management, all such properties are adequately
insured.

Competition

The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements, and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose

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of its properties, the Partnership will also be in competition with sellers of
similar properties to locate suitable purchasers for its properties.

ITEM 2. PROPERTIES

The Partnership owns interests in properties through the following joint
ventures between the Partnership and other affiliated limited partnerships: (i)
the Fund X-XI Joint Venture, a joint venture between the Partnership and Wells
Real Estate Fund X, L.P., (ii) the Fund IX-X-XI-REIT Joint Venture, a joint
venture among the Partnership, Wells Real Estate Fund IX, L.P., Wells Real
Estate Fund X, L.P. and Wells Operating Partnership, L.P. ("Wells OP"), a
Delaware limited partnership having Wells Real Estate Investment Trust, Inc.
("Wells REIT"), as its general partner, and (iii) the Fund XI-XII-REIT Joint
Venture, a joint venture among the Partnership, Wells Real Estate Fund XII, L.P.
and Wells OP. Wells REIT is a Maryland corporation that qualifies as a real
estate investment trust. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investments in joint ventures are recorded using the
equity method.

As of December 30, 2001, the Partnership owned interests in the following
properties through its ownership in the foregoing joint ventures: (i) a
three-story office building in Knoxville, Tennessee (the "Alstom Power-Knoxville
Building"), (ii) a two-story office building located in Boulder County, Colorado
(the "Ohmeda Building"), (iii) a three-story office building located in
Broomfield, Colorado (the "360 Interlocken Building"), (iv) a one-story office
building in Oklahoma City, Oklahoma (the "Avaya Building"), and (v) a
single-story warehouse and office building located in Ogden, Weber County, Utah
(the "Iomega Building"), all of which are owned by the Fund IX-X-XI-REIT Joint
Venture, (vi) a two-story office and manufacturing building located in Fremont,
California (the "Fairchild Building"), which is owned by Wells/Fremont
Associates (the "Fremont Joint Venture"), a joint venture between the Fund X-XI
Joint Venture and Wells OP, (vii) a one-story office and warehouse building
located in Fountain Valley, California (the "Cort Building"), which is owned by
Wells/Orange County Associates (the "Cort Joint Venture"), a joint venture
between the Fund X-XI Joint Venture and Wells OP, and (viii) a two-story
manufacturing and office building located in Fountain Inn, South Carolina (the
"EYBL Cartex Building"), (ix) a three-story office building located in Leawood,
Johnson County, Kansas (the "Sprint Building"), (x) a one-story office building
and warehouse located in Tredyffin Township, Chester County, Pennsylvania (the
"Johnson Matthey Building"), and (xi) a two-story office building located in Ft.
Myers, Lee County, Florida (the "Gartner Building"), all of which are owned by
the Fund XI-XII-REIT Joint Venture.

The following table shows lease expirations during each of the next ten years as
of December 31, 2001, for leases at all properties owned by the joint ventures
described above, assuming no exercise of renewal options or termination rights:

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Partnership Percentage
Number Annualized Share of Percentage
Year of Of Square Annualized Square of Total of Total
Lease Leases Feet Gross Base Gross Base Feet Annualized
Expiration Expiring Expiring Rent (1) Rent (1) Expiring Base Rent
---------- -------- -------- ---------- ----------- ---------- ----------

2002 5 33,610 $ 558,407 $ 49,369 3.5 6.0
2003(2) 2 69,146 1,075,987 211,902 7.3 11.5
2004(3) 1 58,424 902,946 87,947 6.2 9.7
2005(4) 1 106,750 1,027,315 90,825 11.2 11.0
2006 0 0 0 0 0.0 0.0
2007(5) 3 283,304 3,093,891 607,890 29.9 33.2
2008(6) 3 289,096 1,997,312 421,355 30.5 21.4
2009(7) 1 108,250 673,000 59,500 11.4 7.2
2010 0 0 0 0 0.0 0.0
2011 0 0 0 0 0.0 0.0
-------- ------- ---------- ---------- ------- -------
16 948,580 $9,328,858 $1,528,788 100.0% 100.0%
======== ======= ========== ========== ======= =======

(1) Average monthly gross rent over the life of the lease,
annualized.
(2) Expiration 52,000 of square feet (Cort Furniture lease),
and 17,146 square feet (ODS Technologies lease at the 360
Interlocken Building).
(3) Expiration of Fairchild lease.
(4) Expiration of Ohmeda lease.
(5) Expiration of Alstom Power-Knoxville lease, Sprint lease,
and the Johnson Matthey lease.
(6) Expiration of Avaya lease, Gartner lease, and EYBL CarTex
lease.
(7) Expiration of Iomega lease.

The following describes the properties in which the Partnership owns an interest
as of December 31, 2001:

Fund IX-X-XI-REIT Joint Venture

On June 11, 1998, Fund IX and Fund X Associates ("Fund IX-X Joint
Venture"), a joint venture between Wells Real Estate Fund IX and Wells
Real Estate Fund X, L.P. ("Wells Fund IX-X"), a Georgia public limited
partnership, was amended and restated to admit the Partnership, a
Georgia public limited partnership, and Wells OP. Wells Fund IX, Wells
Fund X, Wells OP and the Wells REIT are all affiliates of the
Partnership and its General Partners.

The Fund IX-X Joint Venture, which changed its name to the Fund
IX-X-XI-REIT Joint Venture, had previously acquired and owned the
following three properties: (i) the Alstom Power-Knoxville Building,
(ii) the Ohmeda Building, and (iii) the 360 Interlocken Building. On
June 24, 1998, the Fund IX-X-XI-REIT Joint Venture purchased the Avaya
Building. On July 1, 1998, Wells Fund X contributed a single-story
warehouse and office building with 108,250 rentable square feet `Iomega
Building' to the Fund IX-X-XI-REIT Joint Venture, which was recorded as
a capital contribution.

As of December 31, 2001, the Parntership had contributed $3,357,436 and
held an approximate 8.9% equity interest in the Fund IX-X-XI-REIT Joint
Venture. As of December 31, 2001, Wells Fund IX had an approximate
39.1% equity interest, Wells Fund X had an approximate 48.3% equity
interest, and Wells OP had an approximate 3.7% equity interest in the
Fund IX-X-XI-REIT Joint Venture.

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Alstom Power-Knoxville Building

On March 20, 1997, the Fund IX-X Joint Venture began construction of
the Alstom Power-Knoxville Building, a three-story office building
containing approximately 84,404 rentable square feet locates on a 5.62
acre tract of real property in Knoxville, Knox County, Tennessee. The
land purchase and construction costs totaling $8,137,994 were funded by
capital contributions of $4,221,973 from Wells Fund IX and $3,916,021
from Wells Fund X.

Alstom Power, Inc. ("Alstom Power"), successor in interest to ABB
Environmental Systems, a subsidiary of ABB, Inc., occupied its lease
space of 56,012 rentable square feet comprising approximately 66% of
the building in December 1997. The initial term of the lease is 9 years
and 11 months commencing upon occupancy. Alstom Power has the option
under its lease to extend the initial term of the lease for two
consecutive five year periods. The annual base rent payable during the
initial term is $646,250 during the first five years and $728,750
during the last four years and 11 months of the initial term. The
annual base rent for each extended term will be at then currently
prevailing market rental rates. In addition to the base rent, Alstom
Power is required to pay additional rent equal to its share of
operating expenses during the lease term.

Commencing December 1, 1999, Alstom Power Environmental exercised its
right of first refusal to lease an additional 23,992 square feet of
space vacated by the Associates in September 1999, which increased
their rentable floor area from 57,831 square feet to 81,823 square
feet. On May 19, 2000, Alstom Power, Inc. executed the third amendment
to its lease agreement in order to lease the remaining 2,581 square
feet of rentable floor area on the second floor of the building.
Accordingly, Alstom Power now occupies 100% of the building and will
pay lease rent at the same terms and conditions of their original
lease.

The average effective annual rental per square foot at the Alstom
Power-Knoxville Building was $13.83 for 2001, $14.05 for 2000, $11.82
for 1999, $9.97 for 1998, and $8.16 for 1997, the first year of
occupancy. The occupancy rate at year-end was 100% for 2001 and 2000,
and 98% for 1999, 95% for 1998, and 67% for 1997.

Ohmeda Building

On February 13, 1998, the Fund IX-X Joint Venture acquired the Ohmeda
Building, a two story office building with approximately 106,750
rentable square feet . The Ohmeda Building was on a 15-acre tract of
land located in Louisville, Boulder County, Colorado. The purchase
price for the Ohmeda Building was $10,325,000. The Fund IX-X Joint
Venture also incurred additional acquisition expenses in connection
with the purchase of the Ohmeda Building, including attorneys' fees,
recording fees, and other closing costs. As of December 31, 2001, Wells
Fund IX had contributed $3,460,192 and Wells Fund X had contributed
$6,900,878 towards the purchase of this building.

The entire 106,750 rentable square feet of the Ohmeda Building is
currently under a net lease dated February 26, 1987, as amended by
First Amendment to Lease dated December 3, 1987, as amended by Second
Amendment to Lease dated October 20, 1997 (the "Ohmeda Lease") with
Ohmeda, Inc., a Delaware corporation. The lease was assigned to the
Joint Venture at the closing. The Ohmeda Lease currently expires in
January 2005, subject to (i) Ohmeda's right to effectuate an early
termination of the lease under the terms and conditions described
below, and (ii) Ohmeda's right to extend the lease for two additional
five year periods of time at the then current market rental rates.

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The monthly base rental payable under the lease is $83,710 through
January 31, 2003; $87,891 from February 1, 2003 through January 31,
2004; and $92,250 from February 1, 2004 through January 31, 2005. Under
the lease, Ohmeda is responsible for all utilities, taxes, insurance,
and other operating costs with respect to the Ohmeda Building during
the term of the lease. In addition, Ohmeda shall pay a $21,000 per year
management fee for maintenance and administrative services of the
Ohmeda Building. The Fund IX-X-XI-REIT Joint Venture, as landlord, is
responsible for maintenance of the roof, exterior and structural walls,
foundation, other structural members and floor slab, provided that the
landlord's obligation to make repairs specifically excludes items of
cosmetic and routine maintenance such as the painting of walls.

The average effective annual rental per square foot at the Ohmeda
Building was $9.62 for 2001, 2000, 1999, and 1998, the year of
acquisition. The occupancy rate at year-end was 100% for 2001, 2000,
1999, and 1998.

360 Interlocken Building

On March 20, 1998 the Fund IX-X Joint Venture acquired the 360
Interlocken Building, a three-story multi-tenant office building
containing approximately 51,974 rentable square feet located on a 5.1
acre tract of land in Broomfield, Boulder County, Colorado. The
purchase price was $8,275,000 excluding acquisition costs. The project
was funded by capital contributions of $6,642,466 from Wells Fund IX
and $1,674,271 from Wells Fund X.

The 360 Interlocken Building was completed in December 1996. The first
floor is leased to multiple tenants and contains 15,599 rentable square
feet; the second floor is leased to ODS Technologies, L.P. and contains
17,146 rentable square feet; and the third floor is leased to
Transecon, Inc. and contains 19,229 rentable square feet.

The third floor lease expires in March 2002, subject to Transecon's
right to extend for one additional term of five years upon 180 days'
notice. The monthly rent payable under Transecon's lease is
approximately $24,000 for the initial term of the lease. Under the
lease Transecon is responsible for its share of utilities, taxes,
insurance, and other operating expenses with respect to the Interlocken
Building. In addition, Transecon has a right of first refusal under the
lease for any second floor space proposed to be leased by the landlord.
The second floor lease expires in September 2003, subject to ODS's
right to extend for one additional term of three years. The monthly
rent payable under the ODS lease is $22,100 through January 1998;
$22,150 through January 1999; $22,600 through January 2000; $23,100
through January 2001; $23,550 through January 2002; $24,050 through
January 2003, and $24,550 through September 2003. The rental payments
under the ODS lease are secured by the assignment of a $275,000 letter
of credit which may be drawn upon by the landlord in the event of a
tenant default under the lease. Under the lease, ODS is responsible for
its share of utilities, taxes, insurance, and other operating costs
with respect to the 360 Interlocken building.

The average effective annual rental per square foot at the 360
Interlocken Building was $16.12 for 2001, $16.23 for 2000, $15.97 for
1999 and 1998, the first year of occupancy. The occupancy rate at
year-end was 100% for 2001, 2000, 1999 and 1998.

Avaya Building

On May 30, 1997, the Fund IX-X Joint Venture entered into a purchase
and sale agreement with Wells Development Corporation ("Wells
Development"), an affiliate of the General Partners, for the
acquisition and development of the Avaya Building, a one-story office
building containing

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57,186 net rentable square feet on 5.3 acres of land. On June 24, 1998,
the Fund IX-X-XI-REIT Joint Venture purchased this property for
$5,504,276. The purchase price was funded by capital contributions of
$2,482,810 from the Partnership, $657,804 from Wells Fund IX, $950,392
from Wells Fund X, and $1,421,466 from Wells OP.

Avaya, a world-wide leader in telecommunications technology producing a
variety of communication products, occupies the entire Avaya Building.
The initial term of the lease is ten years commencing January 5, 1998.
Avaya has the option to extend the initial term of the lease for two
additional five-year periods. The annual base rent payable during the
initial term is $508,383 during the first five years and $594,152
during the second five years of the lease term. The annual base rent
for each extended term will be at then currently prevailing market
rental rates. In addition to the base rent, Avaya will be required to
pay additional rent equal to its share of operating expenses during the
lease term.

The average effective annual rental per square foot at the Avaya
Building was $10.19 for 2001, 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year-end was 100% for 2001, 2000, 1999
and 1998.

Iomega Building

On July 1, 1998, Wells Fund X contributed the Iomega Building, a single
story warehouse and office building with 108,250 rentable square feet,
and was credited with making a capital contribution to the Fund
IX-X-XI-REIT Joint Venture in the amount of $5,050,425, which
represents the purchase price of $5,025,000 plus acquisition expenses
of $25,425 originally paid by Wells Fund X on April 1, 1998.

The building is 100% occupied by Iomega Corporation with a ten year
lease term that expires on July 31, 2006. The monthly base rent payable
under the lease is $40,000 through November 12, 1999. Beginning on the
40th and 80th months of the lease term, the monthly base rent payable
under the lease will be increased to reflect an amount equal to 100% of
the increase in the Consumer Price Index (as defined in the lease)
during the preceding 40 months, provided, however, that in no event
shall the base rent be increased with respect to any one year by more
than 6% or by less than 3% per annum, compounded annually, on a
cumulative basis from the beginning of the lease term. The lease is a
triple net lease, whereby the terms require the tenant to reimburse the
Fund IX-X-XI-REIT Joint Venture for certain operating expenses, as
defined in the lease, related to the building.

On March 22, 1999, the Fund IX-X-XI-REIT Joint Venture purchased a
four-acre tract of vacant land adjacent to the Iomega Building located
in Ogden, Utah. The land was purchased at a cost of $212,000, excluding
acquisition costs. The funds used to acquire the land and make
improvements were funded out of capital contributions made by the
Partnership to the Fund IX-X-XI-REIT Joint Venture in the amount of
$874,625, which was the total project cost. The site was developed as
additional parking and a loading-dock area, including 400 new parking
stalls and new site work for truck maneuver space in accordance with
the requirements of the tenant and the city of Ogden. The project was
completed on July 31, 1999. Iomega Corporation has extended its lease
term through April 30, 2009 and will pay as additional annual base rent
$113,700 commencing May 1, 1999.

The average effective annual rental per square foot at the Iomega
Building was $6.22 for 2001 and 2000, $5.18 for 1999, and $4.60 for
1998, the first year of occupancy. The occupancy rate at year-end was
100% for 2001, 2000, 1999 and 1998.

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Fund X-XI Joint Venture

On July 17, 1998 the Partnership and Wells Real Estate Fund X, L.P.
("Wells Fund X"), a Georgia public limited partnership, affiliated with
the Partnership through common general partners, formed a joint venture
known as Fund X and Fund XI Associates (the "Fund X-XI Joint Venture").
The investment objectives of Wells Fund X are substantially identical
to those of the Partnership. As of December 31, 2001, the Partnership
had contributed $2,398,767 and Wells Fund X had contributed $3,296,233
for total contributions of $5,695,000 to the Fund X-XI Joint Venture.
At December 31, 2001, the Partnership's equity interest in the Fund
X-XI Joint Venture was approximately 42%, and Wells Fund X's equity
interest was approximately 58%.

Wells/Fremont Joint Venture - Fairchild Building

On July 15, 1998, Wells OP entered into Fremont Joint Venture with
Wells Development Corporation ("Wells Development"), a Georgia
Corporation. Wells Development is an affiliate of the Partnership and
its General Partners. On July 21, 1998, the Fremont Joint Venture
acquired the Fairchild Building, a 58,424 square-foot manufacturing and
office building located in Fremont, California (the "Fairchild
Building"), for a purchase price of $8,900,000 plus acquisition
expenses of approximately $60,000.

On July 17,1998 the Fund X-XI Joint Venture entered into an agreement
for the purchase of Wells Development's interest in the Fremont Joint
Venture. On October 8, 1998, the Fund X-XI Joint Venture exercised its
rights under the Fremont Joint Venture Contract and purchased Wells
Development's interest in the Fremont Joint Venture and became a joint
venture partner with Wells OP in the ownership of the Fairchild
Building. As of December 31, 2001, Wells OP had contributed $6,983,110
and held an approximate 78% equity percentage interest in the Fremont
Joint Venture, and Fund X-XI Joint Venture had contributed $2,000,000
and held an approximate 22% equity percentage interest in the Fremont
Joint Venture.

The Fairchild Building is 100% occupied by one tenant with a seven-year
lease term that commenced on December 1, 1997 (with an early possession
date of October 1, 1997) and expires on November 30, 2004. The monthly
base rent payable under the lease is $68,128 with a 3% increase on each
anniversary of the commencement date. The lease is a triple net lease,
whereby the terms require the tenant to reimburse the landlord for
certain operating expenses, as defined in the lease, related to the
building.

The average effective annual rental per square foot at the Fairchild
Building was $15.46 for 2001, 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 2001, 2000, 1999
and 1998.

Wells/Orange County Joint Venture

In July 1998, Wells OP entered into Cort Joint Venture with Wells
Development Corporation. On July 31, 1998, the Cort Joint Venture
acquired the Cort Building for a purchase price of $6,400,000 plus
acquisition expenses of approximately $150,000.

On July 30, 1998, the Fund X-XI Joint Venture entered into an agreement
for the purchase of Wells Development's interest in the Cort Joint
Venture. On September 1, 1998, the Fund X-XI Joint Venture exercised
its rights under the Cort Joint Venture Contract and purchased Wells
Development's interest in the Cort Joint Venture and became a joint
venture partner with Wells OP in the ownership of the Cort Building.
The Partnership contributed $1,398,767, the Fund X-

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XI Joint Venture contributed $2,296,233, and Wells OP contributed
$2,871,430 towards the purchase of this building.

The Cort Building is a 52,000-square-foot warehouse and office building
located in Fountain Valley California. The building is 100% occupied by
one tenant with a 15-year lease term that commenced on November 1, 1988
and expires on October 31, 2003. The monthly base rent payable under
the lease is $63,247 through April 30, 2001, at which time the monthly
base rent will be increased 10% to $69,574 for the remainder of the
lease term. The lease is a triple net lease, whereby the terms require
the tenant to reimburse the Cort Joint Venture for certain operating
expenses, as defined in the lease, related to the building.

As of December 31, 2001, Wells OP had made total capital contributions
of $2,871,430 and held an approximate 44% equity interest in the Cort
Joint Venture, and the Fund X-XI Joint Venture had contributed
$3,695,000 and held an approximate 56% equity percentage interest in
the Cort Joint Venture.

The average effective annual rental per square foot at the Cort
Building was $15.30 for 2001, 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 2001, 2000, 1999
and 1998.

Fund XI-XII-REIT Joint Venture

On June 21, 1999, Fund XI-REIT Joint Venture, a joint venture between
the Partnership and Wells OP, was amended and restated to admit the
Wells Real Estate Fund XII L.P. ("Wells Fund XII"), a Georgia public
limited partnership. Wells Fund XII and Wells OP are all affiliates of
the Partnership and its general partners. The Fund XI-REIT Joint
Venture, which changed its name to Wells Fund XI-XII-REIT Joint
Venture, had previously acquired and owned the EYBL CarTex Building
located in Greenville, South Carolina. As of December 31, 2001, the
Partnership had contributed $8,131,351 for an approximate 26.2% equity
interest in the Fund XI-XII-REIT Joint Venture, Wells Fund XII had made
capital contributions of $5,300,000 for an approximate 17.1% equity
interest, and Wells OP had contributed $17,585,310 for an approximate
56.8% interest in the Fund XI-XII-REIT Joint Venture.

EYBL CarTex Building

On May 18, 1999, Wells Real Estate, LLC-SC I ("Wells LLC"), a Georgia
limited liability company wholly owned by the Fund XI-XII-REIT Joint
Venture, acquired the EYBL CarTex Building, a manufacturing and office
building located in Fountain Inn, unincorporated Greenville County,
South Carolina for a purchase price of $5,085,000 plus acquisition
expenses of approximately $37,000. The purchase cost was funded by
capital contributions of $1,530,000 from the partnership and $3,591,827
from Wells OP.

The EYBL CarTex Building is a manufacturing building containing
approximately 169,510 square feet, comprised of approximately 140,580
square feet of manufacturing space, 25,300 square feet of two-story
office space and 3,360 square feet of cafeteria/training space. An
addition was constructed to the EYBL CarTex Building in 1989, which
contained approximately 64,000 square feet of warehouse space.

The entire 169,510 rentable square feet of the EYBL CarTex Building is
currently under an Agreement of Lease (the " EYBL CarTex lease") with
EYBL CarTex, Inc., a South Carolina corporation ("EYBL CarTex"). The
lease was assigned to Wells LLC at the closing. The initial

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term of the Lease is ten years beginning on March 1, 1998. EYBL CarTex
has the right to extend the Lease for two additional five year periods.
Each extension option must be exercised by giving notice to the
landlord at least twelve months prior to the expiration date of the
then current lease term. The annual rent payable during the first four
years of the lease is $508,530. The annual rent payable is $550,908 for
years five and six, $593,285 for years seven and eight, and $610,236
for years nine and ten.

Pursuant to a lease commission agreement dated February 12, 1998
between the Seller and The McNamara Company, Inc., Wells LLC is
required to pay on or before March 1 of each year an amount equal to
$13,787 as a brokerage fee to the McNamara Company, Inc. through March
1, 2007.

The average effective annual rental per square foot at the EBYL CarTex
Building was $3.31 for 2001, 2000 and 1999, the first year of
occupancy. The occupancy rate at year-end was 100% for 2001, 2000 and
1999.

Sprint Building

On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired the Sprint
Building, a three-story office building with approximately 68,900
rentable square feet on a 7.12-acre tract of land located in Leawood,
Johnson County, Kansas, for a purchase price of $9,500,000 plus
acquisition expenses of approximately $46,210. As of December 31, 2001,
the Partnership had contributed $3,000,000, Wells Fund XII had
contributed $1,000,000 and Wells OP had contributed $5,546,210 to the
purchase of this property.

The entire 68,900 rentable square feet of the Sprint Building is
currently under a net lease agreement with Sprint Communications, Inc.
("Sprint") dated February 14, 1997. The seller's interest in the lease
was assigned to the Fund XI-XII-REIT Joint Venture at the closing. The
initial term of the lease is ten years which commenced on May 19, 1997
and expires on May 18, 2007. Sprint has the option to extend the lease
for two additional five-year periods of time. The monthly base rent
payable under the lease is $83,254 through May 18, 2002 and $91,867 for
the remainder of the lease term. The monthly base rent payable for each
extended term of the lease will be equal to 95% of the then current
market rate which is calculated as a full-service rental rate less
anticipated annual operating expenses on a rentable square foot basis
charged for space of comparable location, size, and conditions in
comparable office buildings in the suburban south Kansas City,
Missouri, and south Johnson County, Kansas areas.

The lease contains a termination option which may be exercised by
Sprint effective as of May 18, 2004, provided that Sprint has not
exercised either expansion option, as described below. Sprint must
provide notice to the Fund XI-XII-REIT Joint Venture of its intent to
exercise its termination option on or before August 21, 2003. If Sprint
exercises its termination option, it will be required to pay the Fund
XI-XII-REIT Joint Venture a termination payment equal to $6.53 per
square foot, or $450,199.

Sprint also has an expansion option for an additional 20,000 square
feet of office space, which may be exercised in two expansion phases.
Sprint's expansion rights involve building on unfinished ground-level
space that is currently used as covered parking within the existing
building footprint and shell. At each exercise of an expansion option,
the remaining lease term will be extended to be a minimum of an
additional five years from the date of the completion of such expansion
space.

-10-

The average effective annual rental per square foot at the Sprint
Building was $15.45 for 2001, $15.44 for 2000 and 1999, the first year
of occupancy. The occupancy rate at year-end was 100% for 2001, 2000
and 1999.

Johnson Matthey Building

On August 17, 1999, the Fund XI-XII-REIT Joint Venture acquired the
Johnson Matthey Building, a research and development office and
warehouse building located in Chester County, Pennsylvania for a
purchase price of $8,000,000 plus acquisition expenses of approximately
$60,000. The purchase of the building was funded by capital
contributions of $3,494,727 from the Partnership, $1,500,000 from Wells
Fund XII and $3,061,594 from Wells OP.

The Johnson Matthey Building is a 130,000 square foot research and
development office and warehouse building that was first constructed in
1973 as a multi-tenant facility. It was subsequently converted into a
single-tenant facility in 1998. The site consists of a ten-acre tract
of land located at 434-436 Devon Park Drive in the Tredyffrin Township,
Chester County, Pennsylvania.

The entire 130,000 rentable square feet of the Johnson Matthey Building
is currently leased to Johnson Matthey. The lease was assigned to the
Fund XI-XII-REIT Joint Venture at closing. The annual base rent payable
under the Johnson Matthey lease for the remainder of the lease term is
as follows: year three-$789,750, year four-$809,250, year
five-$828,750, year six-$854,750, year seven-$874,250, year
eight-$897,000, year nine-$916,500, and year ten-$939,250. The current
lease term expires in June 2007. Johnson Matthey has the right to
extend the lease for two additional three-year periods.

Johnson Matthey has a right of first refusal to purchase the Johnson
Matthey Building in the event that the Fund XI-XII-REIT Joint Venture
desires to sell the building to an unrelated third party. The joint
venture must give Johnson Matthey written notice of its intent to sell
the Johnson Matthey Building, and Johnson Matthey will have ten days
from the date of such notice to provide written notice of its intent to
purchase the building. If Johnson Matthey exercises its right of first
refusal, it must purchase the Johnson Matthey Building on the same
terms contained in the third party offer.

The average effective annual rental per square foot at the Johnson
Matthey Building was $6.67 for 2001, 2000 and 1999, the first year of
occupancy. The occupancy rate at year-end was 100% for 2001, 2000 and
1999.

Gartner Building

On September 20, 1999, the Fund XI-XII-REIT Joint Venture acquired the
Gartner Building, a two-story office building with approximately 62,400
rentable square feet on a 4.9-acre tract of land located at 12600
Gateway Boulevard in Fort Myers, Lee County, Florida for a purchase
price of $8,320,000 plus acquisition expenses of approximately $27,600.
The purchase was funded by capital contributions of $106,554 by the
Partnership, $2,800,000 by Wells Fund XII and $5,441,064 by Wells OP.

The entire 62,400 rentable square feet of the Gartner Building is
currently under a net lease agreement with Gartner dated July 30, 1997
(the "Gartner Lease"). The landlord's interest in the Gartner Lease was
assigned to the Fund XI-XII-REIT Joint Venture at the closing. The
initial term of the Gartner Lease is ten years which commenced on
February 1, 1998 and expires on

-11-

January 31, 2008. Gartner has the right to extend the Gartner Lease for
two additional five-year periods. The annual base rent payable for the
remainder of the Gartner Lease term is $642,798 through January 2000,
$790,642 through January 2001, and thereafter will increase by 2.5%
through the remainder of the Gartner Lease.

Gartner also has two expansion options for additional buildings under
the Gartner Lease. The two option plans are described in the Gartner
Lease as the "Small Option Building" and the "Large Option Building."

The "Small Option Building" expansion option allows Gartner the ability
to expand into a separate, free-standing facility on the property
containing between 30,000 and 32,000 rentable square feet to be
constructed by the Fund XI-XII-REIT Joint Venture. Gartner may exercise
its expansion right for the "Small Option Building" by providing notice
in writing to the Fund XI-XII-REIT Joint Venture on or before April 15,
2002.

The "Large Option Building" expansion option allows Gartner the ability
to expand into a separate, free-standing facility on the property
containing between 60,000 and 75,000 rentable square feet to be
constructed by the Fund XI-XII-REIT Joint Venture. Gartner may exercise
its expansion right for the "Large Option Building" by providing notice
in writing to the Fund XI-XII-REIT Joint Venture on or before April 15,
2002.

The average effective annual rental per square foot at the Gartner
Building was $13.68 for 2001, 2000 and 1999, the first year of
occupancy. The occupancy rate at year end was 100% for 2001, 2000 and
1999.

Because of the requirement for fiduciaries of retirement plans subject to ERISA
to determine the value of the assets of such retirement plans on an annual
basis, the General Partners are required under the Partnership Agreement to
report estimated Unit values to the Limited Partners each year in the
Partnership's annual Form 10-K. The methodology to be utilized for determining
such estimated Unit values under the Partnership Agreement is for the General
Partners to estimate the amount a Unit holder would receive if the Partnership's
properties were sold at their estimated fair market values as of the end of the
Partnership's fiscal year and the proceeds therefrom (without reduction for
selling expenses) were distributed to the Limited Partners in liquidation of the
Partnership. Utilizing this methodology, the General Partners have estimated
Unit valuations, based upon their estimates of property values as of December
31, 2001, to be approximately $8.74 per Class A Unit and $11.52 per Class B
Unit, based upon market conditions existing in early December 2001. In
connection with these estimated valuations, the General Partners obtained an
opinion from David L. Beal Company, an independent MAI appraiser, to the effect
that such estimates of value were reasonable; however, due to the inordinate
expense involved in obtaining appraisals for all of the Partnership's
properties, no actual appraisals were obtained. Accordingly, these estimates
should not be viewed as an accurate reflection of the fair market value of the
Partnership's properties, nor do they represent the amount of net proceeds which
would result from an immediate sale of the Partnership's properties. The
valuations performed by the General Partners are estimates only, and are based a
number of assumptions which may not be accurate or complete. In addition,
property values are subject to change and could decline in the future. Further,
as set forth above, no appraisals have or will be obtained. For these reasons,
the estimated Unit valuations set forth above should not be relied upon for any
purpose other than required ERISA disclosures.

ITEM 3. LEGAL PROCEEDINGS

There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 2001.

-12-

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

No matters were submitted to a vote of the Limited Partners during 2001.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

-13-

PART II

ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS

The offering for sale of Units in the Partnership terminated on December 30,
1998, at which time the Partnership had 1,314,906 outstanding Class A Units held
by a total of 1,250 Limited Partners and 338,374 outstanding Class B Units held
by a total of 95 Limited Partners. As of February 28, 2002, the Partnership had
1,346,256 outstanding Class A Units held by a total of 1,255 Limited Partners
and 307,024 outstanding Class B Units held by a total of 83 Limited Partners.
The capital contribution per unit is $10.00. There is no established public
trading for the Partnership's limited partnership units, and it is not
anticipated that a public trading market for the units will develop. Under the
Partnership Agreement, the General Partners have the right to prohibit transfers
of units.

Class A Limited Partners are entitled to a distribution from Net Cash From
Operations, as defined in the Partnership Agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have received distributions in
each fiscal year of the Partnership equal to 10% of their adjusted capital
contributions. After this preference is satisfied, the General Partners will
receive an amount of Net Cash From Operations equal to 10% of the total amount
of Net Cash From Operations distributed. Thereafter, the Limited Partners
holding Class A Units will receive 90% of Net Cash From Operations and the
General Partners will receive 10%. No Net Cash From Operations will be
distributed to Limited Partners holding Class B Units. Holders of Class A Units
will, except in limited circumstances, be allocated none of the Partnership's
net loss, depreciation and amortization deductions. These deductions will be
allocated to the Class B Units, until their capital account balances have been
reduced to zero. No distributions have been made to the General Partners as of
December 31, 2001.

Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners elect to have their cash distributed
monthly. Cash distributions made to Class A Limited Partners during 2000 and
2001 were as follows:

Per Class A Unit
-------------------------
Distribution for Total Cash Investment Return of General
Quarter Ended Distributed Income Capital Partner
---------------------- ----------- ---------- --------- -------

March 31, 2000 $300,802 $ 0.23 $ 0.00 $ 0.00
June 30, 2000 310,189 0.23 0.00 0.00
September 30, 2000 319,576 0.24 0.00 0.00
December 31, 2000 326,954 0.24 0.00 0.00
March 31, 2001 326,967 0.24 0.00 0.00
June 30, 2001 326,752 0.24 0.00 0.00
September 30, 2001 326,936 0.25 0.00 0.00
December 31, 2001 328,150 0.25 0.00 0.00

The fourth quarter distribution was accrued for accounting purposes in 2001, and
paid to Limited Partners in February, 2002. No cash distributions were paid to
holders of Class B Units in 2001.

-14-

ITEM 6. SELECTED FINANCIAL DATA

The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 2001, 2000, 1999, and 1998:

2001 2000 1999 1998
------------ ------------ ------------ ------------

Total assets $ 13,644,230 $ 14,131,924 $ 14,440,800 $ 14,844,515
Total revenues 960,676 975,850 766,586 262,729
Net income 870,350 895,989 630,528 143,295
Net loss allocated to General Partners 0 0 0 (500)
Net income allocated to Class A Limited
Partners 1,361,828 1,381,547 1,009,368 254,862
Net loss allocated to Class B Limited
Partners (491,478) (485,558) (378,840) (111,067)
Net income per weighted average (1) Class A
Limited Partner Unit $ 1.01 $ 1.03 $ 0.77 $ 0.50
Net loss per weighted average (1) Class B
Limited Partner Unit (1.58) (1.55) (1.12) (0.77)
Cash distribution per weighted average (1)
Class A Limited Partner Unit:
Investment income 0.98 0.94 0.71 0.30
Return of capital 0.00 0.00 0.00 0.00

(1) The weighted average unit is calculated by averaging units over the
period they are outstanding during the time units were being purchased
by Limited Partners in the Partnership.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITIONS
RESULTS OF OPERATION

Forward-Looking Statements

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

Results of Operations

Gross revenues of the Partnership were $960,676, $975,850, and $766,586 for the
twelve months ended December 31, 2001, 2000, and 1999, respectively. The
increase in revenues from 1999 to 2000 is attributable primarily to increased
earnings from the Fund IX-X-XI-REIT Joint Venture and the Fund XI-XII-REIT Joint
Venture, primarily due to the Partnership investing in four additional joint
venture properties in mid-1999 through these joint ventures. In addition,
revenues were increased at Alstom Power-Knoxville Building as it became fully
occupied in 2000 and at the Iomega Building as it finished the rentable parking
area in July 1999. Expenses of the Partnership were $90,326, $79,861, and
$136,058 for the twelve months ended December 31, 2001, 2000, and 1999,
respectively. Expenses were

-15-

higher in 1999, as compared to 2000 and 2001, due to the total write-off of net
capitalized organizational costs in accordance with accounting pronouncement
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." Expenses
increased in 2001, as compared to 2000, due to increased partnership
administration expenses. As a result, net income of the Partnership was $870,350
for the year ended December 31, 2001, $895,989 for the year ended December 31,
2000, and $630,528 for the year ended December 31, 2001.

The Partnership made cash distributions of investment income to Limited Partners
holding Class A Units of $0.98 per Class A Unit for the year ended December 31,
2001, $0.94 per Class A Unit for the year ended December 31, 2000, and $0.71 per
Class A Unit for the year ended December 31, 1999. The General Partners
anticipate distributions per unit to Limited Partners holding Class A Units will
continue in 2002 at a level at least comparable with 2001 cash distributions on
an annual basis. Distributions accrued for the fourth quarter of 2001 to the
Limited partners holding Class A Units were paid in February 2002. No cash
distributions were made to Limited Partners holding Class B Units.

Refer to footnotes of audited Financial Statements where a complete summary of
operations is disclosed.

Liquidity and Capital Resources

The Partnership's net cash (used in) provided by operating activities was
($128,985) in 2001, ($72,925) in 2000, and $40,906 in 1999. Net cash provided by
operating activities in 1999, as compared to net cash used in 2000 and 2001, was
attributed primarily to interest income earned on funds held by the Partnership
prior to investment in properties while the Partnership had made all its
investments by the end of 1999. Net cash used in 2001 increased, as compared to
2000, due to an increase in partnership expenses. Net cash provided by (used in)
investing activities was $1,376,673 for 2001, $1,333,337 for 2000, and
($8,300,585) in 1999. This change was primarily the result of the Partnership
investing capital proceeds in the joint ventures in 1999 and receiving a full
year of joint venture distributions in 2000 and 2001. Net cash used in financing
activities increased to $1,307,606 in 2001, from $1,205,303 in 2000, and from
$1,010,770 in 1999 due to increased distributions from the Partnership.

The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to meet
both operating requirements and distributions to limited partners. Although
there is no assurance, the General Partners anticipate that the cash
distributions to Limited Partners holding Class A Units will continue in 2002 at
a level at least comparable with 2001 cash distributions on an annual basis. At
this time, given the nature of the joint ventures and properties in which the
Partnership has invested, there are no known improvements or renovations to the
properties expected to be funded from cash flow from operations.

Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.

Inflation

Real estate has not been affected significantly by inflation in the past three
years due to the relatively low inflation rate. There are provisions in the
majority of tenant leases executed by the Partnership to protect the Partnership
from the impact of inflation. These leases contain common area maintenance
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. The Partnership would have the ability to
negotiation at higher rental rates upon the expiration of 5 leases in 2002.
These

-16-

provisions should reduce the Partnership's exposure to increases in costs and
operating expenses resulting from inflation.

Critical Accounting Policies

The Partnership's accounting policies have been established and conformed to in
accordance with accounting principles generally accepted in the United States
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to use judgment in the application of accounting policies,
including making estimates and assumptions. These judgments affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. If our 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 our financial
statements. Below is a discussion of the accounting policies that we consider to
be critical in that they may require complex judgment in their application or
require estimates about matters, which are inherently uncertain. Additional
discussion of accounting policies that we consider to be significant, including
further discussion of the critical accounting policies described below, is
presented in the notes to the Partnership's financial statements in Item 14(a).

Straight-Lined Rental Revenues

The Partnership recognizes rental income generated from all leases on real
estate assets in which the Partnership has an ownership interest, either
directly or through investments in joint ventures, on a straight-line basis over
the terms of the respective leases. If a tenant was to encounter financial
difficulties in future periods, the amount recorded as receivable may not be
realized.

Operating Cost Reimbursements

The Partnership generally bills tenants for operating cost reimbursements,
either directly or through investments in joint ventures, on a monthly basis at
amounts estimated largely based on actual prior period activity and the
respective lease terms. Such billings are generally adjusted on an annual basis
to reflect reimbursements owed to the landlord based on the actual costs
incurred during the period and the respective lease terms. Financial
difficulties encountered by tenants may result in receivables not being
realized.

Real Estate

Management continually monitors events and changes in circumstances indicating
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 such events or changes in circumstances are
present, management assesses the potential impairment by comparing the fair
market value of the asset, estimated at an amount equal to the future
undiscounted operating cash flows expected to be generated from tenants over the
life of asset and from its eventual disposition, to the carrying value of the
asset. In the event that the carrying amount exceeds the estimated fair market
value, the Partnership would recognize an impairment loss in the amount required
to adjust the carrying amount of the asset to its estimated fair market value.
Neither the Partnership nor its joint ventures have recognized impairment losses
on real estate assets in 2001, 2000 or 1999.

-17-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of the Registrant and supplementary data are detailed
under Item 14(a) and filed as part of the report on the pages indicated.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no disagreements with the Partnership's accountants or other
reportable events during 2001.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

-18-

PART III

ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP

Wells Partners, L.P. The sole General Partner of Wells Partners, L.P. is Wells
Capital, Inc. The executive offices of Wells Capital, Inc. are located at 6200
The Corners Parkway, Norcross, Georgia 30092.

Leo F. Wells, III Mr. Wells is a resident of Atlanta, Georgia, is 58 years of
age and holds a Bachelor of Business Administration Degree in Economics from the
University of Georgia. Mr. Wells is the President and sole Director of Wells
Capital, Inc. He is also the President, sole Director and sole shareholder of
Wells Real Estate Investment Funds, Inc., the parent corporation of Wells
Capital, Inc. Mr. Wells is also the President of Wells & Associates, Inc., a
real estate brokerage and investment company formed in 1976 and incorporated in
1978, for which he serves as the principal broker. Mr. Wells is also the sole
Director and President of Wells Management Company, Inc., a property management
company he founded in 1983. In addition, Mr. Wells is the President and Chairman
of the Board of Wells Investment Securities, Inc., Wells & Associates, Inc., and
Wells Management Company, Inc., all of which are all affiliates of the General
Partners. From 1980 to February 1985, Mr. Wells served as Vice-President of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business.
From 1973 to 1976, he was associated with Sax Gaskin Real Estate Company, and
from 1970 to 1973, he was a real estate salesman and property manager for Roy D.
Warren & Company, an Atlanta real estate company.

The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 2001:

Name of Individual Capacities in Which Served Cash
or Number in Group Form of Compensation Compensation
- --------------------------------- ----------------------------------- ----------------

Wells Management Company, Inc. Property Manager-Management and $74,478(1)
Leasing Fees

(1) These fees are not paid directly by the Partnership, but are paid by
the joint venture entities which own properties for which the property
management and leasing services relate and include management and
leasing fees. The Partnership does not own any properties directly.
Accordingly, these fees are payable to Wells Management, Inc. by the
joint ventures described in Item 1 and represent the Partnership's
ownership interest in amounts attributable to the properties owned
directly by these joint ventures for services rendered during 2001.
Some of these fees were accrued for accounting purposes in 2001,
however, were not paid until January 2002.

-19-

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.

Set forth below is the security ownership of management as of December 31, 2001.

Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- ---------------- ------------------- --------------------------- ----------------

Class A Units Leo F. Wells, III 5,109.22 units (IRA, 401(k) Less than 1%
and Profit Sharing)

No arrangements exist which would, upon execution, result in a change in control
of the Partnership.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:

Interest in Partnership Cash Flow and Net Sale Proceeds

The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow after the Limited Partners holding
Class A Units have received preferential distributions equal to 10% of their
adjusted capital accounts in each fiscal year. The General Partners will also
receive a subordinated participation in net sales proceeds and net financing
proceeds equal to 20% of residual proceeds available for distribution after
Limited Partners holding Class A Units have received a return of their adjusted
capital contributions plus a 10% cumulative return on their adjusted capital
contributions and Limited Partners holding Class B Units have received a return
of their adjusted capital contributions plus a 15% cumulative return on their
adjusted capital contributions; provided, however, that in no event shall the
General Partners receive in the aggregate in excess of 15% of net sales proceeds
and net financing proceeds remaining after payments to Limited Partners from
such proceeds of amounts equal to the sum of their adjusted capital
contributions plus a 6% cumulative return on their adjusted capital
contributions. The General Partners did not receive any distributions from net
cash flow from operations or net sales proceeds for the year ended December 31,
2001.

Property Management and Leasing Fees

Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lesser of (a) fees that would be paid to a comparable
outside firm or (b) 4.5% of the gross revenues generally paid over the life of
the lease plus a separate competitive fee for the one-time initial lease-up of
newly constructed properties generally paid in conjunction with the receipt of
the first month's rent. In the case of commercial properties which are leased on
a long-term (ten or more years) net lease basis, the maximum property management
fee from such leases shall be 1% of the gross revenues generally paid over the
life of the leases except for a one-time initial leasing fee of 3% of the gross
revenues on each lease payable over the first five full years of the original
lease term.

-20-

Wells Management Company, Inc. has received $74,478 in total cash compensation
for services rendered during the year ended December 31, 2001.

Real Estate Commissions

In connection with the sale of Partnership properties, the General Partners or
their affiliates may receive commissions not exceeding the lesser of (A) 50% of
the commissions customarily charged by other brokers in arm's-length
transactions involving comparable properties in the same geographic area or (B)
3% of the gross sales price of the property, and provided that payments of such
commissions will be made only after Limited Partners have received prior
distributions totaling 100% of their capital contributions plus a 6% cumulative
return on their adjusted capital contributions. During 2001, no real estate
commissions were paid to the General Partners or their affiliates.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.)

-21-

PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)1. The financial statements are contained on pages F-2 through F-28 of
this Annual Report on Form 10-K, and the list of the financial
statements contained herein is set forth on page F-1, which is hereby
incorporated by reference.

(a)2. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.

(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 2001.

(c) The exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.

(d) See (a) 2 above.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

-22-

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) 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 this 21st day of March
2002.

Wells Real Estate Fund XI, L.P.
(Registrant)

By: /s/ LEO F. WELLS, III
-------------------------------------
Leo F. Wells, III
Individual General Partner and as
President and Chief Financial Officer
of Wells Capital, Inc., the Corporate
General Partner

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.

Signature Title Date
- ------------------------ ------------------------------ --------------

/s/ LEO F. WELLS, III
- ------------------------
Leo F. Wells, III Individual General Partner, March 21, 2002
President and Sole Director of
Wells Capital, Inc., the Corporate
General Partner

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.

No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.

-23-

INDEX TO FINANCIAL STATEMENTS

Financial Statements Page
- ------------------------------------------------------------------------- ----
Independent Auditors' Report F-2

Balance Sheets as of December 31, 2001 and 2000 F-3

Statements of Income for the Years Ended December 31, 2001, 2000 and 1999 F-4

Statements of Partners' Capital for the Years Ended December 31, 2001,
2000 and 1999 F-5

Statements of Cash Flows for the Years Ended December 31, 2001, 2000
and 1999 F-6

Notes to Financial Statements for December 31, 2001, 2000 and 1999 F-7

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Wells Real Estate Fund XI, L.P.:

We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XI,
L.P. (a Georgia public limited partnership) as of December 31, 2001 and 2000 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund XI, L.P.
as of December 31, 2001 and 2000 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 25, 2002

F-2

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

BALANCE SHEETS

DECEMBER 31, 2001 AND 2000

ASSETS
2001 2000
------------ ------------

INVESTMENT IN JOINT VENTURES $ 13,276,778 $ 13,698,627

CASH AND CASH EQUIVALENTS 17,542 77,460

DUE FROM AFFILIATES 348,632 343,825

ACCOUNTS RECEIVABLE 1,278 12,012
------------ ------------
Total Assets $ 13,644,230 $ 14,131,924
============ ============
LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
Due to affiliate $ 15,000 $ 65,000
Partnership distributions payable 328,151 326,952
Accounts payable 0 438
------------ ------------
Total liabilities 343,151 392,390
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)

PARTNERS' CAPITAL:
Limited partners:
Class A--1,346,256 units and 1,341,356 units as of December 31, 2001
and 2000, respectively 12,070,817 11,993,987
Class B--307,024 units and 311,924 units as of December 31, 2001 and
2000, respectively 1,230,262 1,745,547
------------ ------------
Total partners' capital 13,301,079 13,739,534
------------ ------------
Total liabilities and partners' capital $ 13,644,230 $ 14,131,924
============ ============

The accompanying notes are an integral part of these balance sheets.

F-3

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

2001 2000 1999
----------- ----------- -----------

REVENUES:
Equity in income of joint ventures $ 959,631 $ 967,900 $ 607,579
Interest income 1,045 7,950 159,007
----------- ----------- -----------
960,676 975,850 766,586
----------- ----------- -----------
EXPENSES:
Partnership administration 61,341 48,135 57,557
Legal and accounting 16,193 19,854 45,055
Amortization of organizational costs 0 0 25,000
Computer costs 12,792 11,872 8,446
----------- ----------- -----------
90,326 79,861 136,058
----------- ----------- -----------
NET INCOME $ 870,350 $ 895,989 $ 630,528
=========== =========== ===========
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $ 1,361,828 $ 1,381,547 $ 1,009,368
=========== =========== ===========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ (491,478) $ (485,558) $ (378,840)
=========== =========== ===========
NET INCOME PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT $ 1.01 $ 1.03 $ 0.77
=========== =========== ===========
NET LOSS PER WEIGHTED AVERAGE CLASS B
LIMITED PARTNER UNIT $ (1.58) $ (1.55) $ (1.12)
=========== =========== ===========
DISTRIBUTION PER WEIGHTED AVERAGE CLASS A
LIMITED PARTNER UNIT $ 0.98 $ 0.94 $ 0.71
=========== =========== ===========

The accompanying notes are an integral part of these statements.

F-4

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

Limited Partners
---------------------------------------------------
Class A Class B Total
------------------------- ---------------------- General Partners'
Original Units Amount Units Amount Partner Capital
-------- --------- ------------ ------- ------------ ------- ------------

BALANCE, December 31, 1998 $ 100 1,302,942 $ 11,439,315 350,338 $ 2,961,011 $ 0 $ 14,400,426

Net income (loss) 0 0 1,009,368 0 (378,840) 0 630,528
Partnership distributions 0 0 (930,791) 0 0 0 (930,791)
Class B conversions 0 33,964 287,048 (33,964) (287,048) 0 0
Return of capital (100) 0 0 0 0 0 (100)
-------- --------- ------------ ------- ------------ ------- ------------
BALANCE, December 31, 1999 0 1,336,906 11,804,940 316,374 2,295,123 0 14,100,063

Net income (loss) 0 0 1,381,547 0 (485,558) 0 895,989
Partnership distributions 0 0 (1,256,518) 0 0 0 (1,256,518)
Class B conversions 0 4,450 64,018 (4,450) (64,018) 0 0
-------- --------- ------------ ------- ------------ ------- ------------
BALANCE, December 31, 2000 0 1,341,356 11,993,987 311,924 1,745,547 0 13,739,534

Net income (loss) 0 0 1,361,828 0 (491,478) 0 870,350
Partnership distributions 0 0 (1,308,805) 0 0 0 (1,308,805)
Class B conversions 0 4,900 23,807 (4,900) (23,807) 0 0
-------- --------- ------------ ------- ------------ ------- ------------
BALANCE, December 31, 2001 $ 0 1,346,256 $ 12,070,817 307,024 $ 1,230,262 $ 0 $ 13,301,079
======== ========= ============ ======= ============ ======= ============

The accompanying notes are an integral part of these statements.

F-5

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

2001 2000 1999
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 870,350 $ 895,989 $ 630,528
----------- ----------- -----------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Equity in income of joint venture (959,631) (967,900) (607,579)
Amortization of organizational costs 0 0 25,000
Changes in assets and liabilities:
Accounts receivable 10,734 (1,452) 16,430
Accounts payable (438) 438 0
Due to affiliates (50,000) 0 (23,473)
----------- ----------- -----------
Total adjustments (999,335) (968,914) (589,622)
----------- ----------- -----------
Net cash (used in) provided by operating
activities (128,985) (72,925) 40,906
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture 0 0 (9,005,979)
Distributions received from joint ventures 1,376,673 1,333,337 705,394
----------- ----------- -----------
Net cash provided by (used in) investing
activities 1,376,673 1,333,337 (8,300,585)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales commissions and discounts paid 0 0 (214,609)
Distributions to partners in excess of accumulated earnings 0 0 (10,816)
Distributions to partners from accumulated earnings (1,307,606) (1,205,303) (785,245)
Return of capital 0 0 (100)
----------- ----------- -----------
Net cash used in financing activities (1,307,606) (1,205,303) (1,010,770)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (59,918) 55,109 (9,270,449)

CASH AND CASH EQUIVALENTS, beginning of year 77,460 22,351 9,292,800
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 17,542 $ 77,460 $ 22,351
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:

Deferred project costs contributed to joint ventures $ 0 $ 0 $ 375,246
=========== =========== ===========

The accompanying notes are an integral part of these statements.

F-6

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000, AND 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

Wells Real Estate Fund XI, L.P. (the "Partnership") is a public limited
partnership organized on June 20, 1996 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners, L.P.
("Wells Partners"), a Georgia nonpublic limited partnership. The Partnership
has two classes of limited partnership units. Upon subscription for units,
each limited partner must elect whether to have his or her units treated as
Class A units or Class B units. Thereafter, limited partners have the right
to change their prior elections to have some or all of their units treated
as Class A units or Class B units one time during each quarterly accounting
period. 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, (c) elect or
remove a general partner, (d) dissolve the Partnership, and (e) approve a
sale of all or substantially all of the Partnership's assets, subject to
certain limitations. A majority vote on any of the described matters will
bind the Partnership without concurrence of the general partners. Each
limited partnership unit has equal voting rights, regardless of class. The
Partnership commenced operations as of March 3, 1998.

The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed, are
currently under development or construction, are newly constructed, or have
operating histories. The Partnership owns an interest in several properties
through a joint venture between the Partnership, Wells Real Estate Fund IX,
L.P. ("Fund IX"), Wells Real Estate Fund X, L.P. ("Fund X"), and Wells
Operating Partnership, L.P. (the "Operating Partnership"), a Delaware
limited partnership having Wells Real Estate Investment Trust, Inc. ("Wells
REIT"), a Maryland corporation, as its general partner, which is referred to
as "Fund IX, X, XI, and REIT Joint Venture." The Partnership also owns
interests in two properties through a joint venture between the Partnership
and Fund X, referred to as "Fund X and XI Associates." In addition, the
Partnership owns an interest in several properties through a joint venture
between the Partnership, Wells Real Estate Fund XII, L.P. ("Wells Fund XII")
and the Operating Partnership, which is referred to as Fund XI, XII, and
REIT Joint Venture.

Through its investment in Fund IX, X, XI, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a three-story
office building in Knoxville, Tennessee (the "Alstom Power Building"), (ii)
a two-story office building in Louisville, Colorado (the "Ohmeda Building"),
(iii) a three-story office building in Broomfield, Colorado (the "360
Interlocken Building"), (iv) a one-story office and warehouse building in
Ogden, Utah (the "Iomega Building"), and (v) a one-story office building in
Oklahoma City, Oklahoma (the "Avaya Building," formerly the "Lucent
Technologies Building").

The following properties are owned by Fund X and XI Associates through
investments in two joint ventures with the Operating Partnership: (i) a
one-story office and warehouse building in Fountain Valley, California (the
"Cort Building"), and (ii) a two-story manufacturing and office building in
Fremont, California (the "Fairchild Building").

Through its investment in Fund XI, XII, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a two-story
manufacturing and office building in Fountain Inn, South Carolina (the

F-7

"EYBL CarTexBuilding"), (ii) a three-story office building in Leawood,
Kansas (the "Sprint Building"), (iii) an office and warehouse building in
Chester County, Pennsylvania (the "Johnson Matthey Building"), and (iv) a
two-story office building in Fort Myers, Florida (the "Gartner Building").

Use of Estimates and Factors Affecting the Partnership

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

The carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. The success of the
Partnership's future operations and the ability to realize the investment in
its assets will be dependent on the Partnership's ability to maintain rental
rates, occupancy, and an appropriate level of operating expenses in future
years. Management believes that the steps it is taking will enable the
Partnership to realize its investment in its assets.

Income Taxes

The Partnership is not subject to federal or state income taxes; therefore,
none have been provided for in the accompanying financial statements. The
partners are required to include their respective shares of profits and
losses in their individual income tax returns.

Distributions of Net Cash From Operations

Cash available for distribution, as defined by the partnership agreement,
will be distributed to the limited partners on a quarterly basis. In
accordance with the partnership agreement, distributions are paid first to
limited partners holding Class A units until they have received a 10% per
annum return on their net capital contributions, as defined. Then, such
distributions are paid to the general partners until they have received 10%
of the total amount distributed thus far. Any remaining cash available for
distribution is split 90% to the limited partners holding Class A units and
10% to the general partners. No such distributions will be made to the
limited partners holding Class B units.

Distribution of Sales Proceeds

Upon sales of properties, the net sales proceeds will be distributed in the
following order:

. To limited partners holding units which at any time have been
treated as Class B units until they receive an amount necessary
to equal the net cash available for distribution received by the
limited partners holding Class A units

. To limited partners on a per unit basis until each limited
partner has received 100% of their net capital contributions, as
defined

. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contributions, as defined

. To limited partners on a per unit basis until they receive an
amount equal to their preferential limited partner return
(defined as the sum of a 10% per annum cumulative return on net
capital contributions for all periods during which the units were
treated as Class A units and a 15% per annum cumulative return on
net capital contributions for all periods during which the units
were treated as Class B units)

. To the general partners until they have received 100% of their
capital contributions, as defined

F-8

. Then, if limited partners have received any excess limited
partner distributions (defined as distributions to limited
partners over the life of their investment in the Partnership in
excess of their net capital contributions, as defined, plus their
preferential limited partner return), to the general partners
until they have received distributions equal to 20% of the sum of
any such excess limited partner distributions plus distributions
made to the general partners pursuant to this provision

. Thereafter, 80% to the limited partners on a per unit basis and
20% to the general partners

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

Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. Net income, as defined, of the
Partnership will be allocated each year in the same proportion that net cash
from operations is distributed to the partners. To the extent the
Partnership's net income in any year exceeds net cash from operations, it
will be allocated 99% to the limited partners holding Class A units and 1%
to the general partners.

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

Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to the qualified income offset
provisions of the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, and (c) allocations to limited partners holding Class B
units in amounts equal to the deductions for depreciation and amortization
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized by
the Partnership with respect to the sale of such property.

Investment in Joint Ventures

Basis of Presentation

The Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
the Partnership's investments in joint ventures are recorded using the
equity method of accounting.

Real Estate Assets

Real estate assets held by the joint ventures are stated at cost less
accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
repair and maintenance expenditures are expensed as incurred.

Management continually monitors events and changes in circumstances
which could indicate that carrying amounts of real estate assets may
not be recoverable. When events or changes in circumstances are present
which indicate that the carrying amounts of real estate assets may not
be recoverable, management assesses the recoverability of real estate
assets by determining whether the carrying value of such real estate
assets will be recovered through the future cash flows expected from
the use of the asset and its eventual disposition. Management has
determined that there has been no impairment in the carrying value of
real estate assets held by the joint ventures as of December 31, 2001
or 2000.

F-9

Depreciation for building and improvements is calculated using the
straight-line method over 25 years. Tenant improvements are amortized
over the life of the related lease or the life of the asset, whichever
is shorter.

Revenue Recognition

All leases on real estate assets held by the joint ventures are
classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases. Deferred lease acquisition costs are included in prepaid
expenses and other assets, net, in the balance sheets presented in Note
2.

Partners' Distributions and Allocations of Profit and Loss

Cash available for distribution and allocations of profit and loss to
the Partnership by the joint ventures are made in accordance with the
terms of the individual joint venture agreement. Generally, these items
are allocated in proportion to the partners' respective ownership
interests. Cash is paid from the joint ventures to the Partnership on a
quarterly basis.

Deferred Lease Acquisition Costs

Costs incurred to procure operating leases are capitalized and
amortized on a straight-line basis over the terms of the related
leases. Deferred lease acquisition costs are included in prepaid
expenses and other assets, net, in the balance sheets presented in Note
2.

Cash and Cash Equivalents

For the purposes of the statements of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximate fair value, and consist of investments in money market accounts.

Per Unit Data

Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 2001, 2000, and 1999 is computed based on the weighted
average number of units outstanding during the period.

Reclassifications

Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.

2. RELATED-PARTY TRANSACTIONS

Due from affiliates at December 31, 2001 and 2000 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarter of 2001 and 2000 as follows:

2001 2000
-------- --------
Fund IX, X, XI, and REIT Joint Venture $ 85,927 $ 89,332
Fund X and XI Associates 64,634 62,940
Fund XI, XII, and REIT Joint Venture 198,071 191,553
-------- --------
$348,632 $343,825
======== ========

F-10

The Partnership entered into a property management and leasing agreement
with Wells Management Company, Inc. ("Wells Management"), an affiliate of
the general partners. In consideration for supervising the management and
leasing of the Partnership's properties, the Partnership will pay Wells
Management management and leasing fees equal to the lesser of (a) fees that
would be paid to a comparable outside firm or (b) 4.5% of the gross revenues
generally paid over the life of the lease plus a separate competitive fee
for the one-time initial lease-up of newly constructed properties generally
paid in conjunction with the receipt of the first month's rent. In the case
of commercial properties which are leased on a long-term net basis (ten or
more years), the maximum property management fee from such leases shall be
1% of the gross revenues generally paid over the life of the leases except
for a one-time initial leasing fee of 3% of the gross revenues on each lease
payable over the first five full years of the original lease term.

The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $74,478, $75,700, and $45,039 for the
years ended December 31, 2001, 2000, and 1999, respectively.

Wells Capital, Inc. (the "Company"), general partner of Wells Partners,
performs certain administrative services for the Partnership, such as
accounting and other partnership administration, and incurs the related
expenses. Such expenses are allocated among the various Wells Real Estate
Funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.

The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.

3. INVESTMENT IN JOINT VENTURES

The Partnership's investment and percentage ownership in joint ventures at
December 31, 2001 and 2000 are summarized as follows:

2001 2000
-------------------- ---------------------
Amount Percent Amount Percent
----------- ------- ----------- -------

Fund IX, X, XI, and REIT Joint Venture $ 3,073,671 9% $ 3,191,093 9%
Fund X and XI Associates 2,285,461 42 2,359,273 42
Fund XI, XII, and REIT Joint Venture 7,917,646 26 8,148,261 26
----------- -----------
$13,276,778 $13,698,627
=========== ===========

The following is a roll forward of the Partnership's investment in joint
ventures for the years ended December 31, 2001 and 2000:

2001 2000
----------- -----------

Investment in joint ventures, beginning of year $13,698,627 $14,093,790
Equity in income of joint ventures 959,631 967,900
Distributions from joint ventures (1,381,480) (1,363,063)
----------- -----------
Investment in joint ventures, end of year $13,276,778 $13,698,627
=========== ===========

FUND IX, X, XI, AND REIT JOINT VENTURE

On March 20, 1997, Wells Fund IX and Wells Fund X entered into a joint
venture agreement. The joint venture, Fund IX and X Associates, was formed
to acquire, develop, operate, and sell real properties. On March 20, 1997,
Wells Fund IX contributed a 5.62-acre tract of real property in Knoxville,
Tennessee, and improvements thereon, known as the Alstom Power Building, to
the Fund IX and X Associates joint

F-11

venture. An 84,404-square foot, three-story building was constructed and
commenced operations at the end of 1997.

On February 13, 1998, the joint venture purchased a two-story office
building, known as the Ohmeda Building, in Louisville, Colorado. On March
20, 1998, the joint venture purchased a three-story office building, known
as the 360 Interlocken Building, in Broomfield, Colorado. On April 1, 1998,
Wells Fund X purchased a one-story office and warehouse building, known as
the Iomega Building, in Ogden, Utah. On June 11, 1998, Fund IX and X
Associates was amended and restated to admit the Partnership and the
Operating Partnership. The joint venture was renamed Fund IX, X, XI, and
REIT Joint Venture. On June 24, 1998, the new joint venture purchased a
one-story office building, known as the Avaya Building, in Oklahoma City,
Oklahoma. On July 1, 1998, Wells Fund X contributed the Iomega Building to
Fund IX, X, XI, and REIT Joint Venture.

During 1999, the Partnership and Wells Fund IX made additional capital
contributions to the Fund IX, X, XI, and REIT Joint Venture; during 2000,
Wells Fund IX and Wells Fund X made additional capital contributions to the
Fund IX, X, XI, and REIT Joint Venture. Ownership interests were recomputed
accordingly.

Following are the financial statements for the Fund IX, X, XI, and REIT
Joint Venture:

The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 2001 and 2000

Assets

2001 2000
----------- -----------

Real estate assets, at cost:
Land $ 6,698,020 $ 6,698,020
Building and improvements, less accumulated depreciation
of $5,619,744 in 2001 and $4,203,502 in 2000 27,178,526 28,594,768
----------- -----------
Total real estate assets, net 33,876,546 35,292,788
Cash and cash equivalents 1,555,917 1,500,044
Accounts receivable 596,050 422,243
Prepaid expenses and other sets, net 439,002 487,276
----------- -----------
Total assets $36,467,515 $37,702,351
=========== ===========
Liabilities and Partners' Capital

Liabilities:
Accounts payable and accrued liabilities $ 620,907 $ 568,517
Refundable security deposits 100,336 99,279
Due to affiliates 13,238 9,595
Partnership distributions payable 966,912 931,151
----------- -----------
Total liabilities 1,701,393 1,608,542
----------- -----------
Partners' capital:
Wells Real Estate Fund IX 13,598,505 14,117,803
Wells Real Estate Fund X 16,803,586 17,445,277
Wells Real Estate Fund XI 3,073,671 3,191,093
Wells Operating Partnership, L.P. 1,290,360 1,339,636
----------- -----------
Total partners' capital 34,766,122 36,093,809
----------- -----------
Total liabilities and partners' capital $36,467,515 $37,702,351
=========== ===========

F-12

The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2001, 2000, and 1999

2001 2000 1999
----------- ----------- -----------

Revenues:
Rental income $ 4,174,379 $ 4,198,388 $ 3,932,962
Other income 119,828 116,129 61,312
Interest income 50,002 73,676 58,768
----------- ----------- -----------
4,344,209 4,388,193 4,053,042
----------- ----------- -----------
Expenses:
Depreciation 1,416,242 1,411,434 1,538,912
Management and leasing fees 357,761 362,774 286,139
Operating costs, net of reimbursements (232,601) (133,505) (34,684)
Property administration expense 91,747 57,924 59,886
Legal and accounting 26,223 20,423 30,545
----------- ----------- -----------
1,659,372 1,719,050 1,880,798
----------- ----------- -----------
Net income $ 2,684,837 $ 2,669,143 $ 2,172,244
=========== =========== ===========

Net income allocated to Wells Real Estate Fund IX $ 1,050,156 $ 1,045,094 $ 850,072
=========== =========== ===========

Net income allocated to Wells Real Estate Fund X $ 1,297,665 $ 1,288,629 $ 1,056,316
=========== =========== ===========

Net income allocated to Wells Real Estate Fund XI $ 237,367 $ 236,243 $ 184,355
=========== =========== ===========

Net income allocated to Wells Operating Partnership, L.P. $ 99,649 $ 99,177 $ 81,501
=========== =========== ===========

The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2001, 2000, and 1999

Wells
Wells Real Wells Real Wells Real Operating Total
Estate Estate Estate Partnership, Partners'
Fund IX Fund X Fund XI L.P. Capital
----------- ----------- ---------- ----------- -----------

Balance, December 31, 1998 $14,960,100 $18,707,139 $2,521,003 $1,443,378 $37,631,620
Net income 850,072 1,056,316 184,355 81,501 2,172,244
Partnership contributions 198,989 0 911,027 0 1,110,016
Partnership distributions (1,418,535) (1,762,586) (307,982) (135,995) (3,625,098)
----------- ----------- ---------- ---------- -----------
Balance, December 31, 1999 14,590,626 18,000,869 3,308,403 1,388,884 37,288,782
Net income 1,045,094 1,288,629 236,243 99,177 2,669,143
Partnership contributions 46,122 84,317 0 0 130,439
Partnership distributions (1,564,039) (1,928,538) (353,553) (148,425) (3,994,555)
----------- ----------- ---------- ---------- -----------
Balance, December 31, 2000 14,117,803 17,445,277