<PAGE>
 
    
  AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 
1997     

    
                                                  REGISTRATION NO. 333-32099    
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                _______________

    
                              AMENDMENT NO. 1 TO     
                                  FORM S-11

    
                            REGISTRATION STATEMENT      

    
                                   UNDER THE     
                             SECURITIES ACT OF 1933
                                _______________

                    WELLS REAL ESTATE INVESTMENT TRUST, INC.

    
        (Exact name of registrant as specified in governing instruments)     
                            3885 HOLCOMB BRIDGE ROAD

    
                             NORCROSS, GEORGIA 30092      

    
                     (Address of principal executive offices)      

                                BRIAN M. CONLON

    
                    WELLS REAL ESTATE INVESTMENT TRUST, INC.     

    
                            3885 HOLCOMB BRIDGE ROAD      

    
                            NORCROSS, GEORGIA 30092      

    
                                 (770) 449-7800     

    
                   (Name and address of agent for service)      

    
                                   COPIES TO:      

    
                            DANIEL O. KENNEDY, ESQ.      

    
                               Hunton & Williams     

    
                     600 Peachtree Street, N.E., Suite 4100     

    
                            Atlanta, Georgia  30308     

    
                                 (404) 888-4007     

     Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

    
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.      [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.  [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [_]

                                _______________
                        CALCULATION OF REGISTRATION FEE

    

<TABLE>
<CAPTION> 
=================================================================================================================================== 
                                                 Proposed
                                                 Maximum                    Proposed 
  Title of Securities    Amount Being           Offering Price               Maximum
  Being Registered       Registered              Per Share                  Aggregate           Amount of Registration Fee 
                                                                         Offering Price               
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                    <C>                      <C>                    <C>
Common Stock,
$0.01 par value per      16,500,000
share                      shares                $10.00                   $165,000,000                 $50,000
====================================================================================================================================
</TABLE>

     

    
(1) Includes 1,500,000 shares which may be issued pursuant to the Dividend
    Reinvestment Plan, (as defined herein), and 375,000 shares which may be
    issued pursuant to the Soliciting Dealer Warrants (as defined herein).     

    
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH7 SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.     
- --------------------------------------------------------------------------------

<PAGE>
 
Information contained herein is subject to completion or amendment.  A
registration statement relating to these securities has been filed with
Securities and Exchange Commission.  These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective.  This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

    
                                   Subject to Completion, dated __________, 1997

                    WELLS REAL ESTATE INVESTMENT TRUST, INC.

                       __________________________________
                       15,000,000 SHARES OF COMMON STOCK

                    AT A PURCHASE PRICE OF $10.00 PER SHARE
                    ---------------------------------------

     Wells Real Estate Investment Trust, Inc. (the "Company") is a newly
organized Maryland corporation which intends to qualify as a real estate
investment trust ("REIT").  The Company has been formed to acquire and operate
commercial properties, including properties which are under development or
construction, are newly constructed or have been constructed and have operating
histories.  The Company's operations will be managed by Wells Capital, Inc., a
Georgia corporation (the "Advisor"), an affiliate of the Company.

     The Company hereby offers (the "Offering") for sale to the public up to a
maximum of 15,000,000 shares and a minimum of 125,000 shares of its common
stock, $.01 par value per share (the "Shares").  All of the Shares offered
hereby are being offered by the Company.  The minimum purchase is 100 Shares
($1,000) (except in certain states as described herein).  It is estimated that
approximately 84% of the proceeds from the sale of Shares will be used to
acquire Properties (as defined herein), and the balance will be used to pay fees
and expenses related to the Offering.

AN INVESTMENT IN SHARES INVOLVES SIGNIFICANT RISKS, INCLUDING THE FOLLOWING:

The Company's Articles of Incorporation impose restrictions on ownership and
  transfers of Shares, and no public market for the Shares currently exists, and
  there is no assurance that one will develop.

1 This Offering and the Company's operations require payment of substantial fees
     to several Affiliates (as defined herein) of the Company, including the
     Advisor, some of which fees will be payable regardless of the success or
     failure of the Company.

The Company may borrow funds from its Affiliates, purchase Properties (as
  defined herein) from and/or sell Properties to its Affiliates, and enter into
  joint venture agreements with its Affiliates and with the Prior Wells Public
  Programs (as defined herein) for the acquisition and development of
  Properties.  Accordingly, because such transactions will not be on an arm's-
  length basis, the Company will face inherent conflicts of interest based on
  such relationships.

The Advisor and other Affiliates of the Company are involved in partnerships and
  other activities with investment objectives similar to the Company's, and
  therefore will face conflicts of interest in managing the Company's operations
  and those of such other activities.  Accordingly, such conflicts may affect
  negatively the Company's financial performance and Cash Available for
  Distribution to Investors (as defined herein).

If the Company sells only the minimum amount of Shares required to close the
  Offering, the number of Properties acquired by the Company and its asset and
  geographic diversification will be substantially reduced.

Distributions to investors in certain real estate investment programs previously
  sponsored by the Advisor have fluctuated with real estate business cycles.

The Company does not own any real property, and the Advisor has not identified
  any properties in which there is a reasonable probability that the Company
  will invest.  Accordingly, investors in the Company ("Investors") will not
  have the opportunity to evaluate the Properties that the Company will acquire
  and must rely totally upon the ability of the Advisor with respect to the
  acquisition of Properties.

Failure by the Company to qualify as a REIT for federal income tax purposes will
  cause it to be taxed as a regular corporation under federal income tax laws,
  which would materially reduce the Company's Cash Available for Distribution to
  Investors.

FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT INVESTORS SHOULD CONSIDER
CONCERNING THIS INVESTMENT, SEE "RISK FACTORS" BEGINNING ON PAGE ______.

THE SHARES ARE BEING PLACED FOR THE COMPANY BY WELLS INVESTMENT SECURITIES,
INC., A GEORGIA CORPORATION AND AN AFFILIATE OF THE COMPANY (THE "DEALER
MANAGER"), ON A "BEST EFFORTS" BASIS.  SEE "PLAN OF DISTRIBUTION" AND "CONFLICTS
OF INTEREST."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS ANY SUCH
AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.     

    

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                     PRICE TO                           PROCEEDS TO
                                    PUBLIC (1)   SELLING COMMISSIONS  COMPANY (2)(3)
                                   ------------  -------------------  ---------------
<S>                               <C>            <C>                  <C>
PER SHARE                               $10.00                 $0.70          $9.30
TOTAL MINIMUM                       $1,250,000               $87,500     $1,162,500
TOTAL MAXIMUM (4)                 $165,000,000           $11,550,000   $153,450,000
- -------------------------------------------------------------------------------------
</TABLE>

(See footnotes on following page)
     

                       WELLS INVESTMENT SECURITIES, INC.

                THE DATE OF THIS PROSPECTUS IS __________, 1997.

<PAGE>
 
                   (Cover Page Continued From Previous Page)
Footnotes:

    
(1)  Price to Public and Selling Commissions may be reduced in connection with
     certain large volume purchases and under other circumstances described
     herein; however, in no event will the proceeds to the Company be reduced
     thereby.  In addition to Selling Commissions in the amount of up to 7% of
     the Gross Offering Proceeds, the Company will reimburse the Dealer Manager
     and nonaffiliated broker-dealers participating in this Offering for actual
     expenses paid for due diligence purposes, up to a maximum of 2.5% of the
     Gross Offering Proceeds.  The Company also will issue, for every 40 Shares
     sold, a warrant to purchase one Share during the Offering Period at a price
     of $12.00 per Share (the "Soliciting Dealer Warrants").  Selling
     Commissions on the Soliciting Dealer Warrants are payable to the Dealer
     Manager and an Affiliate of the Advisor, except to the extent reallowed to
     other broker-dealers participating in the Offering.  See "Plan of
     Distribution."     

    
(2)  These figures are before deducting other expenses of the Offering to be
     paid by the Company in an estimated amount equal to 3% of Gross Offering
     Proceeds, or $4,500,000, if the maximum amount under the Offering is sold,
     which amount does not include Selling Commissions or amounts reimbursed for
     due diligence expenses.  Includes Selling Commissions equal to 7% of
     aggregate Gross Offering Proceeds (which commissions may be reduced under
     certain circumstances) and a dealer manager fee equal to 2.5% of aggregate
     Gross Offering Proceeds, both of which are payable to the Dealer Manager,
     an Affiliate of the Company.  The Dealer Manager, in its sole discretion,
     may reallow Selling Commissions of up to 7% of Gross Offering Proceeds to
     other broker-dealers participating in this Offering attributable to shares
     sold by them and may reallow out of its dealer manager fee up to 1.5% of
     Gross Offering Proceeds in marketing fees to broker-dealers participating
     in this Offering based on such factors as the volume of shares sold by such
     participating broker-dealers, marketing support provided by such
     participating broker-dealers and bona fide conference fees incurred.  See
     "Estimated Use of Proceeds" and "Plan of Distribution."     

    
(3)  In addition, assuming all 375,000 Soliciting Dealer Warrants are issued to
     the Dealer Manager, $300 of additional proceeds will be raised, based on a
     purchase price of $.0008 per share; assuming all such warrants are
     exercised at the exercise price of $12.00, a total of $4,500,000 will be
     raised.  No Selling Commission will be paid in connection with the issuance
     of the Soliciting Dealer Warrants or the Shares issuable upon the exercise
     thereof.     

    
(4)  The maximum number of Shares to be sold hereunder is 16,500,000, which
     includes 1,500,000 Shares that may be issued pursuant to the Company's
     Dividend Reinvestment Plan (the "Reinvestment Plan"), and 375,000 shares
     that may be issued upon exercise of the Soliciting Dealer Warrants.  Those
     shareholders who elect to participate in the Reinvestment Plan will have
     their dividends reinvested in additional Shares.  The Soliciting Dealer
     Warrants may not be exercised for one year from the date of issuance, and
     are subject to restrictions on transfer.  See "Description of Capital
     Stock-Soliciting Dealer Warrants."     

    
     The Offering will commence upon the effective date of this Prospectus and
will continue until and terminate upon the earlier of (i) ____________, 1999
(two years after the initial date of this Prospectus), or (ii) the date on which
an aggregate of 15,000,000 Shares (excluding any Shares sold pursuant to the
Reinvestment Plan) (the "Maximum Offering") have been sold.  Subscription
proceeds will be placed in an interest-bearing escrow account with NationsBank,
N.A., Atlanta, Georgia, until subscriptions for at least 125,000 Shares (the
"Minimum Offering") have been received and accepted by the Company, at which
time the proceeds will be released to the Company to be held in trust for the
benefit of investors.  If the Minimum Offering is not met by ________ 1998 (one
year after the date of this Prospectus), the Offering will be terminated and
subscriber's funds (plus interest net of escrow expenses) will be promptly
refunded.     

     THE USE OF PROJECTIONS OR FORECASTS IN THIS OFFERING IS PROHIBITED.  ANY
REPRESENTATIONS TO THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE
AMOUNT OR CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE
WHICH MAY FLOW FROM AN INVESTMENT IN THE COMPANY ARE NOT PERMITTED.

<PAGE>
 
                               TABLE OF CONTENTS

    

<TABLE>
<CAPTION>

                                                                                             Page
                                                                                             ----
<S>                                                                                          <C> 
SUMMARY OF THE OFFERING.....................................................................  1


RISK FACTORS................................................................................  8
     Investment Risks.......................................................................  8
          Lack of Liquidity of Shares ERROR! BOOKMARK NOT
               DEFINED
          Total Substantial Reliance on the  Advisor........................................  8
          Conflicts of Interest Related to the Company's                                       
               Affiliates...................................................................  8
          Possible Lack of Diversification Resulting from...................................  8
               Subscriptions for Less than the Maximum
               Number of Shares.............................................................  8
          Substantial Management Compensation...............................................  9
          No Identified Sources for Funding of Future
               Capital Needs................................................................  9
          Joint Ventures May Negatively Affect the
               Company......................................................................  9
          Anti-Takeover Effects of Governing Documents
               and Maryland Law............................................................. 10
          Reinvestment Plan Proceeds May Not be Used to                                        
               Acquire Properties........................................................... 10

     Real Estate Risks...................................................................... 10
          Fluctuating Financial Performance of Previously                                      
               Sponsored Programs........................................................... 10
          Potential Adverse Economic and Regulatory
               Changes...................................................................... 10
          Unspecified Property Offering..................................................... 10
          Potential Increased Costs and Delays Related to
               Property Development......................................................... 10
          Competition for Investments....................................................... 11
          Potential Adverse Effects of Delays in
               Investments.................................................................. 11
          Risks Relating to Failure of the Company to
               Liquidate Upon Failure to List............................................... 11
          Potential Liabilities Related to Environmental
               Matters...................................................................... 11
          Uninsured Losses.................................................................. 12

     Tax Risks.............................................................................. 12
          Failure to Qualify as a REIT...................................................... 12
          REIT Minimum Distribution Requirements;
               Possible Incurrence of Additional Debt....................................... 12
          Failure of the Operating Partnership to be
               Classified as a Partnership for Federal
               Income Tax Purposes; Impact on REIT
               Status....................................................................... 13
          ERISA Risks....................................................................... 13

INVESTOR SUITABILITY STANDARDS.............................................................. 14

ESTIMATED USE OF PROCEEDS................................................................... 15

MANAGEMENT COMPENSATION..................................................................... 17

CONFLICTS OF INTEREST....................................................................... 19

     Interests in Other Companies........................................................... 19
     Other Activities of the Advisor and its Affiliates..................................... 20
     Competition............................................................................ 20
     Affiliated Dealer Manager.............................................................. 21
     Affiliated Property Manager............................................................ 21
     Affiliated Developer................................................................... 21
     Lack of Separate Representation........................................................ 21
     Joint Ventures with Affiliates of the Advisor.......................................... 21
     Receipt of Fees and Other Compensation by Advisor and
          Affiliates........................................................................ 21
     Certain Conflict Resolution Procedures................................................. 21

SUMMARY OF REINVESTMENT PLAN................................................................ 23

     General................................................................................ 23
     Investment of Distributions............................................................ 23
     Participant Accounts, Fee, and  Allocation of Shares................................... 23
     Reports to Participants................................................................ 24
     Election to Participate or Terminate Participation..................................... 24
     Amendments and Termination............................................................. 25

SHARE REPURCHASE PROGRAM.................................................................... 25

PRIOR PERFORMANCE SUMMARY................................................................... 26

     Prior Wells Public Programs............................................................ 26

MANAGEMENT.................................................................................. 30

     General................................................................................ 30
     Fiduciary Responsibility of the Board  of Directors.................................... 30
     Directors and Executive Officers....................................................... 31
     Committees............................................................................. 32
     Compensation of Directors and Officers................................................. 32

THE ADVISOR AND THE ADVISORY AGREEMENT...................................................... 32

     The Advisor............................................................................ 32
     The Advisory Agreement................................................................. 33

WELLS MANAGEMENT............................................................................ 36

INVESTMENT OBJECTIVES AND CRITERIA.......................................................... 37

     General................................................................................ 37
     Acquisition and Investment Policies.................................................... 37
     Development and Construction of Properties............................................. 39
     Terms of Leases and Lessee Creditworthiness............................................ 39
     Borrowing Policies..................................................................... 39
     Joint Venture Investments.............................................................. 40
     Other Policies......................................................................... 41

REAL PROPERTY INVESTMENTS................................................................... 41

DISTRIBUTION POLICY......................................................................... 42

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
     FINANCIAL CONDITION AND RESULTS OF
     OPERATIONS............................................................................. 42
DESCRIPTION OF CAPITAL STOCK................................................................ 43

     Common Stock........................................................................... 43
     Preferred Stock........................................................................ 43
     Soliciting Dealer Warrants............................................................. 43
     Articles of Incorporation and Bylaw Provisions......................................... 44
     Limitation of Liability and Indemnification............................................ 46
     Business Combinations.................................................................. 47
     Control Share Acquisition Statute...................................................... 48
     Amendment to the Articles of Incorporation............................................. 48
     Dissolution of the Company............................................................. 48
     Advance Notice of Director Nominations and New
</TABLE>
 
     

                                      (i)

<PAGE>
 
    

<TABLE> 
                                                                                             page
                                                                                             ----
<S>                                                                                          <C>           
          Business.......................................................................... 49
     Meeting of Stockholders................................................................ 49
     Operations............................................................................. 49
     Anti-Takeover Effect of Certain Provisions of
          Maryland Law and of the Articles of
          Incorporation and Bylaws ERROR! BOOKMARK
          NOT DEFINED
     Inspection of Books and Records........................................................ 48
     Restrictions on "Roll-Up" Transactions................................................. 48

FEDERAL INCOME TAX CONSIDERATIONS........................................................... 50

     Taxation of the Company................................................................ 50
     Requirements for Qualification......................................................... 51
     Failure to Qualify..................................................................... 57
     Taxation of Taxable U.S. Shareholders.................................................. 57
     Taxation of Shareholders on the Disposition of the
          Shares............................................................................ 58
     Capital Gains and Losses............................................................... 58
     Information Reporting Requirements and Backup
          Withholding....................................................................... 58
     Taxation of Tax-Exempt Shareholders.................................................... 58
     Taxation of Non-U.S. Shareholders...................................................... 59
     Other Tax Consequences................................................................. 60
     Tax Aspects of the Operating Partnership............................................... 60
     Sale of the Operating Partnership's  Property.......................................... 63

ERISA CONSIDERATIONS........................................................................ 63

     Employee Benefit Plans, Tax-Qualified Retirement
          Plans, and IRAs................................................................... 64
     Status of the Company and the Operating Partnership
          under ERISA....................................................................... 64

PARTNERSHIP AGREEMENT....................................................................... 65

     Management............................................................................. 66
     Transferability of Interests........................................................... 66
     Capital Contribution................................................................... 66
     Redemption Rights...................................................................... 66
     Operations............................................................................. 67
     Distributions and Allocations.......................................................... 67
     Term................................................................................... 67
     Tax Matters............................................................................ 68

PLAN OF DISTRIBUTION........................................................................ 68

SUPPLEMENTAL SALES MATERIAL................................................................. 72

LEGAL MATTERS............................................................................... 72

EXPERTS..................................................................................... 72

ADDITIONAL INFORMATION...................................................................... 72

GLOSSARY.................................................................................... 73
 
FINANCIAL STATEMENTS........................................................................ APPENDIX I
PRIOR PERFORMANCE TABLES.................................................................... EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT AND
 SUBSCRIPTION AGREEMENT SIGNATURE
 PAGE....................................................................................... EXHIBIT B
DIVIDEND REINVESTMENT PLAN.................................................................. EXHIBIT C
</TABLE>
 
     

                                     (ii)

<PAGE>
 
    
                            SUMMARY OF THE OFFERING     
    
     The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context requires otherwise, the term "Company" includes Wells
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership").  See "Glossary" for the definitions of certain terms used in this
Prospectus.  Investors should carefully consider the information set forth under
the heading "Risk Factors."     

    
THE COMPANY:                 Wells Real Estate Investment Trust, Inc. was
                             incorporated in July 1997 as a Maryland
                             corporation, and intends to qualify as a REIT.
                             The Company's principal place of business and
                             registered office is located at the office of the
                             Advisor:  3885 Holcomb Bridge Road, Norcross,
                             Georgia 30092, and its telephone number at that
                             office is 800-448-1010.     

    
ADVISOR:                     Wells Capital, Inc., incorporated in Georgia in
                             April 1984, is the Advisor and will make all
                             investment decisions for the Company, subject to
                             approval by the Board of Directors in certain
                             circumstances.  See "The Advisor and the Advisory
                             Agreement."  The Advisor is an affiliate of the
                             Company.  See "Conflicts of Interest."  For
                             information regarding the previous experience of
                             the Advisor and its Affiliates in the management
                             of real estate limited partnerships, see "Prior
                             Performance Summary."     

    
SECURITIES OFFERED:          A Minimum Offering of 125,000 Shares and a Maximum
                             Offering of 16,500,000 Shares (the "Maximum
                             Offering").  The Maximum Offering includes  up to
                             1,500,000 Shares to be issued pursuant to the
                             Reinvestment Plan and up to 375,000 shares to be
                             issued pursuant to the Soliciting Dealer Warrants.
                             The Shares issued in this Offering and under the
                             Reinvestment Plan are offered at a price of $10
                             per share.     

    
RISK FACTORS:                An investment in the Shares involves various risks
                             including the following:     
                             .  To ensure that the Company will not fail to
                             qualify as a REIT, the Articles of Incorporation,
                             subject to certain exceptions, will limit any
                             person from owning, directly or indirectly, more
                             than 9.8% of the outstanding Shares or more than
                             9.8% of the number of outstanding shares of any
                             class of the Company's preferred stock.

    
                             .  Initially, the Shares will not be listed (and
                             therefore not traded) on a securities exchange or
                             any over-the-counter market.  However, the Board
                             of Directors may elect to so list the Shares in
                             the future (the "Listing") though there can be no
                             assurances that the Company will ever qualify for
                             such a Listing.  Listing does not assure
                             liquidity.  There can be no assurance that a
                             market for the Shares will develop.  In the event
                             that Listing does not occur by _______, 2007 (ten
                             years after the initial date of this Prospectus),
                             the Company will be dissolved.  See "Description
                             of Capital Stock -- Articles of Incorporation and
                             Bylaw Provisions."     
                             .  Shareholders must rely on the Advisor and the
                             Board of Directors, who will have full
                             responsibility for the day-to-day management of
                             the Company.
    
                             .  The number of properties that the Company will
                             acquire and the diversification of its investments
                             will be reduced to the extent that less than the
                             maximum number of Shares are sold.  Lack of
                             diversification of the Company's investments will
                             increase the risks associated with an investment
                             in the Shares.     

                                       1

<PAGE>
 
    
                             .  This Offering involves payment of substantial
                             fees to the Advisor and other Affiliates, some of
                             which will be payable regardless of the success or
                             failure of the Company.     
    
                             .  Distributions to investors in certain real
                             estate programs previously sponsored by the
                             Advisor and its Affiliates have experienced
                             fluctuating financial performance along with real
                             estate cycles, and there are no assurances that
                             Properties acquired by the Company will be
                             profitable.  See "Prior Performance Summary."     
                             .  The Company will be subject to market and
                             economic risks associated with investments in real
                             estate, which means that both the amount of cash
                             the Company will receive from the lessees of its
                             properties and the future value of its properties
                             cannot be predicted.  Accordingly, Cash Available
                             for Distribution and the value of the Company's
                             real estate investments will be dependent upon
                             fluctuating market and economic conditions.
                             .  The Company does not own any real property, and
                             the Advisor has not identified any properties in
                             which there is a reasonable probability that the
                             Company will invest.  Accordingly, investors will
                             not have the opportunity to evaluate the
                             properties that the Company will acquire and must
                             rely totally upon the ability of the Advisor and
                             the Board of Directors with respect to the
                             acquisition of properties.
                             .  A portion of the proceeds available for
                             Investment in Properties may be invested in the
                             acquisition and construction of undeveloped
                             properties, which involve risks relating to the
                             builder's ability to control construction costs,
                             failure to perform, or failure to build in
                             conformity with plan specifications and
                             timetables, thus potentially subjecting the
                             Company to cost overruns and time delays for
                             properties under construction.  Increased costs of
                             newly constructed properties may have the effect
                             of reducing Cash Available for Distribution, while
                             construction delays may have the effect of
                             delaying cash flow from the operation of such
                             properties.
                             .  As a result of the fact that the Advisor and
                             its Affiliates serve as general partners of real
                             estate limited partnerships with investment
                             objectives similar to the Company's and will
                             continue to engage in other business activities,
                             the Advisor will have conflicts of interest in
                             allocating its time between the Company and such
                             partnerships and activities.  The Advisor also
                             will have conflicts of interest when evaluating
                             potential investments for the Company in deciding
                             which entity will acquire a particular property,
                             and in leasing properties in the event that the
                             Company and another program managed by the Advisor
                             or its Affiliates were to compete for the same
                             tenants in negotiating leases.
                             .  The Company intends to borrow money in
                             connection with the construction and development
                             of properties.  Accordingly, the Company will be
                             subject to risks normally associated with debt
                             financing, including the risk that the Company
                             will not be able to meet its debt service
                             obligations, and, to the extent that it cannot,
                             the risk that the Company may lose its investment
                             in any properties encumbered by debt.
                             .  The Company intends to elect to be taxed as a
                             REIT for federal income tax purposes.  In order to
                             qualify to be taxed as a REIT, the Company must
                             meet numerous organizational and operating
                             requirements.  While the Company has received an
                             opinion of counsel that it will qualify to be
                             taxed as a REIT, this opinion is not binding on
                             the Service or any court. In the event that the
                             Company fails to qualify as a REIT, it will be
                             taxed as a corporation, which could have a
                             material adverse effect on the Company's Cash
                             Available for Distribution.

                                       2

<PAGE>
 
    
                             See "Risk Factors" for a discussion of the risk
                             factors relating to an investment in the
                             Shares.     

    
TERMS OF THE OFFERING:       The Offering will commence upon the date of this
                             Prospectus and will continue until and terminate
                             upon the earlier of (i) two years after the date
                             of this Prospectus, or (ii) the date on which an
                             aggregate of 15,000,000 Shares (excluding Shares
                             sold pursuant to the Dividend Reinvestment Plan)
                             have been sold, provided, that if the Minimum
                             Offering is not sold within one year of the date
                             of this Prospectus, the Offering will be
                             terminated and investors' funds, with interest but
                             net of escrow expenses, will be returned promptly.
                             Subscription proceeds will be held in escrow until
                             investors are admitted as shareholders, which will
                             occur no less often than quarterly.     

    
PROPERTIES:                  The Company will seek to acquire and operate
                             commercial properties, including without
                             limitation, office buildings, shopping centers,
                             business and industrial parks and other commercial
                             and industrial properties, including properties
                             which are under construction or development, are
                             newly constructed, or have been constructed and
                             have operating histories.  All such properties may
                             be acquired, developed and operated by the Company
                             alone or jointly with another party.  The Company
                             is likely to enter into one or more joint ventures
                             with certain of its Affiliates and the present and
                             future real estate limited partnership sponsored
                             by the Advisor for the acquisition of properties.
                             As of the date of this Prospectus, the Company has
                             neither purchased nor contracted to purchase any
                             properties, nor has the Advisor identified any
                             properties in which there is a reasonable
                             probability that the Company will invest.  The
                             Company may incur indebtedness of up to 50% of its
                             Properties' aggregate value, but may exceed such
                             leverage with respect to one or more individual
                             Properties.  The Company intends to use the
                             straight-line depreciation method for its
                             Properties.  See "Real Property Investments,"
                             "Investment Objectives and Criteria," "Conflicts
                             of Interest," and "Glossary."     

    
ESTIMATED USE OF PROCEEDS    It is anticipated that approximately 84% of the
 OF OFFERING:                proceeds of this Offering will actually be
                             invested in properties, and the remainder will be
                             used to pay selling commissions and fees and
                             expenses relating to the selection and acquisition
                             of properties and the costs of organizing the
                             Company and the Offering.  See "Estimated Use of
                             Proceeds" for a more detailed discussion of the
                             Company's estimated use of the proceeds of the
                             Offering, which include proceeds from shares sold
                             pursuant to the Reinvestment Plan, but excludes
                             proceeds Plan the Soliciting Dealer Warrants.  See
                             also "Management Compensation" regarding the
                             compensation and fees to be paid to the Advisor
                             and other Affiliates.     

    
INVESTMENT OBJECTIVES:       The Company's objectives are:  (i) to preserve,
                             protect and return the Invested Capital of the
                             shareholders; (ii) to maximize Cash Available for
                             Distribution; (iii) to realize capital
                             appreciation upon the ultimate sale of Company's
                             properties; and (iv) to provide shareholders with
                             liquidity of their investment within ten years
                             after the commencement of the Offering through
                             either (a) the Listing of the Shares, or (b) if
                             Listing does not occur within ten years following
                             the commencement of the Offering, the dissolution
                             of the Company and orderly liquidation of its
                             assets.  Certain real estate programs previously
                             sponsored by the Advisor and its Affiliates, each
                             of which has investment objectives similar to
                             those of the Company,      

                                       3

<PAGE>
 
    
                             have experienced fluctuating financial performance
                             and distributions to investors, as shown in the
                             Prior Performance Tables included as Exhibit A
                             hereto. Many of the real properties in which such
                             prior programs have invested have experienced the
                             same economic problems as other real estate
                             investments in recent years, including without
                             limitation, general over-building and an excess of
                             supply in many markets, along with increased
                             operating costs and a general downturn in the real
                             estate industry. These prior Funds have not yet
                             sold any real property investments and thus no
                             evaluation can be made as to whether these prior
                             programs will achieve their objectives of returning
                             capital contributions or realizing capital
                             appreciation upon the sale of such properties. See
                             "Investment Objectives and Criteria" and "Prior
                             Performance Summary."     

    
CONFLICTS OF INTEREST:       The Advisor and other Affiliates will experience
                             conflicts of interest in connection with the
                             management of the Company, including the 
                             following:     

    
                                   .  The Advisor and certain of its Affiliates
                                   serve as general partners of real estate
                                   limited partnerships that have objectives
                                   similar to the Company's and expect that they
                                   will organize additional real estate
                                   partnerships in the future. As a result,
                                   investors should be aware that the Advisor
                                   will have to allocate its time between the
                                   Company and such partnerships and activities
                                   and may have conflicts of interest in
                                   deciding which entity will acquire a
                                   particular property.    

    
                                   .  The Company may acquire properties in the
                                   same geographic areas where other properties
                                   owned or managed by the Advisor or other
                                   Affiliates are located, resulting in
                                   potential conflicts in the leasing or resale
                                   of the Company's properties in the event that
                                   the Company and another program managed by
                                   the Advisor were to attempt to compete for
                                   the same tenants in negotiating leases or to
                                   sell similar properties at the same
                                   time.    
    
                                   .  Since it is anticipated that the Company's
                                   properties will be managed by the Management
                                   Company, an Affiliate of the Advisor, the
                                   Company will not have the benefit of
                                   independent property management, and
                                   investors must rely on the Advisor and the
                                   Management Company, for management of the
                                   Company's Properties.    
                                  
                                   .  The Company is likely to enter into one or
                                   more joint ventures for the acquisition and
                                   operation of specific properties with one or
                                   more real estate limited partnerships
                                   sponsored by the Advisor and other
                                   Affiliates, resulting in potential conflicts
                                   of interest in determining which program
                                   should enter into a particular joint venture,
                                   in structuring the terms of the relationship
                                   and in managing the joint venture. In
                                   addition, the Company may purchase properties
                                   from, and sell properties to, the Advisor and
                                   other Affiliates, resulting in conflicts of
                                   the Advisor based on its relationship with
                                   both parties to such transactions. See
                                   "Conflicts of Interest."    
                                  
                                   .  Fees payable to the Advisor and other
                                   Affiliates in connection with Company
                                   transactions involving the purchase,
                                   management and sale of Company Properties are
                                   not the result of arm's-length negotiations
                                   and will be payable regardless of the quality
                                   of the property acquired or the services
                                   provided to the Company.    

                                       4

<PAGE>
 
    
                             .  The conflicts of interest created at the time
                             of a sale of a Property by:  (a) the loss of
                             management fees by the Management Company
                             conflicting with the brokerage fee which may be
                             received by the Advisor, and (b) the receipt of
                             brokerage fees by the Advisor conflicting with the
                             advisability of such a sale.

                             .  The Company may borrow funds from the Advisor
                             and other Affiliates, resulting in conflicts for
                             both parties based on such lender-borrower
                             relationship between affiliated entities.
                             See "Conflicts of Interest" for a discussion of
                             the various conflicts of interest relating to an
                             investment in the Shares.     

    
PRIOR OFFERING SUMMARY:      The Advisor and its Affiliates have previously
                             sponsored eleven publicly offered real estate
                             limited partnerships on an unspecified property or
                             "blind pool" basis (the "Prior Wells Public
                             Programs").  The total amount of funds raised from
                             the approximately 24,000 investors in the Prior
                             Wells Public Programs as of August  31, 1997 was
                             approximately $257,000,000, and the amount of such
                             funds invested in properties as of August 31,
                             1997, was approximately $200,000,000.  Certain of
                             the Prior Wells Public Programs have experienced
                             fluctuating financial performance in recent years.
                             The "Prior Performance Summary" section of this
                             Prospectus contains a discussion of the Prior
                             Wells Public Programs.  Certain statistical data
                             relating to the Prior Wells Public Programs are
                             contained in the Prior Performance Tables included
                             as Exhibit A to this Prospectus.     

    
COMPENSATION TO ADVISOR      The Advisor and other Affiliates will receive
 AND OTHER AFFILIATES:       compensation and fees for services relating to
                             this Offering and in connection with the
                             investment and management of the Company's assets,
                             which are not the result of arm's-length
                             negotiations and will be paid regardless of the
                             quality of the property acquired or the services
                             provided to the Company.  The most significant
                             items of compensation are:     

    
                             Offering Stage:  Selling Commissions of 7%
                             ($10,500,000 at the Maximum Offering) payable to
                             the Dealer Manager, and one Soliciting Dealer
                             Warrant for every 40 Shares sold, issuable to the
                             Dealer Manager, all or a part of which may be
                             reallowed to unaffiliated participating
                             broker-dealers a marketing support and due
                             diligence reimbursement fee (the "Diligence Fee")
                             of 2.5% ($3,750,000 at the Maximum Offering) and
                             up to 3% ($4,500,000 at the Maximum Offering) of
                             Gross Offering Proceeds as a reimbursement of
                             costs and expenses of organizing the Company,
                             including legal, accounting, printing, marketing
                             and other offering expenses (the "Organization and
                             Offering Expense Fee"), a majority of which will
                             be paid to third parties unaffiliated with the
                             Advisor.     

    
                             Acquisition Stage:  A fee of up to 3% ($4,500,000)
                             of Gross Offering Proceeds in connection with the
                             selection, valuation and acquisition of properties
                             (subject to certain overall limitations) (the
                             "Acquisition and Advisory Fees"), which is payable
                             regardless of the quality of the properties
                             acquired by the Company; and reimbursement of
                             costs and expenses for the acquisition of
                             properties.     

    
                             Operational Stage:  Property management fee (the
                             "Management Fee") payable to the Management
                             Company in an amount equal to 4.5% of the gross
                             rental income from each property and, in the case
                             of leases to new tenants, an initial leasing fee
                             equal to the lesser of (i) the first month's rent
                             under the applicable lease or (ii) the amounts
                             charged by unaffiliated persons rendering
                             comparable services in the same geographic area.
                             Also, a Listing Fee shall be payable to the
                             Advisor generally equal to 10%      

                                       5

<PAGE>
 
    
                             of the amount by which the adjusted market value of
                             the Company exceeds the adjusted amount of capital
                             invested in the Company.     

    
                             Liquidation Stage:  After all shareholders have
                             received a return of their Invested Capital and an
                             8% per annum cumulative, noncompounded return on
                             their Invested Capital from inception until the
                             date of the property sale (the "Common Return"),
                             then the Advisor is entitled to receive 10% of
                             remaining amounts of Nonliquidating Net Sale
                             Proceeds and Liquidating Distributions available
                             for distribution and a real estate brokerage
                             commission of up to 3% of the sale price of
                             properties sold by the Company.     

    
                             Also, a Performance Fee shall be payable to the
                             Advisor upon termination of the Advisory
                             Agreement, in differing amounts depending whether
                             the Company's stock is listed or not.
                             Payment of certain fees is subject to conditions
                             and restrictions or to change under certain
                             specified circumstances.  The Advisor and other
                             Affiliates also may receive reimbursement for
                             out-of-pocket expenses that they incur on behalf
                             of the Company, subject to certain expense
                             limitations, and a subordinated incentive fee if
                             Listing occurs.     

SHARE REDEMPTION:            The Company may use proceeds received from sales
                             of Shares pursuant to the Reinvestment Plan to
                             redeem Shares at its sole discretion.
                             Shareholders will have no right to request that
                             the Company redeem their Shares after Listing.

    
DIVIDEND REINVESTMENT PLAN:  The Company will establish the Reinvestment Plan
                             pursuant to which shareholders who elect to
                             participate may have their dividends from the
                             Company automatically invested in Shares.
                             Shareholders who participate in the Reinvestment
                             Plan will be allocated their share of the
                             Company's taxable income even though such
                             shareholders will receive no cash distributions
                             from the Company, which may result in tax
                             liability for such participants even though they
                             would receive no cash distributions with which to
                             pay such tax liability.  The Company may terminate
                             the Reinvestment Plan for any reason at any time
                             with ten days' prior notice to participants.  See
                             "Dividend Reinvestment Plan" and "Risk Factors --
                             Federal Income Tax Risks."     

    
DISTRIBUTION POLICY:         As a REIT, the Company will be required to
                             distribute to its shareholders at least 95% of its
                             annual net taxable income.  Because the Company
                             has not identified any probable acquisitions,
                             there can be no assurances as to when the Company
                             will begin to generate net taxable income and to
                             make distributions.     

    
TAX STATUS:                  The Company intends to qualify and will elect to
                             be taxed as a REIT under sections 856 through 860
                             of the Code, commencing with its short taxable
                             year ending December 31, 1997.  If the Company
                             qualifies for taxation as a REIT, the Company
                             generally will not be subject to federal corporate
                             income tax on its taxable income that is
                             distributed to its stockholders.  A REIT is
                             subject to a number of organizational and
                             operational requirements, including a requirement
                             that it currently distribute at least 95% of its
                             annual taxable income.  Although the Company does
                             not intend to request a ruling from the Internal
                             Revenue Service (the "Service) as to its REIT
                             status, the Company has received an opinion of
                             Hunton & Williams, its legal counsel, that the
                             Company will qualify as a REIT for its short
                             taxable year ending December 31, 1997, and the
                             Company's      

                                       6

<PAGE>
 
    
                             organization and proposed method of operation will
                             enable it to continue to qualify as a REIT, which
                             opinion is based on certain assumptions and
                             representations about the Company's ongoing
                             businesses and investment activities and other
                             matters. No complete assurance can be given that
                             the Company will be able to comply with such
                             assumptions and representations in the future.
                             Furthermore, such opinion is not binding on the
                             Service or on any court. Even if the Company
                             qualifies for taxation as a REIT, the Company may
                             be subject to certain federal state and local taxes
                             on its income and property. Failure to qualify as a
                             REIT would render the Company subject to federal
                             income tax (including any applicable alternative
                             minimum tax) on its taxable income at regular
                             corporate rates and distributions to the Company's
                             stockholders in any such year would not be
                             deductible. See "Risk Factors -- Legal Risks -- Tax
                             Risks" and "Federal Income Tax Considerations --
                             Taxation of the Company."     

    
OPERATING PARTNERSHIP:       The Company intends to own its properties through
                             Wells Operating Partnership, L.P., a Delaware
                             limited partnership (the "Operating Partnership").
                             Initially, the Company will be the sole general
                             partner of the Operating Partnership, and the
                             Advisor will contribute $200,000 to the Operating
                             Partnership and will be the sole limited partner
                             thereof.  This "UPREIT" structure will allow the
                             Company to acquire properties using units of
                             limited partnership interest in the Operating
                             Partnership ("OP Units") as currency, which
                             generally will allow sellers of properties to
                             defer gain recognition with respect to such
                             properties.  Each OP Unit will be redeemable, at
                             the option of the holder, for cash with a value
                             equal to one Share or, at the option of the
                             Company, one Share.     

    
LISTING:                     Initially, the Company's Shares will not be
                             listed, but the Board of Directors may elect to
                             effect the Listing of the Shares at any time
                             following the completion of the Offering, though
                             there can be no assurances that the Board of
                             Directors will make such election or that the
                             Company will ever qualify for Listing.  In the
                             event that the Listing does not occur on or before
                             __________, 2007 (ten years after the date of the
                             Prospectus), the Company will automatically
                             terminate and dissolve, unless the shareholders
                             holding a majority of the Common Shares vote to
                             extend the duration of the Company.     

                                       7

<PAGE>
 
                                 RISK FACTORS

    
     The purchase of Shares involves a number of risks.  In addition to the
factors set forth elsewhere in this Prospectus, prospective investors should
consider specifically the following:     

INVESTMENT RISKS

     LACK OF LIQUIDITY OF SHARES.  Shareholders may not be able to sell their
Shares promptly at a desired price; therefore, the Shares should be considered
as a long-term investment only.  Currently there is no public market for the
Shares.  The Board of Directors, with or without the consent of the
shareholders, may apply for Listing of the Shares if the Board of Directors
(including a majority of Independent Directors) determines Listing to be in the
best interests of the shareholders.  There can be no assurance, however, that
the Company will apply for Listing, that any such application will be made
before the passage of a significant period of time, that any application will be
accepted or, even if accepted, that a public trading market will develop,  In
any event, the Articles of Incorporation provide that the Company will not apply
for Listing before the completion or termination of the Offering.

    
     TOTAL RELIANCE ON THE ADVISOR.  All decisions with respect to the
management of the Company will be made by the Advisor, with oversight from the
Board of Directors.  The shareholders will have no right or power to take part
in the management of the Company except through the exercise of their voting
rights, which are limited.  The Advisor may be removed under certain conditions,
as set forth in the Advisory Agreement, subject to payment and release from all
obligations incurred by the Advisor in connection with its role as advisor.
Further, the Advisor has the ability to assign the Advisory Agreement to an
affiliate, subject to approval by the Company's independent directors.  In such
case, the shareholders will not be able to vote on such new Advisor, and there
can be no assurances that such new Advisor will perform satisfactorily.  See
"Management Compensation."     

    
     CONFLICTS OF INTEREST RELATED TO THE COMPANY'S AFFILIATES.  In connection
with its relationship with the Advisor and other Affiliates, the Company has
several conflicts of interest, including the following: (a) the Advisor and
certain of its Affiliates serve as general partners of real estate limited
partnerships that have objectives similar to the Company's and expect that they
will organize additional real estate partnerships in the future.  As a result,
investors should be aware that the Advisor will have to allocate its time
between the Company and such partnerships and activities and may have conflicts
of interest in deciding which entity will acquire a particular property; (b)
The Company may acquire properties in the same geographic areas where other
properties owned or managed by the Advisor or other Affiliates are located,
resulting in potential conflicts in the leasing or resale of the Company's
properties in the event that the Company and another program managed by the
Advisor were to attempt to compete for the same tenants in negotiating leases or
to sell similar properties at the same time; (c) Since it is anticipated that
the Company's properties will be managed by the Management Company, an Affiliate
of the Advisor, the Company will not have the benefit of independent property
management, and investors must rely on the Advisor and the Management Company,
for management of the Company's Properties; (d) The Company is likely to enter
into one or more joint ventures for the acquisition and operation of specific
properties with one or more real estate limited partnerships sponsored by the
Advisor and other Affiliates, resulting in potential conflicts of interest in
determining which program should enter into a particular joint venture, in
structuring the terms of the relationship and in managing the joint venture.  In
addition, the Company may purchase properties from, and sell properties to, the
Advisor and other Affiliates, resulting in conflicts of the Advisor based on its
relationship with both parties to such transactions; (e)  Fees payable to the
Advisor and other Affiliates in connection with Company transactions involving
the purchase, management and sale of Company Properties are not the result of
arm's-length negotiations and will be payable regardless of the quality of the
property acquired or the services provided to the Company; (f) The conflicts of
interest created at the time of a sale of a Property by:  (i) the loss of
management fees by the Management Company conflicting with the brokerage fee
which may be received by the Advisor, and (ii) the receipt of brokerage fees by
the Advisor conflicting      

                                       8

<PAGE>
 
    
with the advisability of such a sale; and (g) The Company may borrow funds from
the Advisor and other Affiliates, resulting in conflicts for both parties based
on such lender-borrower relationship between affiliated entities.     

    
     POSSIBLE LACK OF DIVERSIFICATION RESULTING FROM SUBSCRIPTIONS FOR LESS THAN
THE MAXIMUM NUMBER OF SHARES.  To the extent that less than the Maximum Offering
is sold, the diversification of the Company's investments will be decreased and
the extent to which the Company's profitability will be affected by any one of
its investments will increase.  Specifically, the various types of real estate
assets in which the Company invests and the geographic diversity of such assets
will be reduced proportionally.  Consequently, the effects of the financial
performance of such fewer assets will be concentrated and thus the risks of poor
financial performance will be increased.  Further, reduced geographic diversity
of the Company's Properties will increase the Company's reliance on (and
therefore risks) related to regional economic conditions.  Accordingly, lack of
diversification of the Company's investments will have the effect of increasing
the risks associated with an investment in the Shares.     

    
     SUBSTANTIAL MANAGEMENT COMPENSATION.  The Advisor and the other Affiliates
will perform services for the Company in connection with the offer and sale of
Shares, the selection and acquisition of the Company's properties, and the
management and leasing of the Company's properties, and will receive substantial
compensation from the Company in consideration for these services.  In
connection with the Offering, the Dealer Manager will receive 7% ($10,500,000 at
the Maximum Offering) of the Gross Offering Proceeds as a Selling Commission and
a Diligence Fee equal to 2.5% ($3,750,000 at the Maximum Offering) for marketing
and due diligence reimbursements, substantially all of which is expected to be
reallowed to participating broker-dealers.  In connection with the review and
evaluation of potential acquisitions, the Advisor will receive Acquisition and
Advisory Fees equal to 3% ($4,500,000 at the Maximum Offering) of the Gross
Offering Proceeds.  In connection with the management and leasing of Properties,
the Management Company will receive a fee equal to 4.5% of the gross rental
income from each Property as well as certain leasing fees.  The amount of such
compensation has not been determined in arm's-length negotiations, and such
amounts will be payable regardless of the quality of services provided to the
Company.  Further, the Selling Commission, Diligence Fee, Organization and
Offering Expense Fee and the initial Acquisition and Advisory Fees will be paid
to Affiliates prior to any distributions to shareholders.  See "Management
Compensation" and "Conflicts of Interest."     

    
     NO IDENTIFIED SOURCES FOR FUNDING OF FUTURE CAPITAL NEEDS.  As the Company
raises capital from investors, substantially all of the Gross Proceeds of the
Offering will be used for investment in properties and for payment of various
fees and expenses.  See "Estimated Use Of Proceeds."  In order to qualify as a
REIT, the Company must distribute to its shareholders at least 95% of its annual
taxable income.  Therefore, it is not anticipated that the Company will maintain
any meaningful permanent working capital reserves.  Accordingly, in the event
that the Company develops a need for additional capital in the future for the
improvement of its properties or for any other reason, no sources for such
funding have been identified, and no assurance can be made that such sources of
funding will be available to the Company for potential capital needs in the
future or, if available, that such funds can be obtained on economically
feasible terms.     

    
     JOINT VENTURES MAY NEGATIVELY AFFECT THE COMPANY.  The Company is likely to
enter into one or more joint ventures with Affiliates for the acquisition,
development or improvement of properties.  In this regard, the Company may enter
into joint ventures with future programs sponsored by the Advisors or other
Affiliates or with one or more Prior Wells Public Programs.  The Company may
purchase and develop properties in joint ventures or in partnerships, co-
tenancies or other co-ownership arrangements with the Advisor or other
Affiliates, the sellers of the properties, affiliates of the sellers, developers
or other persons.  Such investments may, under certain circumstances, involve
risks not otherwise present, including, for example, the possibility that the
Company's co-venturer, co-tenant or partner in an investment might become
bankrupt, that such co-venturer, co-tenant or partner may at any time have
economic or business interests or goals which are inconsistent with the business
interests or goals of the Company, or that such co-venturer, co-tenant or
partner may be in a position to take action contrary to the instructions or the
requests of the Company or contrary to the Company's policies or      

                                       9

<PAGE>
 
    
objectives. Actions by such a co-venturer, co-tenant or partner might have the
result of subjecting the applicable property to liabilities in excess of those
otherwise contemplated and may have the effect of reducing Cash Available for
Distribution. In the event a co-venturer has a right of first refusal to buy out
the other co-venturer, it may be unable to finance such buy-out at that time. It
may also be difficult for the Company to sell its interest in any such joint
venture or partnership or as a co-tenant in such property. In addition, to the
extent that the Company's co-venturer or partner is the Advisor or one of its
Affiliates, certain conflicts of interest will exist. See "Conflicts of 
Interest -- Joint Ventures with the Advisor and other Affiliates."     

    
     Anti-Takeover Effects of Governing Documents and Maryland Law.  Certain
provisions of the Company's Articles of Incorporation, including the ownership
limitations, transfer restrictions and ability to issue preferential preferred
stock, may have the effect of preventing or discouraging takeovers of the
Company by third parties.  In addition, certain provisions of the Maryland
General Corporation Law ("MGCL"), including the restrictions on certain business
combinations and control share acquisitions, may have a similar effect.  See
"Description of Capital Stock."     

    
     REINVESTMENT PLAN PROCEEDS MAY NOT BE USED TO ACQUIRE PROPERTIES.  Proceeds
from sale of Shares in the Reinvestment Plan may, in the Advisor's discretion,
be used to fund the Share Repurchase Program rather than for the funding of real
estate investment.  In such case, the Company's real estate investments, and
therefore the underlying value of the Shares and potential distributions to
shareholders, will not be increased by the amount of net proceeds so directed
into the Share Repurchase Program.     

REAL ESTATE RISKS

    
     FLUCTUATING FINANCIAL PERFORMANCE OF PREVIOUSLY SPONSORED PROGRAMS.  The
real properties in which the Prior Wells Public Programs have invested have
experienced the same economic problems as other real estate investments in
recent years, including, without limitation, general over-building and an excess
of supply in many markets, along with increased operating costs and a general
downturn in the real estate industry.  The historical fluctuations in net income
of the Prior Wells Public Programs were primarily due to tenant turnover,
resulting in increased vacancies and the requirement to expend funds for tenant
refurbishments, and increases in administrative and other operating expenses.
Specifically, certain of the Prior Wells Public Programs suffered decreases in
net income during the real estate recession of the late 1980s and early 1990s,
which decreases were generally attributable to the overall downturn in the
economy and in the real estate market in particular.  Because of the cyclical
nature of the real estate market, such downturns in the performance of a real
estate program could occur at any time in the future when economic conditions
decline.  None of the Prior Wells Public Programs has liquidated or sold any of
its real properties to date and, accordingly, no assurance can be made that such
programs will ultimately be successful in meeting their investment objectives.
There are no assurances that properties acquired by the Company will not also
experience fluctuating financial performance.  See "Prior Performance Summary"
and the Prior Performance Tables included as Exhibit A hereto.    

     POTENTIAL ADVERSE ECONOMIC AND REGULATORY CHANGES.  The Company will be
subject to risks generally incident to the ownership of real estate, including
changes in general economic or local conditions, changes in supply of or demand
for similar or competing properties in an area, changes in interest rates and
availability of permanent mortgage funds which may render the sale of a property
difficult or unattractive, and changes in tax, real estate, environmental and
zoning laws.  Periods of high interest rates and tight money supply may make the
sale of properties more difficult.  For these and other reasons, no assurance of
profitable operation or realization of gains from the sales of the Company's
properties can be given.

    
     UNSPECIFIED PROPERTY ACQUISITIONS/BLIND POOL.  This Offering is commonly
referred to as a "blind pool" offering in that the Advisor has not identified
any properties in which there is a reasonable probability that the Company will
invest.  Investors must rely upon the ability of the Advisor and the Board of
Directors with respect to the investment of the proceeds of this Offering and
the management of the unspecified properties and will not have an opportunity to
evaluate for themselves the relevant economic, financial and other information
regarding the specific properties in which the proceeds of this Offering will be
invested.  Accordingly, the risk of      

                                       10

<PAGE>
 
    
investing in the Shares may be increased. No assurance can be given that the
Company will be successful in obtaining suitable investments or that, if
investments are made, the objectives of the Company will be achieved.     

    
     POTENTIAL INCREASED COSTS AND DELAYS RELATED TO PROPERTY DEVELOPMENT.  The
Company may invest some or all of the net proceeds of this Offering in the
acquisition and development of properties upon which it will develop and
construct improvements at a fixed contract price, provided that the Company may
not invest more than 10% of is total assets in properties which are not expected
to produce income within two years of their acquisition.  In this regard, the
Company will be subject to risks relating to the builder's ability to control
construction costs or to build in conformity with plans, specifications and
timetables.  The builder's failure to perform may necessitate legal action by
the Company to rescind its purchase or the construction contract or to compel
performance.  Performance also may be affected or delayed by conditions beyond
the builder's control.  Delays in completion of construction could also give
lessees the right to terminate preconstruction leases for space at a newly
developed project.  Additional risks may be incurred where the Company makes
periodic progress payments or other advances to such builders prior to
completion of construction.  However, the Company will make such payments only
after having received a certification from an independent architect or an
independent engineer, or both, as to the percentage of the project which has
been completed and as to the dollar amount of the construction then completed.
Factors such as those discussed above can result in increased costs of a project
and a corresponding depletion of the Company's working capital reserves or loss
of the Company's investment.  In addition, the Company will be subject to normal
lease-up risks relating to newly constructed projects.  Furthermore, the price
to be paid for a property upon which improvements are to be constructed or
completed, which price is normally agreed upon at the time of acquisition, of
necessity must be based upon projections of rental income and expenses or fair
market value of the property upon completion of construction, which are not
certain until after a number of months of actual operation.     

    
     COMPETITION FOR INVESTMENTS.  The Company will experience competition for
real property investments from individuals, corporations and bank and insurance
company investment accounts, as well as other real estate investment
partnerships, including the Prior Wells Public Programs, real estate investment
trusts and other entities engaged in real estate investment activities.  For
example, one Prior Wells Public Program has approximately $11,000,000 available
for real estate investments, and another will be seeking up to $35,000,000 in
investments, both of which will compete with the Company for real estate
investment opportunities and both of which are managed by the Advisor.
Competition for investments may have the effect of increasing costs and reducing
Cash Available for Distribution.     

     POTENTIAL ADVERSE EFFECTS OF DELAYS IN INVESTMENTS.  Delays which may take
place in the selection, acquisition and development of properties could
adversely affect the per Share Cash Available for Distribution as a result of
the lower returns that will be received by the Company if it is required to
invest in short-term investments.  Also, where properties are acquired prior to
the commencement of construction or during the early stages of construction, it
will typically take several months to complete construction and rent available
space.

    
     RISKS RELATING TO FAILURE OF THE COMPANY TO LIQUIDATE UPON FAILURE TO LIST.
The Company intends, to the extent consistent with its objective of qualifying
as a REIT, to reinvest Net Sales Proceeds from the sale of its properties in
additional properties for at least the first five to ten years after
commencement of the Offering.  Unless Listing occurs within ten years after
commencement of the Offering, the Company will undertake, to the extent
consistent with the Company's objective of qualifying as a REIT, the orderly
sale of the Company's assets, the distribution of the Net Sales Proceeds of such
sales to stockholders, and will engage only in activities related to its orderly
liquidation unless the stockholders elect otherwise.  If Listing occurs, the
Company will become a perpetual life entity, and Net Sales Proceeds may be
reinvested in other properties for an indefinite period of time.  Neither the
Advisor nor the Board of Directors may be able to control the timing of sales
due to market conditions, and there can be no assurance that the Company will be
able to sell its assets so as to return stockholders' aggregate Invested
Capital, or to generate a profit for the stockholders.  Invested Capital, in the
aggregate, will be returned to shareholders upon disposition of the Company's
properties only if the properties are sold for more than their original purchase
price, although return of capital, for federal income tax purposes, is not
necessarily limited to stockholder distributions following sales of properties.
See "Federal Income Tax Considerations."  In the      

                                       11

<PAGE>
 
event that a purchase money obligation is taken in partial payment of the sales
price of a property, the proceeds of the sale will be realized over a period of
years.

    
     POTENTIAL LIABILITIES RELATED TO ENVIRONMENTAL MATTERS.  Under various
federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the
cost of removal or remediation of hazardous or toxic substances on, under or in
such property.  Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances.  Environmental laws also may impose restrictions on the manner
in which property may be used or businesses may be operated.  Environmental laws
provide for sanctions in the event of noncompliance and may be enforced by
governmental agencies or, in certain circumstances, by private parties.  In
connection with the acquisition and ownership of its properties, the Company may
be potentially liable for such costs.  The cost of defending against claims of
liability, of compliance with environmental regulatory requirements or of
remediating any contaminated property could materially adversely affect the
business, assets or results of operations of the Company and, consequently, Cash
Available for Distribution.     

    
     UNINSURED LOSSES.  Material damages at one or more of its Properties that
are not covered, or not adequately covered, by insurance could have a material
adverse effect on the Company.  Although the Company believes it is adequately
insured, there can be no assurances that material uninsured losses will not
occur in the future.     

TAX RISKS

     FAILURE TO QUALIFY AS A REIT.  The Company intends to operate so as to
qualify as a REIT for federal income tax purposes.  Although the Company has not
requested, and does not expect to request, a ruling from the Service that it
qualifies as a REIT, it has received an opinion of its counsel that, based on
certain assumptions and representations, it so qualifies.  Investors should be
aware, however, that opinions of counsel are not binding on the Service or any
court.  The REIT qualification opinion only represents the view of counsel to
the Company based on counsel's review and analysis of existing law, which
includes no controlling precedent.  Furthermore, both the validity of the
opinion and the qualification of the Company as a REIT will depend on the
Company's continuing ability to meet various requirements concerning, among
other things, the ownership of its outstanding stock, the nature of its assets,
the sources of its income, and the amount of its distributions to its
shareholders.  See "Federal Income Tax Considerations -- Taxation of the
Company."

     If the Company were to fail to qualify as a REIT for any taxable year, the
Company would not be allowed a deduction for distributions to its shareholders
in computing its taxable income and would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates.  Unless entitled to relief under certain Code
provisions, the Company also would be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification was lost.
As a result, Cash Available for Distribution would be reduced for each of the
years involved.  Although the Company intends to operate in a manner intended to
allow it to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause the Board of Directors to revoke
the Company's REIT election.  See "Federal Income Tax Considerations."

     REIT MINIMUM DISTRIBUTION REQUIREMENTS; POSSIBLE INCURRENCE OF ADDITIONAL
DEBT.  In order to qualify as a REIT, the Company generally will be required
each year to distribute to its shareholders at least 95% of its net taxable
income (excluding any net capital gain).  In addition, the Company will be
subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the sum
of (i) 85% of its ordinary income for that year, (ii) 95% of its capital gain
net income for that year, and (iii) 100% of its undistributed taxable income
from prior years.

     The Company intends to make distributions to its shareholders to comply
with the 95% distribution requirement and to avoid the nondeductible excise tax.
The Company's income will consist primarily of its share of the income of the
Operating Partnership, and the Cash Available for Distribution by the Company to
its 

                                       12

<PAGE>
 
shareholders will consist of its share of cash distributions from the Operating
Partnership. Differences in timing between (i) the actual receipt of income and
actual payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company could
require the Company, through the Operating Partnership, to borrow funds on a
short-term basis to meet the 95% distribution requirement and to avoid the
nondeductible excise tax. The requirement to distribute a substantial portion of
the Company's net taxable income could cause the Company to distribute amounts
that otherwise would be spent on future acquisitions, unanticipated capital
expenditures or repayment of debt, which would require the Company to borrow
funds or to sell assets to fund the costs of such items.

     FAILURE OF THE OPERATING PARTNERSHIP TO BE CLASSIFIED AS A PARTNERSHIP FOR
FEDERAL INCOME TAX PURPOSES; IMPACT ON REIT STATUS.  Although the Company has
not requested, and does not expect to request, a ruling from the Service that
the Operating Partnership will be classified as a partnership for federal income
tax purposes, the Company has received an opinion of its counsel stating that
the Operating Partnership will be classified as a partnership, and not as a
corporation or association taxable as a corporation for federal income tax
purposes.  If the Service were to challenge successfully the tax status of the
Operating Partnership as a partnership for federal income tax purposes, the
Operating Partnership would be taxable as a corporation.  In such event, the
Company likely would cease to qualify as a REIT for a variety of reasons.
Furthermore, the imposition of a corporate income tax on the Operating
Partnership would reduce substantially the amount of Cash Available for
Distribution.  See "Federal Income Tax Considerations -- Tax Aspects of the
Operating Partnership."

    
     ERISA RISKS.  The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and section 4975 of the Code prohibit certain transactions
that involve (i) certain pension, profit-sharing, employee benefit, or
retirement plans or individual retirement accounts (each, a "Plan") and (ii) the
assets of a Plan.  A "party in interest" or "disqualified person" with respect
to a Plan will be subject to (x) an initial 5% excise tax on the amount involved
in any prohibited transaction involving the assets of the Plan and (y) an excise
tax equal to 100% of the amount involved if any prohibited transaction is not
corrected.  Consequently, the fiduciary of a Plan contemplating an investment in
the Shares should consider whether the Company, any other person associated with
the issuance of the Shares, or any affiliate of the foregoing is or might become
a "party in interest" or "disqualified person" with respect to the Plan.  In
such a case, the acquisition or holding of Shares by or on behalf of the Plan
could be considered to give rise to a prohibited transaction under ERISA and the
Code.  See "ERISA Considerations -- Employee Benefit Plans, Tax-Qualified
Retirement Plans, and IRAs" herein.     

    
     Regulations of the Department of Labor that define "plan assets" (the "Plan
Asset Regulations") provide that in some situations, when a Plan acquires an
equity interest in an entity, the Plan's assets include both the equity interest
and an undivided interest in each of the underlying assets of the entity, unless
one or more exceptions specified in the Plan Asset Regulations are satisfied.
In such a case, certain transactions that the Company might enter into in the
ordinary course of its business and operations might constitute "prohibited
transactions" under ERISA and the Code.  The assets of the Company should not be
deemed to be "plan assets" of any Plan that invests in the Shares.  See "ERISA
Considerations -- Status of the Company and the Operating Partnership under
ERISA."     

                                       13

<PAGE>
 
    
                        INVESTOR SUITABILITY STANDARDS     

     An investment in the Company involves significant risk.  An investment in
the Shares is suitable only for persons who have adequate financial means and
desire a relatively long-term investment with respect to which they do not
anticipate any need for immediate liquidity.

     If the investor is an individual (including an individual beneficiary of a
purchasing IRA), or if the investor is a fiduciary (such as a trustee of a trust
or corporate pension or profit sharing plan, or other tax-exempt organization,
or a custodian under a Uniform Gifts to Minors Act), such individual or
fiduciary, as the case may be, must represent that he meets certain
requirements, as set forth in the Subscription Agreement attached as Exhibit B
to this Prospectus, including the following:

    
     (i)  that such individual (or, in the case of a fiduciary, that the
fiduciary account or the donor who directly or indirectly supplies the funds to
purchase the Shares) has a minimum annual gross income of $45,000 and a net
worth (excluding home, furnishings and automobiles) of not less than $45,000; 
or     

    
     (ii) that such individual (or, in the case of a fiduciary, that the
fiduciary account or the donor who directly or indirectly supplies the funds to
purchase the Shares) has a net worth (excluding home, furnishings and
automobiles) of not less than $150,000.     

     Under the laws of certain states, transferees will also be required to
comply with applicable standards, except for intra-family transfers and
transfers made by gift, inheritance or family dissolution.

    
     The minimum purchase is 100 Shares ($1,000) (except in certain states as
described below).  No transfers will be permitted of less than the minimum
required purchase, nor (except in very limited circumstances) may an investor
transfer, fractionalize or subdivide such Shares so as to retain less than such
minimum number thereof.  For purposes of satisfying the minimum investment
requirement for Retirement Plans, unless otherwise prohibited by state law, a
husband and wife may jointly contribute funds from their separate Individual
Retirement Accounts ("IRAs"), provided that each such contribution is made in
increments of at least $25.  It should be noted, however, that an investment in
the Company will not, in itself, create a Retirement Plan for any investor and
that, in order to create a Retirement Plan, an investor must comply with all
applicable provisions of the Code.  Except in Maine, Minnesota and Washington,
investors who have satisfied the minimum purchase requirements and have
purchased units in Prior Wells Public Programs may purchase less than the
minimum number of Shares set forth above, but in no event less than 2.5 Shares
($25).  After an investor has purchased the minimum investment, any additional
investments must be made in increments of at least 2.5 Shares ($25), except for
(i) those made by investors in Maine, who must still meet the minimum investment
requirement for Maine residents of $1,000 for IRAs and $2,500 for non-IRAs, (ii)
purchases of Shares pursuant to the Reinvestment Plan, which may be in lesser
amounts; and (iii) minimum for Minnesota investors is $2,500, however the
minimum investment for IRAs and qualified plans may be $2,000.     

     Various states have established suitability standards for individual
investors and subsequent transferees different from those set by the Company.
Those requirements are set forth below.

     IOWA, MASSACHUSETTS, MISSOURI, NORTH CAROLINA AND TENNESSEE -- The investor
has either (i) a net worth (exclusive of home, furnishings, and personal
automobiles) of at least $60,000 and an annual gross income of at least $60,000,
or (ii) a net worth (exclusive of home, furnishings, and personal automobiles)
of at least $225,000.

     MAINE -- The investor has either (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $50,000 and an annual gross
income of at least $50,000, or (ii) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $200,000.

                                       14

<PAGE>
 
     NEW HAMPSHIRE -- The investor has either (i) a net worth (exclusive of
home, furnishings, and personal automobiles) of at least $125,000 and an annual
gross income of at least $50,000, or (ii) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $250,000.

     OHIO -- The investor's investment in the Shares shall not exceed 10% of the
investor's net worth (exclusive of home, furnishings, and personal automobiles.)

     PENNSYLVANIA -- The investor has (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least ten times the investor's
investment in the Company, and (ii) either (a) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $45,000 and an annual gross
income of at least $45,000, or (b) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $150,000.  Because the minimum offering of
Shares of the Company is less than $16,500,000, Pennsylvania investors are
cautioned to evaluate carefully the Company's ability to fully accomplish its
stated objectives and to inquire as to the current dollar volume of the
Company's subscription proceeds.

      NET WORTH IN ALL CASES EXCLUDES HOME, FURNISHINGS AND AUTOMOBILES.

    
     By executing the Subscription Agreement and Subscription Agreement
Signature Page (collectively, the "Subscription Agreement"), which is attached
as Exhibit B to this Prospectus, an investor represents to the Company that he
meets the foregoing applicable suitability standards for the state in which he
resides.  The Company will not accept subscriptions from any person or entity
which does not represent that it meets such standards.  The Company have the
unconditional right to accept or reject any subscription in whole or in 
part.     

     The Company and each person selling Shares on behalf of the Company are
required to (i) make reasonable efforts to assure that each person purchasing
Shares in the Company is suitable in light of such person's age, educational
level, knowledge of investments, financial means and other pertinent factors and
(ii) maintain records for at least six years of the information used to
determine that an investment in Shares is suitable and appropriate for each
investor.  The agreements with the selling broker-dealers require such broker-
dealers to (i) make inquiries diligently as required by law of all prospective
investors in order to ascertain whether a purchase of the Shares is suitable for
the investor, and (ii) transmit promptly to the Company all fully completed and
duly executed Subscription Agreements.

                           ESTIMATED USE OF PROCEEDS

     The following table sets forth information concerning the estimated use of
the Gross Proceeds of the Offering of Shares made hereby.  Many of the figures
set forth below represent the best estimate of the Company since they cannot be
precisely calculated at this time.  The percentage of the Gross Proceeds of the
Offering of Shares to be invested in Company Properties is estimated to be
approximately 84%.


<TABLE>
<CAPTION>
                                                      MINIMUM OFFERING       MAXIMUM OFFERING(1)   
                                                    ---------------------  ----------------------- 
                                                      Amount     Percent      Amount      Percent  
                                                    -----------  --------  -------------  -------- 
<S>                                                 <C>          <C>       <C>            <C>      
Gross Offering Proceeds (2)                         $1,250,000       100%  $150,000,000       100% 
Less Public Offering Expenses:                                                                     
   Selling Commissions (3)                              87,500         7%    10,500,000         7% 
   Organization and Offering Expenses (4)               37,500         3%     4,500,000         3% 
   Marketing support and due diligence                  31,250       2.5%     3,750,000       2.5% 
     reimbursement fee(5)                           ----------      ----   ------------      ----  
Amount Available for Investment (6)                 $1,093,750      87.5%  $131,250,000      87.5% 
                                                    ==========      ====   ============      ====  
   Acquisition and Development:                                                                       
   Acquisition and Advisory Fees (7)                $   37,500         3%  $  4,500,000         3% 
   Acquisition Expenses (8)                              6,250       0.5%       750,000       0.5% 
   Initial Working Capital Reserve (9)                      (9)        -             (9)        -  
Amount Invested in Properties (6)(10)               $1,050,000        84%  $126,000,000        84% 
                                                    ==========      ====   ============      ====   
</TABLE>
 

________________

                                       15

<PAGE>
 
    
(1)  Excludes 1,500,000 Shares that may be sold pursuant to the Reinvestment
     Plan, but excludes 375,00 Shares which may be issued pursuant to the
     Soliciting Dealer Warrants.     

    
(2)  The amounts shown for Gross Offering Proceeds do not reflect the possible
     discounts in commissions and other fees as described in "Plan Of
     Distribution."     

    
(3)  Includes Selling Commissions equal to 7% of aggregate Gross Offering
     Proceeds (which commissions may be reduced under certain circumstances)
     which are payable to the Dealer Manager, an Affiliate. The Company also
     will issue to the Dealer Manager one Soliciting Dealer Warrant for every 40
     Shares sold. The Dealer Manager, in its sole discretion, may reallow
     Selling Commissions of up to 7% of Gross Offering Proceeds and Soliciting
     Dealer Warrants to other broker-dealers participating in this Offering
     attributable to the Shares sold by them. In no event shall the total
     underwriting compensation, including Selling Commissions, and expense
     reimbursements, exceed 7% of Gross Offering Proceeds, except for an
     additional 2.5% of Gross Offering Proceeds which may be paid as a
     reimbursement of expenses incurred for due diligence purposes. See "Plan of
     Distribution."     

    
(4)  These amounts represent the Advisor's best estimates of the Organization
     and Offering Expenses to be incurred in connection with the Offering.
     Organization and Offering Expenses consist of estimated legal, accounting,
     printing and other accountable offering expenses (other than Selling
     Commissions and the Diligence Fee). The Advisor and other Affiliates will
     be responsible for the payment of Organization and Offering Expenses (other
     than Selling Commissions and the marketing support and due diligence
     reimbursement fee) to the extent they exceed 3% of Gross Offering Proceeds,
     without recourse against or reimbursement by the Company.     

    
(5)  All or a portion of the Diligence Fee may be reallowed to non-affiliated
     Soliciting Dealers for bona fide due diligence expenses.     

(6)  Until required in connection with the acquisition and development of
     properties, substantially all of the net proceeds of the Offering and,
     thereafter, the working capital reserves of the Company, may be invested in
     short-term, highly-liquid investments including government obligations,
     bank certificates of deposit, short-term debt obligations and interest-
     bearing accounts.

    
(7)  The Company will pay Acquisition and Advisory Fees to the Advisor or other
     Affiliates in connection with the acquisition of properties up to a maximum
     amount of 3% of Gross Offering Proceeds. Acquisition and Advisory Fees do
     not include Acquisition Expenses.     

(8)  Includes legal fees and expenses, travel and communication expenses, costs
     of appraisals, nonrefundable option payments, accounting fees and expenses,
     title insurance premiums and other closing costs and miscellaneous expenses
     relating to the selection, acquisition and development of properties that
     ultimately are not acquired by the Company. With respect to successful
     acquisitions, such costs generally will be included in the purchase price
     of the applicable property. It is anticipated that substantially all of
     such items will be directly related to the acquisition of specific
     properties and will be capitalized rather than currently deducted by the
     Company.

(9)  Because the vast majority of leases for the properties acquired by the
     Company will provide for tenant reimbursement of operating expenses, it is
     not anticipated that a permanent reserve for maintenance and repairs of the
     Company's properties will be established. However, to the extent that the
     Company has insufficient funds for such purposes, the Company may apply an
     aggregate amount of up to 1% of Gross Offering Proceeds for maintenance and
     repairs of the Company's properties. The Company also may, but is not
     required to, establish reserves from Gross Offering Proceeds, out of cash
     flow generated by operations properties or out of Nonliquidating Net Sale
     Proceeds.

                                       16

<PAGE>
 
    
(10) Includes amounts anticipated to be invested in properties net of fees and
     expenses. It is estimated that approximately 84% of the proceeds of this
     Offering will be used to acquire Properties.     

                                       17

<PAGE>
 
                            MANAGEMENT COMPENSATION

     The following table summarizes and discloses all of the compensation and
fees (including reimbursement of expenses) to be paid by the Company to the
Advisor and its Affiliates during the various phases of the organization and
operation of the Company.

    

<TABLE>
<CAPTION>
FORM OF COMPENSATION                     DETERMINATION                 ESTIMATED MAXIMUM
AND ENTITY RECEIVING                       OF AMOUNT                   DOLLAR AMOUNT (1)
- --------------------             ----------------------------          -----------------
                                  ORGANIZATIONAL AND OFFERING 
                                             STAGE            
                                 ----------------------------
<S>                              <C>                                   <C>
Selling Commissions - The        Up to 7% of Gross Offering            $10,500,000 at
Dealer Manager                   Proceeds before reallowance           the Maximum
                                 of commissions earned by              Offering and
                                 participating broker-dealers.         $87,500 at the
                                 The Dealer Manager intends to         Minimum Offering
                                 reallow 100% of commissions  
                                 earned by participating      
                                 broker-dealers.              
                                                              
Reimbursement of                 Up to 3% of Gross Offering            $4,500,000 at
Organization and Offering        Proceeds.  All Organization           the Maximum
Expenses - The Advisor           and Offering Expenses                 Offering and
and its Affiliates               (excluding Selling                    $37,500 at the
                                 Commissions) will be advanced         Minimum Offering.
                                 by the Advisor and its       
                                 Affiliates and reimbursed by 
                                 the Company.                 

Marketing support and due        Up to 2.5% of Gross Offering          $3,750,000 at
diligence expense -              Proceeds for reimbursement of         the Maximum
Dealer Manager and               bona fide marketing and due           Offering and
Soliciting Dealers               diligence expenses.                   $31,250 at the
                                                                       Minimum Offering.
                                  ACQUISITION AND DEVELOPMENT 
                                             STAGE            
                                 ----------------------------

Acquisition and Advisory         For the review and evaluation         $4,500,000 at
Fees - The Advisor or its        of potential real property            the Maximum
Affiliates                       acquisitions, a fee of up to          Offering and
                                 3% of Gross Offering                  $43,750 at the
                                 Proceeds, plus reimbursement          Minimum Offering.
                                 of costs and expenses for the
                                 acquisition of properties.   
                                                              
Reimbursement of                 Up to .5% of the Gross                $750,000 at the
Acquisition Expenses -           Offering Proceeds for                 Maximum Offering
The Advisor                      reimbursement of expenses             and $6,250 at
                                 related to real property              the Minimum
                                 acquisitions, such as legal           Offering.
                                 fees, travel and             
                                 communication expenses, title
                                 insurance premiums expenses. 
                                                              
                                       OPERATIONAL STAGE      
                                       -----------------

Property Management and          For supervising the                   Actual amounts
Leasing Fees - The               management of the Company's           are dependent
Management Company               properties, a fee equal to            upon results of
                                 4.5% of the Company's gross           operations and
                                 revenues and, in the case of          therefore cannot
                                 leases to new tenants, an             be determined at
                                 initial leasing fee equal to          the present time.
                                 the lesser of (i) the first  
                                 month's rent under the       
                                 applicable lease or (ii) the 
                                 amounts charged by           
                                 unaffiliated persons         
                                 rendering comparable services
                                 in the same geographic area. 
                                                              
Real Estate Commissions -        In connection with the sale           Actual amounts
The Advisor or Its               of any Company property,              are dependent
                                 an amount not exceeding the           upon results of
                                 lesser of:  (A) 50% of the   
                                 reasonable, customary and             
                                 competitive real estate              
                                 brokerage commissions                
                                 customarily paid for the sale        
                                 of a comparable property                               
</TABLE>
 
                                                                   
                                                              

                                       18

<PAGE>
 
    

<TABLE> 
<S>                              <C>                                   <C> 
Affiliates                       in light of the size, type and        operations and 
                                 location of the property, or          therefore cannot 
                                 (B) 3% of the gross sales             be determined at 
                                 price of each property,               the present time 
                                 subordinated to distributions
                                 to shareholders from Sale    
                                 Proceeds of an amount which, 
                                 together with prior          
                                 distributions to the         
                                 shareholders, will equal (i) 
                                 100% of their Invested       
                                 Capital plus (ii) a 6% per   
                                 annum cumulative             
                                 (noncompounded) return on    
                                 their Invested Capital.      

Subordinated Incentive fee       Upon Listing, a fee equal to          Actual amounts
upon Listing - The Advisor       10% of the amount by which            are dependent
                                 (i) the market value of the           upon results of
                                 Company plus the total                operations and
                                 distributions made to                 therefore cannot
                                 shareholders from the                 be determined at
                                 Company's inception until the         the present time.
                                 date of Listing exceeds (ii) 
                                 the sum of (A) 100% of       
                                 Invested Capital and (B) the 
                                 total distributions required 
                                 to pay the Common Return to  
                                 the shareholders from        
                                 inception through the date on
                                 which the market value is    
                                 determined.                  

                                 LIQUIDATION/TERMINATION STAGE
                                 -----------------------------    

Subordinated Participation       After all shareholders have           Actual amounts
in Nonliquidating Net            received a return of their            are dependent
Sale Proceeds and                Invested Capital and their            upon results of
Liquidating Distributions        Common Return, then the               operations and
- - The Advisor                    Advisor is entitled to                therefore cannot
                                 receive the following                 be determined at
                                 amounts:  (a) an amount equal         the present time.
                                 to the capital contributed by
                                 the Advisor to the Operating 
                                 Partnership, (b) then, 10% of
                                 remaining Residual Proceeds  
                                 available for distribution.  

Performance Fee upon             If prior to Listing, an               Actual amounts
Termination of Advisory          amount equal to 10% of the            are dependent
Agreement - The Advisor          amount by which the appraised         upon results of
                                 value of the Company's                operations and
                                 Properties (less                      therefore cannot
                                 indebtedness), plus the total         be determined at
                                 distributions to shareholders         the present time.
                                 from inception through the   
                                 termination date, exceeds    
                                 Invested Capital plus the    
                                 Common Return.                   
</TABLE>
 
     

_________________________

    
(1)  Assumes that the maximum number of 15,000,000 Shares is sold (excluding any
     Shares sold pursuant to the Reinvestment Plan).     

     In addition, the Advisor and its Affiliates will be reimbursed only for the
actual cost of goods, services and materials used for or by the Company as set
forth in Section 10 of the Advisory Agreement.  The Advisor may be reimbursed
for the administrative services, including personnel costs, necessary to the
prudent operation of the Company, provided that the reimbursement shall be at
the lower of the Advisor's actual cost or the amount the Company would be
required to pay to independent parties for comparable administrative services in
the same geographic location.  No payment or reimbursement will be made for
services or personnel costs for which the Advisor is entitled to compensation by
way of a separate fee.

    
     Since the Advisor and its Affiliates are entitled to differing levels of
compensation for undertaking different transactions on behalf of the Company,
such as the property management fees for operating the Company's properties and
the subordinated participation in proceeds from the sale of the Company's
properties, the Advisor has the ability to affect the nature of the compensation
it receives by undertaking different transactions.  However, the Advisor is
obligated to exercise good faith and integrity in all its dealings with respect
to Company affairs pursuant to its fiduciary duties to the shareholders.  See
"The Advisor and the Advisory Agreement."  As noted above, there are ceilings on
certain categories of fees or expenses payable to the Advisor and its
Affiliates.  Because these fees or expenses are payable only with respect to
certain transactions or services, they may not be recovered by the Advisor or
their Affiliates by reclassifying them under a different category.     

                                       19

<PAGE>
 
                             CONFLICTS OF INTEREST

    
     The Company is subject to various conflicts of interest arising out of its
relationship with the Advisor and its Affiliates, including conflicts related to
the arrangements pursuant to which the Advisor and its Affiliates will be
compensated by the Company.  See "Management."     

     The following chart indicates the relationship between Wells Real Estate
Funds, Inc., the parent corporation of the Advisor and the Affiliates of the
Advisor which will be providing services to the Company.


<TABLE>
<CAPTION>
================================================================================
WELLS REAL ESTATE FUNDS, INC.
================================================================================

           100%                             100%                      100%
<S>                    <C>                                <C> 
====================   ===============================    ======================
WELLS CAPITAL, INC.      WELLS INVESTMENT SECURITIES,        WELLS MANAGEMENT
                           INC. (DEALER  MANAGER)             COMPANY, INC.
                                                             (PROPERTY MANAGER)
====================                                      ======================

                Advisory Agreement                                     100%

===================                                       ======================
 
WELLS REIT                                                   WELLS DEVELOPMENT
                                                             CORPORATION
===================                                       ======================
</TABLE>


INTERESTS IN OTHER COMPANIES

     The Advisor and its Affiliates are also general partners of other real
estate limited partnerships, including partnerships which have investment
objectives substantially identical to those of the Company, and it is expected
that they will organize other such partnerships in the future.

    
     As described in the "Prior Performance Summary," the Advisor and its
Affiliates have sponsored the following eleven public partnerships with
substantially identical investment objectives as those of the Company: (i) Wells
Real Estate Fund I ("Wells Fund I"), (ii) Wells Real Estate Fund II ("Wells Fund
II"), (iii) Wells Real Estate Fund II-OW ("Wells Fund II-OW"), (iv) Wells Real
Estate Fund III, L.P. ("Wells Fund III"), (v) Wells Real Estate Fund IV, L.P.
("Wells Fund IV"), (vi) Wells Real Estate Fund V, L.P. ("Wells Fund V"), (vii)
Wells Real Estate Fund VI, L.P. ("Wells Fund VI"), (viii) Wells Real Estate Fund
VII, L.P. ("Wells Fund VII"), (ix) Wells Real Estate Fund VIII, L.P. ("Wells
Fund VIII"), (x) Wells Real Estate Fund IX, L.P. ("Wells Fund IX"), and (xi)
Wells Real Estate Fund X, L.P. ("Wells Fund X").  All of the proceeds of the
offerings of Wells Fund I, Wells Fund II, Wells Fund II-OW, Wells Fund III,
Wells Fund IV, Wells Fund V and Wells Fund VI available for investment in real
properties have been invested.  In addition, all of the proceeds of the offering
of Wells Fund VII available for investment in real properties have either been
invested in properties or are currently committed for investment in properties.
As of March 31, 1997, approximately 97% and 65% of the proceeds of the offerings
of Wells Fund VIII and Wells Fund IX, respectively, available for investment in
real properties had either been invested in properties or were committed for
investment in properties.  In addition, the Company has recently formed Wells
Real Estate Fund XI, L.P. ("Wells Fund XI"), a publicly registered partnership
that has not offered any securities to date.     

     The Advisor also may be subject to potential conflicts of interest at such
time as the Company wishes to acquire a property that also would be suitable for
acquisition by an Affiliate of the Advisor.  Affiliates of the 

                                       20

<PAGE>
 
    
Advisor serve as Directors of the Company, and, in this capacity, have a
fiduciary obligation to act in the best interest of the stockholders of the
Company and, as general partners or directors of the Prior Wells Public
Programs, to act in the best interests of the partners in other programs with
investments that may be similar to those of the Company and will use their best
efforts to assure that the Company will be treated as favorably as any such
other program. See "Management-- Fiduciary Responsibility of the Board of
Directors." In addition, the Company has developed procedures to resolve
potential conflicts of interest in the allocation of properties between the
Company and certain of its Affiliates. See "Certain Conflict Resolution
Procedures" below. The Company will supplement this Prospectus during the
Offering period to disclose the acquisition of a material property at such time
as the Advisor believes that a reasonable probability exists that the Company
will acquire a property, including an acquisition from the Advisor or its
Affiliates.     

OTHER ACTIVITIES OF THE ADVISOR AND ITS AFFILIATES

     The Company will rely on the Advisor for the day-to-day operation of the
Company and the management of its assets.  As a result of its interests in other
partnerships and the fact that it has also engaged and will continue to engage
in other business activities, the Advisor and its Affiliates and certain of the
Directors will have conflicts of interest in allocating their time between the
Company and other partnerships and activities in which they are involved.
However, the Advisor believes that it and its Affiliates have sufficient
personnel to discharge fully their responsibilities to all partnerships and
ventures in which they are involved.

     The Company will not purchase or lease any property in which the Advisor or
any of its Affiliates have an interest; provided, however, that (i) the Advisor
or any of its Affiliates may temporarily enter into contracts relating to
investment in properties to be assigned to the Company prior to closing or may
purchase property in their own name and temporarily hold title for the Company,
and (ii) the Company may enter into joint ventures with Affiliates of the
Advisor to acquire properties held by such Affiliates, provided that in either
case, such properties are purchased by the Company or joint venture at a price
no greater than the cost of such property (including acquisition and carrying
costs) to the Advisor or its Affiliate, and further provided that the Advisor or
such Affiliate may not hold title to any such property on behalf of the Company
or an Affiliated joint venture for more than 12 months, that the Advisor or its
Affiliates shall not sell property to the Company or an Affiliated joint venture
if the cost of the property exceeds the funds reasonably anticipated to be
available for the Company to purchase any such property, and that all profits
and losses during the period any such property is held by the Advisor or the
Affiliate will accrue to the Company or the Affiliated joint venture, as
applicable.  In no event may the Company (i) sell or lease real property to the
Advisor or any of its Affiliates except for joint ventures in which the Company
is a partner (unless a majority of the Independent Directors determine that the
transaction is fair and reasonable to the Company); (ii) loan Company funds to
the Advisor or any of its Affiliates; (iii) obtain appraisals of real properties
from the Advisor or any of their Affiliates; or (iv) enter into agreements with
the Advisor or its Affiliates for the provision of insurance covering the
Company or any property owned by the Company.

COMPETITION

     Conflicts of interest will exist to the extent that the Company may acquire
properties in the same geographic areas where other properties owned by the
Advisor and its Affiliates are located.  In such a case, a conflict could arise
in the leasing of the Company's properties in the event that the Company and
another program managed by the Advisor or its Affiliates were to compete for the
same tenants in negotiating leases, or a conflict could arise in connection with
the resale of Company's properties in the event that the Company and another
program managed by the Advisor or its Affiliates were to attempt to sell similar
properties at the same time.  Conflicts of interest may also exist at such time
as the Company or Affiliates of the Advisor managing property on behalf of the
Company seek to employ developers, contractors or building managers as well as
under other circumstances.  The Advisor will seek to reduce conflicts relating
to the employment of developers, contractors or building managers by making
prospective employees aware of all such properties seeking to employ such
persons.  In addition, the Advisor will seek to reduce conflicts which may arise
with respect to properties available for sale or rent by making prospective
purchasers or lessees aware of all such properties.  However, these conflicts
cannot 

                                       21

<PAGE>
 
be fully avoided in that the Advisor may establish differing compensation
arrangements for employees at different properties or differing terms for
resales or leasing of the various properties.

AFFILIATED DEALER MANAGER

    
     Because the Dealer Manager is an Affiliate of the Advisor, the Company will
not have the benefit of an independent due diligence review and investigation of
the type normally performed by an unaffiliated, independent underwriter in
connection with the offering of securities.  See "Plan of Distribution."     

AFFILIATED PROPERTY MANAGER

    
     Since it is anticipated that the Company's properties will be managed and
leased by Wells Management Company, Inc., an Affiliate of the Advisor, the
Company will not have the benefit of independent property management.  See
"Management Compensation."     

AFFILIATED DEVELOPER

     It is expected that Wells Development Corporation, an Affiliate of the
Advisor, will serve as the developer of certain unimproved properties acquired
by the Company, but will not receive any profit from the development of such
properties.

LACK OF SEPARATE REPRESENTATION

     Hunton & Williams is counsel to the Company, the Advisor, the Dealer
Manager and their Affiliates in connection with this Offering and may in the
future act as counsel to the Company, the Advisor, the Dealer Manager and their
Affiliates.  There is a possibility that in the future the interests of the
various parties may become adverse.  In the event that a dispute were to arise
between the Company, the Advisor, the Dealer Manager or their Affiliates, the
Advisor will cause the Company to retain separate counsel for such matters as
and when appropriate.

JOINT VENTURES WITH AFFILIATES OF THE ADVISOR

    
     The Company is likely to enter into one or more joint venture agreements
with Affiliates of the Advisor for the acquisition, development or improvement
of properties.  See "Investment Objectives and Criteria -- Joint Venture
Investments."  The Advisor and its Affiliates may have conflicts of interest in
determining which partnerships should enter into any joint venture agreement.
Should any such joint venture be consummated, the Advisor may face a conflict in
structuring the terms of the relationship between the interest of the Company
and the interest of the affiliated co-venturer.  Since the Advisor and its
Affiliates will control both the Company and the affiliated co-venturer,
agreements and transactions between the co-venturers with respect to any such
joint venture will not have the benefit of arm's-length negotiation of the type
normally conducted between unrelated co-venturers.     

RECEIPT OF FEES AND OTHER COMPENSATION BY ADVISOR AND AFFILIATES

     Company transactions involving the purchase and sale of the Company's
properties may result in the receipt of commissions, fees and other compensation
by the Advisor and its Affiliates, including Acquisition and Advisory Fees,
property management and leasing fees, real estate brokerage commissions, and
participation in distributions of Nonliquidating Net Sale Proceeds and
Liquidating Distributions.  However, the fees and compensation payable to the
Advisor and its Affiliates relating to sale of the Company's properties are
subordinated to the return to the shareholders of their Invested Capital plus
cumulative returns thereon.  Subject to the oversight of the Board of Directors,
the Advisor has considerable discretion with respect to all decisions relating
to the terms and timing of all Company transactions.  Therefore, the Advisor may
have conflicts of interest concerning certain actions taken on behalf of the
Company, particularly due to the fact that such fees will generally be payable
to the 

                                       22

<PAGE>
 
    
Advisor and its Affiliates regardless of the quality of the properties acquired
or the services provided to the Company. See "Management Compensation."     

CERTAIN CONFLICT RESOLUTION PROCEDURES

     In order to reduce or eliminate certain potential conflicts of interest,
the Articles of Incorporation contain a number of restrictions relating to (i)
transactions between the Company and the Advisor or its Affiliates, (ii) certain
future offerings, and (iii) allocation of properties among certain affiliated
entities.  These restrictions include, among others, the following:

     1.   No goods or services will be provided by the Advisor or its Affiliates
to the Company except for transactions in which the Advisor or its Affiliates
provide goods or services to the Company in accordance with the Articles of
Incorporation which provides that a majority of the Directors (including a
majority of the Independent Directors) not otherwise interested in such
transactions must approve such transactions as fair and reasonable to the
Company and on terms and conditions not less favorable to the Company than those
available from unaffiliated third parties and not less favorable than those
available from the Advisor or its Affiliates in transactions with unaffiliated
third parties.

     2.   The Company will not purchase or lease properties in which the Advisor
or its Affiliates has an interest without the determination, by a majority of
the Directors (including a majority of the Independent Directors) not otherwise
interested in such transaction, that such transaction is competitive and
commercially reasonable to the Company and at a price to the Company no greater
than the cost of the asset to the Advisor or its Affiliate unless there is
substantial justification for any amount that exceeds such cost and such excess
amount is determined to be reasonable.  In no event shall the Company acquire
any such asset at an amount in excess of its appraised value.  The Company will
not sell or lease properties to the Advisor or its Affiliates unless a majority
of the Directors (including a majority of the Independent Directors) not
interested in the transaction determine the transaction is fair and reasonable
to the Company.

    
     3.   The Company will not make any loans to Affiliates.  The Advisor and
its Affiliates will not make loans to the Company, or to joint ventures in which
the Company is a co-venturer, for the purpose of acquiring properties.  Any
loans to the Company by the Advisor or its Affiliates for other purposes must be
approved by a majority of the Directors (including a majority of the Independent
Directors) not otherwise interested in such transaction as fair, competitive,
and commercially reasonable, and no less favorable to the Company than
comparable loans between unaffiliated parties.  It is anticipated that the
Advisor or its Affiliates shall be entitled to reimbursement, at cost, for
actual expenses incurred by them on behalf of the Company or joint ventures in
which the Company is a co-venturer, subject to the 2%/25% Guidelines (2% of
Average Invested Assets or 25% of Net Income) described under "The Advisor and
the Advisory Agreement -- The Advisory Agreement."     

     4.   The Board of Directors and the Advisor have agreed that, in the event
than an investment opportunity becomes available which is suitable for both the
Company and a public or private entity with which the Advisor or its Affiliates
are affiliated, for which both entities have sufficient uninvested funds, then
the entity which has had the longest period of time elapse since it was offered
an investment opportunity will first be offered the investment opportunity.  An
investment opportunity will not be considered suitable for a program if the
requirements of Item 3 above could not be satisfied if the program were to make
the investment.  In determining whether or not an investment opportunity is
suitable for more than one program, the Board of Directors and the Advisor will
examine such factors, among others, as the cash requirements of each program,
the effect of the acquisition both on diversification of each program's
investments by types of commercial office properties and geographic area, and on
diversification of the tenants of its properties (which also may affect the need
for one of the programs to prepare or produce audited financial statements for a
property or a tenant), the anticipated cash flow of each program, the size of
the investment, the amount of funds available to each program, and the length of
time such funds have been available for investment.  If a subsequent
development, such as a delay in the closing of a property or a delay in the
construction of a property, causes any such investment, in the opinion of the
Board of Directors and the Advisor, to be more appropriate for an entity other
than the entity which committed to make the 

                                       23

<PAGE>
 
investment, however, the Advisor has the right to agree that the other entity
affiliated with the Advisor or its Affiliates may make the investment. The
Advisor and certain other Affiliates of the Company are affiliated with Wells
Fund X, a public program for which offerings of securities are ongoing. In
addition, the Advisor and its Affiliates are affiliated with Wells Fund XI, a
publicly registered partnership that has not offered any securities to date. As
of March 31, 1997, Wells Fund X had approximately $4,982,340 available for
investment.

                         SUMMARY OF REINVESTMENT PLAN

    
     The Company has adopted the Reinvestment Plan pursuant to which
stockholders may elect to have the full amount of their cash distributions from
the Company reinvested in additional Shares of the Company.  The following
discussion summarizes the principal terms of the Reinvestment Plan.  The
Reinvestment Plan is attached hereto as Exhibit C.     

GENERAL

     Shareholders who have received a copy of this Prospectus and participate in
this Offering can elect to participate in and purchase Shares through the
Reinvestment Plan at any time and will not need to receive a separate prospectus
relating solely to the Reinvestment Plan.  A person who becomes a stockholder
otherwise than by participating in this Offering may purchase Shares through the
Reinvestment Plan only after receipt of a separate prospectus relating solely to
the Reinvestment Plan.

    
     The price per Share purchased pursuant to the Reinvestment Plan shall be
the Offering price, which is $10.00 per Share, until all of the Shares in this
Offering that are reserved for the Reinvestment Plan have been sold thereunder.
After such time, Shares for the Reinvestment Plan may be acquired by the Company
either through purchases on the open market and/or additional registrations
relating to the Reinvestment Plan, in either case at a per Share price equal to
the then-prevailing market price on the securities exchange or over-the-counter
market on which the Shares are listed at the date of purchase.  The Company is
unable to predict the effect which such a Listing would have on the price of the
Shares acquired through the Reinvestment Plan.     

INVESTMENT OF DISTRIBUTIONS

     Distributions will be used to purchase Shares on behalf of the Participants
from the Company.  All such distributions shall be invested in Shares within 30
days after such payment date.  Any distributions not so invested will be
returned to Participants.

     At this time, Participants will not have the option to make voluntary
contributions to the Reinvestment Plan to purchase Shares in excess of the
amount of Shares that can be purchased with their distributions.  The Board of
Directors reserves the right, however, to amend the Reinvestment Plan in the
future to permit voluntary contributions to the Reinvestment Plan by
Participants, to the extent consistent with the Company's objective of
qualifying as a REIT.

PARTICIPANT ACCOUNTS, FEE, AND ALLOCATION OF SHARES

     For each Participant, the Company will maintain a record which shall
reflect for each fiscal quarter the distributions received by the Company on
behalf of such Participant.  Any interest earned on such Distributions will be
paid to the Company to defray certain costs relating to the Reinvestment Plan.

     The Company will use the aggregate amount of distributions to all
Participants for each fiscal quarter to purchase Shares for the Participants.
If the aggregate amount of distributions to Participants exceeds the amount
required to purchase all Shares then available for purchase, the Company will
purchase all available Shares and will return all remaining distributions to the
Participants within 30 days after the date such distributions are made. 

                                       24

<PAGE>
 
The purchased Shares will be allocated among the Participants based on the
portion of the aggregate distributions received on behalf of each Participant,
as reflected in the records maintained by the Company. The ownership of the
Shares purchased pursuant to the Reinvestment Plan shall be reflected on the
books of the Company.

    
     Shares acquired pursuant to the Reinvestment Plan will entitle the
Participant to the same rights and to be treated in the same manner as those
purchased by the Participants in the Offering.  Accordingly, the Company will
pay the following commissions and fees in connection with Shares sold under the
Reinvestment Plan (until all such Shares are sold):  the Selling Commissions of
7% (subject to reduction under the circumstances provided under "The Offering --
Plan of Distribution"), the Diligence Fee of 2.5%, and the Acquisition and
Advisory Fees of 3% of the purchase price of the Shares sold pursuant to the
Reinvestment Plan.  Thereafter, Acquisition and Advisory Fees will be paid by
the Company only in the event that proceeds of the sale of Shares are used to
acquire properties.  As a result, aggregate fees payable to Affiliates of the
Company will total between 9% and 12% of the proceeds of reinvested
distributions, up to 7% of which may be reallowed to Soliciting Dealers.     

     The allocation of Shares among Participants may result in the ownership of
fractional Shares, computed to four decimal places.

REPORTS TO PARTICIPANTS

    
     Within 60 days after the end of each fiscal quarter, the Company will mail
to each Participant a statement of account describing, as to such Participant,
the distributions reinvested during the quarter, the number of Shares purchased
during the quarter, the per Share purchase price for such Shares, the total
administrative charge paid by the Company on behalf of each Participant (see " -
- - Participant Accounts, Fees and Allocation of Shares" above), and the total
number of Shares purchased on behalf of the Participant pursuant to the
Reinvestment Plan.  See " -- General" above.     

     Tax information with respect to income earned on Shares under the
Reinvestment Plan for the calendar year will be sent to each participant by the
Company.

ELECTION TO PARTICIPATE OR TERMINATE PARTICIPATION

    
     Stockholders of the Company who purchase Shares in this Offering may become
Participants in the Reinvestment Plan by making a written election to
participate on their Subscription Agreements at the time they subscribe for
Shares.  Any other stockholder who receives a copy of this Prospectus or a
separate prospectus relating solely to the Reinvestment Plan and who has not
previously elected to participate in the Reinvestment Plan may so elect at any
time by written notice to the Board of Directors of such stockholder's desire to
participate in the Reinvestment Plan.  Participation in the Reinvestment Plan
will commence with the next distribution made after receipt of the Participant's
notice, provided it is received at least ten days prior to the record date for
such distribution.  Subject to the preceding sentence, the election to
participate in the Reinvestment Plan will apply to all distributions
attributable to the fiscal quarter in which the stockholder made such written
election to participate in the Reinvestment Plan and to all fiscal quarters
thereafter, whether made (i) upon subscription or subsequently for stockholders
who participate in this offering, or (ii) upon receipt of a separate prospectus
relating solely to the Reinvestment Plan for stockholders who do not participate
in this offering.  Participants will be able to terminate their participation in
the Reinvestment Plan at any time without penalty by delivering ten days' prior
written notice to the Board of Directors, and the Company may also terminate the
Reinvestment Plan for any reason at any time, upon 10 days' prior written notice
to all Participants.     

    
     A Participant who chooses to terminate participation in the Reinvestment
Plan must terminate his or her entire participation in the Reinvestment Plan and
will not be allowed to terminate in part.  If the Reinvestment Plan is
terminated, the Company will send each Participant a check in payment for any
fractional Shares in his/her account based on the then market price of the
Shares and the record books of the Company will be revised to reflect the
ownership of records of his/her whole Shares.  There are no fees associated with
a Participant's terminating his interest in the Reinvestment Plan or the
Company's termination of the plan.  A      

                                       25

<PAGE>
 
Participant in the Reinvestment Plan who terminates his interest in the
Reinvestment Plan will be allowed to participate in the Reinvestment Plan again
by notifying the Company and completing any required forms.

    
     The Board of Directors reserves the right to prohibit Qualified Plans from
participating in the Reinvestment Plan if such participation would cause the
underlying assets of the Company to constitute "plan assets" of Qualified Plans.
See "Federal Income Tax Considerations -- Taxation of Tax-Exempt 
Shareholders."     

FEDERAL INCOME TAX CONSIDERATIONS

     Stockholders subject to federal income taxation who elect to participate in
the Reinvestment Plan will incur a tax liability for distributions allocated to
them even though they have elected not to receive their distributions in cash
but rather to have their distributions held pursuant to the Reinvestment Plan.
Specifically, stockholders will be treated as if they have received the
distribution from the Company and then applied such Distribution to purchase
Shares in the Reinvestment Plan.  A stockholder designating a distribution for
reinvestment will be taxed on the amount of such distribution as ordinary income
to the extent such distribution is from current or accumulated earnings and
profits, unless the Company has designated all or a portion of the distribution
as a capital gain dividend.  In such case, such designated portion of the
distribution will be taxed as long-term capital gain.

AMENDMENTS AND TERMINATION

     The Company reserves the right to renew, extend, or amend any aspect of the
Reinvestment Plan without the consent of stockholders, provided that notice of
the amendment is sent to Participants at least 30 days prior to the effective
date thereof.  The Company also reserves the right to terminate the Reinvestment
Plan for any reason at any time by ten days' prior written notice of termination
to all Participants.

                           SHARE REPURCHASE PROGRAM

    
     The Share Repurchase Program ("SRP") may, subject to certain restrictions,
provide eligible stockholders with limited, interim liquidity by enabling them
to sell Shares back to the Company at a price during the period of this Offering
equal to $8.40 per Share (a reduction of $1.60 from the $10 offering price,
reflecting Selling Commissions, the Diligence Fee and Acquisition and Advisory
Fees).  After the Offering, the price per Share pursuant to the SRP will be set
from time to time by the Board of Directors in its sole discretion.  In such
cases, the Board of Directors will consider the Company's net asset value,
recent comparable offerings and other factors which the Board of Directors, in
its sole discretion, deems relevant.  Repurchase prices are expected to be
available on the Company's internet/world wide web site (www.wellsref.com), and
will be given by telephone upon request.     

    
     Repurchases under the SRP, when done, will be made quarterly by the Company
in its sole discretion on a first-come, first-served basis, and will be limited
in the following ways:  (i) not more than $500,000 worth of the outstanding
Shares will be repurchased in any given year; and (ii) the funds available for
repurchase will be limited to available proceeds received by the Company from
the sale of Shares under the Reinvestment Plan.  The determination of available
funds from sales under the Reinvestment Plan and the decision to repurchase
Shares will be at the sole discretion of the Board.  In making this
determination, the Board will consider the need to use proceeds from the Share
sales under the Reinvestment Plan for investment in additional properties, or
for maintenance or repair of existing properties.  Such property-related uses
will have priority over the need to allocate funds to the SRP.  To be eligible
to offer Shares for purchase to the SRP, the stockholder must have beneficially
held the Shares for at least one year.     

     The Company cannot guarantee that funds will be available for repurchase.
If no funds are available for the SRP at the time when repurchase is requested,
the stockholder could: (i) withdraw his request for repurchase; 

                                       26

<PAGE>
 
or (ii) ask that the Company honor the request at such time, if any, when funds
are available. Such pending requests will be honored on a first come, first
served basis. There is no requirement that stockholders sell their Shares to the
Company. The SRP is only intended to provide interim liquidity for stockholders
until a secondary market developed for the Shares. No such market presently
exists and no assurance can be given that one will develop. The SRP will exist
during the Offering period and will be terminated following the close of the
Offering period upon the Listing.

     Shares purchased by the Company under the SRP will be canceled, and will
have the status of authorized but unissued Shares.  Shares acquired by the
Company through the SRP will not be reissued unless they are first registered
with the Commission under the Act and under appropriate state securities laws or
otherwise issued in compliance with such laws.

                                       27

<PAGE>
 
                           PRIOR PERFORMANCE SUMMARY

    
     THE INFORMATION PRESENTED IN THIS SECTION REPRESENTS THE HISTORICAL
EXPERIENCE OF REAL ESTATE PROGRAMS MANAGED BY THE ADVISOR AND ITS AFFILIATES.
INVESTORS IN THE COMPANY SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE RETURNS, IF
ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN SUCH PRIOR REAL ESTATE
PROGRAMS.     

    
     The Advisor serves as a general partner of a total of eleven real estate
limited partnerships, ten of which have completed offerings within the last 10
years and one of which has commenced but not completed its public offering.  A
twelfth partnership is in registration with the Commission and thus has not
commenced.  These limited partnerships and the year in which their offerings
were completed are as follows:     

     1.  Wells Real Estate Fund I (1986)
     2.  Wells Real Estate Fund II (1988)
     3.  Wells Real Estate Fund II-OW (1988)
     4.  Wells Real Estate Fund III, L.P. (1990)
     5.  Wells Real Estate Fund IV, L.P. (1992)
     6.  Wells Real Estate Fund V, L.P. (1993)
     7.  Wells Real Estate Fund VI, L.P. (1994)
     8.  Wells Real Estate Fund VII, L.P. (1995)
     9.  Wells Real Estate Fund VIII, L.P. (1996)
     10.  Wells Real Estate Fund IX, L.P. (1996)
     11.  Wells Real Estate Fund X, L.P. (not completed)

    
     12.  Wells Real Estate Fund XI, L.P. (in registration)     

     The tables included in Exhibit A attached hereto set forth information as
of the dates indicated regarding certain of these prior programs as to (i)
experience in raising and investing funds (Table I); (ii) compensation to
sponsor (Table II); and (iii) annual operating results of prior programs (Table
III).  No information is given as to results of completed programs or sales or
disposals of property because, to date, none of the prior programs have sold any
of their properties.

PRIOR WELLS PUBLIC PROGRAMS

    
     The Advisor and its Affiliates sponsored the Prior Wells Public Programs,
all of which were offered on an unspecified property or "blind pool" basis.  The
total amount of funds raised from investors in the offerings of the Prior Wells
Public Programs, as of August 31, 1997, was approximately $257,000,000, and the
total number of investors in such partnerships was approximately 24,000.     

    
     The investment objectives of the Prior Wells Public Programs are
substantially identical to the investment objectives of the Company.  All of the
proceeds of the offerings of Wells Fund I, Wells Fund II, Wells Fund II-OW,
Wells Fund III, Wells Fund IV, Wells Fund V and Wells Fund VI available for
investment in real properties have been invested in properties.  In addition,
all of the proceeds of the offering of Wells Fund VII available for investment
in real properties have either been invested or are committed for investment in
properties.  As of March 31, 1997, approximately 97%, 65%, and 78% of the
proceeds of the offerings of Wells Fund VIII, Wells Fund IX, and Wells Fund X,
respectively, available for investment in real properties had either been
invested in properties or were committed for investment in properties.  Wells
Real Estate Fund XI has not commenced its offering and thus has no funds for
investments until such time.  For the fiscal year ended December 31, 1996,
approximately three-quarters of the aggregate gross rental income of nine of
these eleven publicly offered partnerships was derived from tenants which are
U.S. corporations, each of which the Company believes has net worth of at least
$100,000,000 or whose lease obligations are guaranteed by another corporation
with a net worth of at least $100,000,000.     

                                       28

<PAGE>
 
    
     The Prior Wells Public Programs have acquired a total of 31 Properties in
the following U.S. regions:  24 in the Southeast, one in the Northeast, two in
Southcentral, one in Northcentral and two in the West.  Each Prior Wells Public
Program has used only proceeds from its respective offering to finance its
acquisitions of properties.     

    
     The real properties in which the Prior Wells Public Programs have invested
have experienced the same economic problems as other real estate investments in
recent years, including without limitation, general over-building and an excess
supply in many markets, along with increased operating costs and a general
downturn in the real estate industry.  As a result, certain of these public
partnerships have experienced increases in expenses and decreases in net income.
These fluctuations were primarily due to tenant turnover, resulting in increased
vacancies and the requirement to expend funds for tenant refurbishments, and
increases in administrative and other operating expenses.  See the Prior
Performance Tables included as Exhibit A hereto.  Additionally, while overall
occupancy rates have not decreased significantly at the properties owned by the
Prior Wells Public Programs, some of these properties have experienced high
tenant turnover, and the partnerships owning these properties have generally
been unable to raise rental rates and have been required to make expenditures
for tenant improvements and to grant free rent and other concessions in order to
attract new tenants.  Specifically, certain of the Prior Wells Public Programs
suffered decreases in net income during the real estate recession of the late
1980s and early 1990s, which decreases were generally attributable to the
overall downturn in the economy and in the real estate market in particular.
Because of the cyclical nature of the real estate market, such decreases in net
income of the public partnerships could occur at any time in the future when
economic conditions decline.  None of these prior programs has liquidated or
sold any of its real properties to date and, accordingly, no assurance can be
made that prior programs will ultimately be successful in meeting their
investment objectives.  See "Risk Factors."     

     The aggregate dollar amount of the acquisition and development costs of the
properties purchased by the Prior Wells Public Programs, as of March 31, 1997,
was approximately $196,419,519, of which $9,888,959 (or approximately 5.0%) had
not yet been expended on the development of certain of the projects which are
still under construction.  Of the aggregate amount, approximately 65.0% was or
will be spent on acquiring or developing office buildings, and approximately
35.0% was or will be spent on acquiring or developing shopping centers.  Of the
aggregate amount, approximately 4.1% was or will be spent on new properties,
37.5% on existing or used properties and 58.4% on construction properties.
Following is a table showing a breakdown of the aggregate amount of the
acquisition and development costs of the properties purchased by the eleven
Prior Wells Public Programs as of March 31, 1997:

    

<TABLE>
<CAPTION>
Type of Property            New         Existing        Construction
- ------------------          ----        ---------       -------------
<S>                         <C>         <C>             <C>
Office Buildings            4.1%         26.1%             34.8%
Shopping Centers              -          11.4%             23.6%
</TABLE>

     

    
     Wells Fund I terminated its offering on September 5, 1986, and received
gross proceeds of $35,321,000 representing subscriptions from 4,895 limited
partners.  $24,679,000 of the gross proceeds were attributable to sales of Class
A Limited Partnership Units ("Class A Units"), and $10,642,000 of the gross
proceeds were attributable to sales of Class B Limited Partnership Units ("Class
B Units" and, collectively with the Class A Units, "Units").  Limited partners
in Wells Fund I have no right to change the status of their Units from Class A
to Class B or vice versa.  Wells Fund I owns interests in the following
properties: (i) a medical office building in Atlanta, Georgia; (ii) two
commercial office buildings in Atlanta, Georgia; (iii) a shopping center in
DeKalb County, Georgia; (iv) a shopping center in Knoxville, Tennessee; (v) a
shopping center in Cherokee County, Georgia; and (vi) a project consisting of
seven office buildings and a shopping center in Tucker, Georgia.  The prospectus
of Wells Fund I provided that the properties purchased by Wells Fund I would
typically be held for a period of eight to twelve years, but that the general
partners may exercise their discretion as to whether and when to sell the
properties owned by Wells Fund I and the partnership will have no obligation to
sell properties at any      

                                       29

<PAGE>
 
particular time. Wells Fund I acquired its properties between 1985 and 1987, and
has not yet liquidated or sold any of its properties.

     Wells Fund II and Wells Fund II-OW terminated their offerings on September
7, 1988, and received aggregate gross proceeds of $36,870,250 representing
subscriptions from 4,659 limited partners.  $28,829,000 of the gross proceeds
were attributable to sales of Class A Units, and $8,041,250 of the gross
proceeds were attributable to sales of Class B Units.  Limited partners in Wells
Fund II and Wells Fund II-OW have no right to change the status of their Units
from Class A to Class B or vice versa.  Wells Fund II and Wells Fund II-OW own
all of their properties through a joint venture, which owns interests in the
following properties: (i) a shopping center in Cherokee County, Georgia; (ii) a
project consisting of seven office buildings and a shopping center in Tucker,
Georgia; (iii) a two story office building in Charlotte, North Carolina; (iv) a
four story office building in Houston, Texas; (v) a restaurant in Roswell,
Georgia; and (vi) a combined retail and office development in Roswell, Georgia.

     Wells Fund III terminated its offering on October 23, 1990, and received
gross proceeds of $22,206,310 representing subscriptions from 2,700 limited
partners.  $19,661,770 of the gross proceeds were attributable to sales of Class
A Units, and $2,544,540 of the gross proceeds were attributable to sales of
Class B Units.  Limited partners in Wells Fund III have no right to change the
status of their Units from Class A to Class B or vice versa.  Wells Fund III
owns interests in the following properties: (i) a four story office building in
Houston, Texas; (ii) a restaurant in Roswell, Georgia; (iii) a combined retail
and office development in Roswell, Georgia; (iv) a two story office building in
Greenville, North Carolina; (v) a shopping center in Stockbridge, Georgia; and
(vi) a two story office building in Richmond, Virginia.

     Wells Fund IV terminated its offering on February 29, 1992, and received
gross proceeds of $13,614,655 representing subscriptions from 1,286 limited
partners.  $13,229,150 of the gross proceeds were attributable to sales of Class
A Units, and $385,505 of the gross proceeds were attributable to sales of Class
B Units.  Limited partners in Wells Fund IV have no right to change the status
of their Units from Class A to Class B or vice versa.  Wells Fund IV owns
interests in the following properties: (i) a shopping center in Stockbridge,
Georgia; (ii) a four story office building in Jacksonville, Florida; (iii) a two
story office building in Richmond, Virginia; and (iv) two two-story office
buildings in Stockbridge, Georgia.

     Wells Fund V terminated its offering on March 3, 1993, and received gross
proceeds of $17,006,020 representing subscriptions from 1,667 limited partners.
$15,209,666 of the gross proceeds were attributable to sales of Class A Units,
and $1,796,354 of the gross proceeds were attributable to sales of Class B
Units.  Limited partners in Wells Fund V who purchased Class B Units are
entitled to change the status of their Units to Class A, but limited partners
who purchased Class A Units are not entitled to change the status of their Units
to Class B.  After taking into effect conversion elections made by limited
partners subsequent to their subscription for Units, as of March 31, 1997,
$15,514,160 of Units of Wells Fund V were treated as Class A Units, and
$1,491,860 of Units were treated as Class B Units.  Wells Fund V owns interests
in the following properties: (i) a four story office building in Jacksonville,
Florida; (ii) two two-story office buildings in Stockbridge, Georgia; (iii) a
four story office building in Hartford, Connecticut; (iv) two restaurants in
Stockbridge, Georgia; and (v) a three story office building in Appleton,
Wisconsin.

     Wells Fund VI terminated its offering on April 4, 1994, and received gross
proceeds of $25,000,000 representing subscriptions from 1,793 limited partners.
$19,332,176 of the gross proceeds were attributable to sales of Class A Units,
and $5,667,824 of the gross proceeds were attributable to sales of Class B
Units.  Limited partners in Wells Fund VI are entitled to change the status of
their Units from Class A to Class B and vice versa.  After taking into effect
conversion elections made by limited partners subsequent to their subscription
for Units, as of March 31, 1997, $21,132,570 of Units of Wells Fund VI were
treated as Class A Units, and $3,867,430 of Units were treated as Class B Units.
Wells Fund VI owns interests in the following properties: (i) a four story
office building in Hartford, Connecticut; (ii) two restaurants in Stockbridge,
Georgia; (iii) another restaurant and a retail building in Stockbridge, Georgia;
(iv) a shopping center in Stockbridge, Georgia; (v) a three story office
building in Appleton, Wisconsin; (vi) a shopping center in Cherokee County,
Georgia; (vii) a combined retail and office 

                                       30

<PAGE>
 
development in Roswell, Georgia; (viii) a four story office building in
Jacksonville, Florida; and (ix) a tract of land in Clemmons, North Carolina upon
which a shopping center is being developed.

     Wells Fund VII terminated its offering on January 5, 1995, and received
gross proceeds of $24,180,174 representing subscriptions from 1,910 limited
partners.  $16,788,095 of the gross proceeds were attributable to sales of Class
A Units, and $7,392,079 of the gross proceeds were attributable to sales of
Class B Units.  Limited partners in Wells Fund VII are entitled to change the
status of their Units from Class A to Class B and vice versa.  After taking into
effect conversion elections made by limited partners subsequent to their
subscriptions for Units, as of March 31, 1997, $18,406,760 of Units in Wells
Fund VII were treated as Class A Units, and $5,773,410 of Units were treated as
Class B Units.  Wells Fund VII owns interests in the following properties: (i) a
three story office building in Appleton, Wisconsin; (ii) a restaurant and a
retail building in Stockbridge, Georgia; (iii) a shopping center in Stockbridge,
Georgia; (iv) a shopping center in Cherokee County, Georgia; (v) a combined
retail and office development in Roswell, Georgia; (vi) a two story office
building in Alachua County, Florida near Gainesville; (vii) a four story office
building in Jacksonville, Florida; (viii) a tract of land in Clemmons, North
Carolina upon which a shopping center is being developed; and (ix) a retail
development in Clayton County, Georgia.

     Wells Fund VIII terminated its offering on January 4, 1996, and received
gross proceeds of $32,042,689 representing subscriptions from 2,241 limited
partners.  $26,135,339 of the gross proceeds were attributable to sales of Class
A Status Units, and $5,907,350 were attributable to sales of Class B Status
Units.  Limited partners in Wells Fund VIII are entitled to change the status of
their Units from Class A to Class B and vice versa.  After taking into effect
conversion elections made by limited partners subsequent to their subscriptions
for Units, as of March 31, 1997, $26,248,480 of Units in Wells Fund VIII were
treated as Class A Status Units, and $5,784,210 of Units were treated as Class B
Status Units.  Wells Fund VIII owns interests in the following properties: (i) a
two story office building in Alachua County, Florida near Gainesville; (ii) a
four story office building in Jacksonville, Florida; (iii) a tract of land in
Clemmons, North Carolina, upon which a shopping center is being developed; (iv)
a retail development in Clayton County, Georgia; (v) a tract of land in Madison,
Wisconsin, upon which a four story office building is being developed; and (vi)
a one-story office building in Farmers Branch, Texas.

    
     Wells Fund IX terminated its offering on December 30, 1996, and received
gross proceeds of $35,000,000 representing subscriptions from 2,095 limited
partners.  $29,359,270 of the gross proceeds were attributable to sales of Class
A Units and $5,640,730 were attributable to sales of Class B Units.  Wells Fund
IX owns interests in (i) a tract of land in Madison, Wisconsin, upon which a
four story office building is being developed, (ii) a one story office building
in Farmers Branch, Texas and (iii) an interest in a joint venture (in which
Wells Fund X is a partner), which owns a tract of land in Knox County, Tennessee
in the Knoxville metropolitan area, upon which a three story office building is
being developed (the "Knoxville Joint Venture").     

     On December 31, 1996, Wells Fund X commenced a public offering of up to
$35,000,000 of limited partnership units.  Wells Fund X commenced active
operations on February 4, 1997.  As of March 31, 1997, Wells Fund X had sold
469,009 Class A Units and 146,095 Class B Units and had net offering proceeds of
$4,982,340 available for Investment in Properties.  Wells Fund X owns an
interest in the Knoxville Joint Venture.

     THE INFORMATION SET FORTH ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF
RESULTS TO BE EXPECTED FROM THE COMPANY.

     The foregoing properties in which the Prior Wells Public Programs have
invested have all been acquired and developed on an all cash basis.

    
     The Advisor is the general partner of Wells Partners L.P., which is a
general partner of the Operating Partnership, which is a general partner of
Wells Fund IV, Wells Fund V, Wells Fund VI, Wells Fund VII, Wells Fund VIII,
Wells Fund IX, Wells Fund X and Wells Fund XI.  The Advisor is a general partner
of Wells Fund I, Wells Fund II, Wells Fund II-OW and Wells Fund III.  Leo F.
Wells, III, the President and a      

                                       31

<PAGE>
 
Director of the Company, is a general partner in each of the Prior Wells Public
Programs and the sole shareholder and Director of Wells Real Estate Funds, Inc.,
the parent corporation of the Advisor.

     Potential investors are encouraged to examine the Prior Performance Tables
attached as Exhibit A hereto for more detailed information regarding the prior
experience of the Advisor.  In addition, upon request, prospective investors may
obtain from the Advisor without charge copies of offering materials and any
reports prepared in connection with any of the Prior Wells Public Programs,
including a copy of the most recent Annual Report on Form 10-K filed with the
Commission.  For a reasonable fee, the Company will also furnish upon request
copies of the exhibits to any such Form 10-K.  Any such request should be
directed to the Advisor.  Additionally, Table VI contained in Part II of the
Registration Statement (which is not part of this Prospectus) gives certain
additional information relating to properties acquired by the Prior Wells Public
Programs.  The Company will furnish, without charge, copies of such table upon
request.

                                  MANAGEMENT

GENERAL

     The Company will operate under the direction of the Board of Directors, the
members of which are accountable to the Company as fiduciaries.  As required by
applicable regulations, a majority of the Independent Directors and a majority
of the Directors have reviewed and ratified the Articles of Incorporation and
have adopted the Bylaws.

    
     The Company currently has five Directors; it may have no fewer than three
Directors and no more than fifteen.  Directors will be elected annually, and
each Director will hold office until the next annual meeting of stockholders or
until his successor has been duly elected and qualified.  There is no limit on
the number of times that a Director may be elected to office.  Although the
number of Directors may be increased or decreased as discussed above, a decrease
shall not have the effect of shortening the term of any incumbent Director.     

     Any Director may resign at any time and may be removed with or without
cause by the stockholders upon the affirmative vote of at least a majority of
all the Shares outstanding and entitled to vote at a meeting called for this
purpose.  The notice of such meeting shall indicate that the purpose, or one of
the purposes, of such meeting is to determine if a Director shall be removed.

FIDUCIARY RESPONSIBILITY OF THE BOARD OF DIRECTORS

     The Board of Directors will be responsible for the management and control
of the affairs of the Company; however, the Board of Directors will retain the
Advisor to manage the Company's day-to-day affairs and the acquisition and
disposition of investments, subject to the supervision of the Board of
Directors.

     The Directors are not required to devote all of their time to the Company
and are only required to devote such of their time to the affairs of the Company
as their duties require.  The Board of Directors will meet quarterly in person
or by telephone, or more frequently if necessary.  It is not expected that the
Directors will be required to devote a substantial portion of their time to
discharge their duties as directors.  Consequently, in the exercise of their
fiduciary responsibilities, the Directors will rely heavily on the Advisor.  In
this regard, the Advisor, in addition to the Directors, will have a fiduciary
duty to the Company.

    
     The Directors will monitor the administrative procedures, investment
operations, and performance of the Company and the Advisor to assure that such
policies are in the best interest of the stockholders and are fulfilled.  Until
modified by the Directors, the Company will follow the policies on investments
set forth in this Prospectus.  See "Investment Objectives and Policies."     

                                       32

<PAGE>
 
     The Independent Directors are responsible for reviewing the fees and
expenses of the Company at least annually or with sufficient frequency to
determine that the total fees and expenses of the Company are reasonable in
light of the Company's investment performance, Net Assets, Net Income, and the
fees and expenses of other comparable unaffiliated real estate investment
trusts.  This determination shall be reflected in the minutes of the meetings of
the Board of Directors.  For purposes of this determination, Net Assets are the
Company's total assets (other than intangibles), calculated at cost before
deducting depreciation or other non-cash reserves, less total liabilities, and
computed at least quarterly on a basis consistently applied.  Such determination
will be reflected in the minutes of the meetings of the Board of Directors.  In
addition, a majority of the Independent Directors and a majority of Directors
not otherwise interested in the transaction must approve each transaction with
the Advisor or its Affiliates.  The Board of Directors also will be responsible
for reviewing and evaluating the performance of the Advisor before entering into
or renewing an advisory agreement.  The Independent Directors shall determine
from time to time and at least annually that compensation to be paid to the
Advisor is reasonable in relation to the nature and quality of services to be
performed and shall supervise the performance of the Advisor and the
compensation paid to it by the Company to determine that the provisions of the
Advisory Agreement are being carried out.  Specifically, the Independent
Directors will consider factors such as the amount of the fee paid to the
Advisor in relation to the size, composition and performance of the Company's
investments, the success of the Advisor in generating appropriate investment
opportunities, rates charged to other comparable REITs and other investors by
advisors performing similar services, additional revenues realized by the
Advisor and its Affiliates through their relationship with the Company, whether
paid by the Company or by others with whom the Company does business, the
quality and extent of service and advice furnished by the Advisor, the
performance of the investment portfolio of the Company and the quality of the
portfolio of the Company relative to the investments generated by the Advisor
for its own account.  Such review and evaluation will be reflected in the
minutes of the meetings of the Board of Directors.  The Board of Directors shall
determine that any successor Advisor possesses sufficient qualifications to (i)
perform the advisory function for the Company and (ii) justify the compensation
provided for in its contract with the Company.

    
     The liability of the officers and Directors while serving in such capacity
is limited in accordance with the Articles of Incorporation and applicable law.
See "Description of Capital Stock -- Limitation of Liability and
Indemnification."     

DIRECTORS AND EXECUTIVE OFFICERS

     The Directors and executive officers of the Company are listed below:

    

<TABLE>
<CAPTION>
Name                           Age      Positions                              
- ----                           ---      ---------                              
<S>                            <C>      <C>                                    
Leo F. Wells, III              52       President and Director                 
Brian M. Conlon                39       Executive Vice President and Director  
[Director to be named]                  Independent Director                   
[Director to be named]                  Independent Director                   
[Director to be named]                  Independent Director                    
</TABLE>

     

     LEO F. WELLS, III is the President and a Director of the Company and the
President and sole Director of the Advisor.  He is also the sole shareholder and
Director of Wells Real Estate Fund, Inc., the parent corporation of the Advisor.
In addition, he is President of Wells & Associates, Inc., a real estate
brokerage and investment company formed in 1976 and incorporated in 1978, for
which he serves as principal broker.  He is also the sole Director and President
of Wells Management Company, Inc., a property management company he founded in
1983; the Dealer Manager, a registered securities broker-dealer he formed in
1984; and Wells Advisors, Inc., a company he organized in 1991 to act as a non-
bank custodian for IRAs.  Mr. Wells was a real estate salesman and property
manager from 1970 to 1973 for Roy D. Warren & Company, an Atlanta real estate
company, and he was associated from 1973 to 1976 with Sax Gaskin Real Estate
Company, during which time he became a Life Member of the Atlanta Board of
Realtors Million Dollar Club.  From 1980 to February 1985, he served as Vice
President of 

                                       33

<PAGE>
 
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business.
Mr. Wells holds a Bachelor of Business Administration degree in Economics from
the University of Georgia. Mr. Wells is a member of the International
Association for Financial Planning and a registered NASD principal.

    
     Mr. Wells has over 25 years of experience in real estate sales, management
and brokerage services.  He is currently a co-general partner in a total of 26
real estate limited partnerships formed for the purpose of acquiring, developing
and operating office buildings and other commercial properties, a majority of
which are located in suburban areas of metropolitan Atlanta, Georgia.  As of
March 31, 1997, these 23 real estate limited partnerships represented
investments totaling $255,433,723 from 23,741 investors.  See "Prior Performance
Summary."     

     BRIAN M. CONLON is the Executive Vice President and a Director of the
Company.  He also serves in the same capacity for the Advisor.  Mr. Conlon
joined the Advisor in 1985 as a Regional Vice President, and served as Vice
President and National Marketing Director from 1991 until April 1996 when he
assumed his current position.  Previously, Mr. Conlon was Director of Business
Development for Tishman Midwest Management & Leasing Services Corp. where he was
responsible for marketing the firm's property management and leasing services to
institutions.  Mr. Conlon also spent two years as an Investment Property
Specialist with Carter & Associates where he specialized in acquisitions and
dispositions of office and retail properties for institutional clients.  Mr.
Conlon received a Bachelor of Business Administration degree from Georgia State
University and a Master of Business Administration degree from the University of
Dallas.  Mr. Conlon is a member of the International Association for Financial
Planning (IAFP), a general securities principal and a Georgia real estate
broker.  Mr. Conlon also holds the certified commercial investment member (CCIM)
designation of the Commercial Investment Real Estate Institute and the certified
financial planner (CFP) designation of the Certified Financial Planner Board of
Standards, Inc.

     [INDEPENDENT DIRECTOR BIOGRAPHIES TO BE ADDED.]

COMMITTEES

     The Audit Committee will consist of a majority of Independent Directors.
If the Listing occurs, the Audit Committee will consist entirely of Independent
Directors.  The Audit Committee will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans and results of the audit engagement, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Company's internal accounting controls.

     In the event that the Listing occurs, the Board of Directors will establish
a Compensation Committee, which will oversee the compensation of the Company's
executive officers and which will consist of three Independent Directors.

     The Company may from time to time form other committees as circumstances
warrant.  Such committees will have authority and responsibility as delegated by
the Board of Directors.  At least a majority of the members of each committee of
the Board of Directors will be Independent Directors.

COMPENSATION OF DIRECTORS AND OFFICERS

     The Board of Directors shall determine the amount of compensation to be
received by each non-employee director for serving on the Board of Directors.
Such compensation, including fees for attending meetings, will not exceed $7,500
annually.  The Company will not pay any compensation to officers and directors
of the Company who also serve as officers and directors of the Advisor.

                                       34

<PAGE>
 
                    THE ADVISOR AND THE ADVISORY AGREEMENT

THE ADVISOR

    
     The Advisor is a Georgia corporation organized in 1984.  The Company has
entered into the Advisory Agreement effective as of the date hereof.  The
Advisor has a fiduciary responsibility to the Company and its stockholders.     

     The directors and officers of the Advisor are as follows:


     Leo F. Wells, III         President and sole Director

     Brian M. Conlon           Executive Vice President

     Louis A. Trahant          Vice President of Sales and Operations

     Kim R. Comer              National Vice President of Marketing

     Edna B. King              Vice President of Investor Services

     Linda L. Carson           Vice President of Accounting

    
     The backgrounds of Messrs. Wells and Conlon are described above under
"Management--Directors and Executive Officers."     

    
     LOUIS A. TRAHANT (age 51) is Vice President of Sales and Operations for the
Advisor.  He is responsible for the internal sales support provided to regional
vice presidents and to registered representatives of broker-dealers
participating in other public offerings by the Wells Prior Public Program.  Mr.
Trahant is also responsible for statistical analysis of sales-related
activities, development of office and communication systems, and hiring of
administrative personnel.  Mr. Trahant joined the Advisor in 1993 as Vice
President for Marketing of the Southern Region and assumed his current position
in 1995.  Prior to joining the Advisor, Mr. Trahant had extensive sales and
marketing experience in the commercial lighting industry.  He is a graduate of
Southeastern Louisiana University, a member of the International Association for
Financial Planning (IAFP) and the American Management Association, and holds a
Series 22 license.     

    
     KIM R. COMER (age 43) rejoined the Advisor as National Vice President of
Marketing in April 1997, after working for the Company in similar capacities
from January 1992 through September 1995.  He is responsible for all investor,
financial advisor, and broker-dealer communications and broker-dealer relations.
In prior positions with the Advisor, Mr. Comer served as Vice President of
Marketing for the southeast and northeast regions at the Advisor's' home office.
He has ten years of experience in the securities industry and is a licensed
registered representative and financial principal with the NASD.  Additionally,
he brings strong financial experience to his marketing position with the
Advisor, including experience as controller and Chief Financial Officer of two
regional broker-dealers.  In 1976, Mr. Comer graduated with honors from Georgia
State University with a BBA degree in accounting.     

    
     EDNA B. KING (age 60) is the Vice President of Investor Services for the
Advisor.  She is responsible for processing new investments, sales reporting,
and investor communications.  Prior to joining the Advisor in 1985, Ms. King
served as the Southeast Service Coordinator for Beckman Instruments and as
office manager for a regional office of Commerce Clearing House.  Ms. King holds
an Associate Degree in Business Administration from DeKalb Community College in
Atlanta, Georgia, and has completed various courses at the University of North
Carolina at Wilmington.     

                                       35

<PAGE>
 
    
     LINDA L. CARSON (age 54) is Vice President of Accounting for the Advisor.
She is responsible for fund, property, and corporate accounting, SEC reporting
and coordination of the audit with its independent auditors.  Ms. Carson joined
The Advisor in 1989 as Staff Accountant, became Controller in 1991, and assumed
her current position in 1996.  Prior to joining the Advisor, Ms. Carson was an
accountant with an electrical distributor.  She is a graduate of City College of
New York and has completed additional accounting courses at Kennesaw State.  She
is a member of the National Society of Accountants.     

     The Advisor employs personnel, in addition to the directors and executive
officers listed above, who have extensive experience in selecting and managing
commercial properties similar to the Properties.

     The Advisor currently owns 20,000 OP Units, for which it contributed
$200,000 to the capital of the Operating Partnership.  The Advisor may not sell
these OP Units while the Advisory Agreement is in effect, although the Advisor
may transfer such OP Units to Affiliates.  Neither the Advisor, a Director, nor
any Affiliate may vote or consent on matters submitted to the stockholders
regarding removal of the Advisor, or any transaction between the Company and the
Advisor, Directors, or an Affiliate.  In determining the requisite percentage in
interest of Shares necessary to approve a matter on which the Advisor,
Directors, and any Affiliate may not vote or consent, any Shares owned by any of
them will not be included.

THE ADVISORY AGREEMENT

     Under the terms of the Advisory Agreement, the Advisor has responsibility
for the day-to-day operations of the Company, administers the Company's
bookkeeping and accounting functions, serves as the Company's consultant in
connection with policy decisions to be made by the Board of Directors, manages
the Company's properties and renders other services as the Board of Directors
deems appropriate.  The Advisor is subject to the supervision of the Company's
Board of Directors and has only such functions as are delegated to it.

     The Company will reimburse the Advisor for all of the costs it incurs in
connection with the services it provides to the Company, including, but not
limited to:  (i) Organizational and Offering Expenses, which are defined to
include expenses attributable to preparing the documents relating to this
Offering, the formation and organization of the Company, qualification of the
Shares for sale in the states, escrow arrangements, filing fees and expenses
attributable to the sale of the Shares, (ii) Selling Commissions, advertising
expenses, expense reimbursements, and legal and accounting fees, (iii) the
actual cost of goods and materials used by the Company and obtained from
entities not affiliated with the Advisor, including brokerage fees paid in
connection with the purchase and sale of securities, (iv) administrative
services (including personnel costs; provided, however that no reimbursement
shall be made for costs of personnel to the extent that such personnel perform
services in transactions for which the Advisor receives a separate fee), and (v)
Acquisition Expenses, which are defined to include expenses related to the
selection and acquisition of properties, at the lesser of actual cost or 90% of
the competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location.

    
     The Company shall not reimburse the Advisor at the end of any fiscal
quarter for operating expenses that, in the four consecutive fiscal quarters
then ended (the "Expense Year") exceed (the "Excess Amount") the greater of 2%
of Average Invested Assets or 25% of Net Income (the "2%/25% Guidelines") for
such year.  Any Excess Amount paid to the Advisor during a fiscal quarter shall
be repaid to the Company.  If there is an Excess Amount in any Expense Year and
the Independent Directors determine that such excess was justified, based on
unusual and nonrecurring factors which they deem sufficient, the Excess Amount
may be carried over and included in operating expenses in subsequent Expense
Years, and reimbursed to the Advisor in one or more of such years, provided that
operating expenses in any Expense Year, including any Excess Amount to be paid
to the Advisor, shall not exceed the 2%/25% Guidelines.  Within 60 days after
the end of any fiscal quarter of the Company for which total operating expenses
for the Expense Year exceed the 2%/25% Guidelines, there shall be sent to the
stockholders a written disclosure of such fact, together with an explanation of
the factors the Independent Directors considered in determining that such excess
expenses were justified.  Such determination shall be reflected in the minutes
of the meetings of the Board of Directors.     

                                       36

<PAGE>
 
     The Company will not reimburse the Advisor or its Affiliates for services
for which the Advisor or its Affiliates are entitled to compensation in the form
of a separate fee.

    
     Pursuant to the Advisory Agreement, the Advisor is entitled to receive
certain fees and reimbursements, as listed in "Management -- Management
Compensation."  The Subordinated Incentive Fee, which is payable to the Advisor
under certain circumstances if Listing occurs, may be paid, at the option of the
Company, in cash, in Shares, by delivery of a promissory note payable to the
Advisor, or by any combination thereof.  In the event the Subordinated Incentive
Fee is paid to the Advisor following Listing, no Performance Fee, as described
below, will be paid to the Advisor under the Advisory Agreement nor will any
share of Net Sales Proceeds be paid to the Advisor.  The Acquisition Fees
payable to the Advisor in connection with the selection or acquisition of any
property shall be reduced to the extent that, and if necessary to limit, the
total compensation paid to all persons involved in the acquisition of such
property to the amount customarily charged in arm's-length transactions by other
persons or entities rendering similar services as an ongoing public activity in
the same geographical location and for comparable types of properties, and to
the extent that other acquisition fees, finder's fees, real estate commissions,
or other similar fees or commissions are paid by any person in connection with
the transaction.     

     If the Advisor or an Affiliate performs services that are outside of the
scope of the Advisory Agreement, compensation will be at such rates and in such
amounts as are agreed to by the Advisor and the Independent Directors of the
Company.

     Further, if Listing occurs, the Company automatically will become a
perpetual life entity.  At such time, the Company and the Advisor will negotiate
in good faith a fee structure appropriate for an entity with a perpetual life,
subject to approval by a majority of the Independent Directors.  In negotiating
a new fee structure, the Independent Directors shall consider all of the factors
they deem relevant.  These are expected to include, but will not necessarily be
limited to:  (i) the amount of the advisory fee in relation to the asset value,
composition, and profitability of the Company's portfolio; (ii) the success of
the Advisor in generating opportunities that meet the investment objectives of
the Company; (iii) the rates charged to other REITs and to investors other than
REITs by advisors that perform the same or similar services; (iv) additional
revenues realized by the Advisor and its Affiliates through their relationship
with the Company, including loan administration, underwriting or broker
commissions, servicing, engineering, inspection and other fees, whether paid by
the Company or by others with whom the Company does business; (v) the quality
and extent of service and advice furnished by the Advisor; (vi) the performance
of the investment portfolio of the Company, including income, conservation or
appreciation of capital, and number and frequency of problem investments; and
(vii) the quality of the portfolio of the Company in relationship to the
investments generated by the Advisor for its own account.  The Board of
Directors, including a majority of the Independent Directors, may not approve a
new fee structure that, in its judgment, is more favorable to the Advisor than
the current fee structure.

     The Advisory Agreement, which was entered into by the Company with the
unanimous approval of the Board of Directors, including the Independent
Directors, expires one year after the date hereof, on _______, 1998, subject to
successive one-year renewals upon mutual consent of the parties.  In the event
that a new Advisor is retained, the previous Advisor has agreed to cooperate
with the Company and the Directors in effecting an orderly transition of the
advisory functions.  The Board of Directors (including a majority of the
Independent Directors) shall approve a successor Advisor only upon a
determination that such successor Advisor possesses sufficient qualifications to
perform the advisory functions for the Company and that the compensation to be
received by the new Advisor pursuant to the new Advisory Agreement is justified.

    
     The Advisory Agreement may be terminated without cause or penalty by either
party, or by the mutual consent of the parties (by a majority of the Independent
Directors of the Company or a majority of the directors of the Advisor, as the
case may be), upon 60 days' prior written notice.  At that time, the Advisor
shall be entitled to receive the Performance Fee (the "Performance Fee") if
performance standards satisfactory to a majority of the Board of Directors,
including a majority of the Independent Directors, when compared to (a) the
performance of the Advisor in comparison with its performance for other
entities, and (b) the performance of other advisors for similar entities, have
been met.  If Listing has not occurred, the Performance Fee, if any, shall equal
10% of the      

                                       37

<PAGE>
 
    
amount, if any, by which (i) the appraised value of the Company's properties on
the date of termination of the Advisory Agreement (the "Termination Date"), less
the amount of all indebtedness secured by such properties, plus the total
distributions made to stockholders from the Company's inception through the
Termination Date, exceeds (ii) the shareholders' Invested Capital plus an amount
equal to the Common Return, calculated as of the Termination Date. The Advisor
shall be entitled to receive all accrued but unpaid compensation and expense
reimbursements in cash within 30 days of the Termination Date. All other amounts
payable to the Advisor in the event of a termination shall be evidenced by a
promissory note and shall be payable from time to time. The Performance Fee
shall be paid in 12 equal quarterly installments without interest on the unpaid
balance, provided, however, that no payment will be made in any quarter in which
such payment would jeopardize the Company's REIT status, in which case any such
payment or payments will be delayed until the next quarter in which payment
would not jeopardize REIT status. Notwithstanding the preceding sentence, any
amounts which may be deemed payable at the date the obligation to pay the
Performance Fee is incurred which relate to the appreciation of the Company's
properties shall be an amount which provides compensation to the terminated
Advisor only for that portion of the holding period for the respective
properties during which such terminated Advisor provided services to the
Company. If Listing occurs, the Performance Fee, if any, payable thereafter will
be as negotiated between the Company and the Advisor. The Advisor shall not be
entitled to payment of the Performance Fee in the event the Advisory Agreement
is terminated because of failure of the Company and the Advisor to establish a
fee structure appropriate for a perpetual-life entity at such time, if any, as
the Listing occurs. The Performance Fee, to the extent payable at the time of
Listing, will not be paid in the event that the Subordinated Incentive Fee is
paid in connection with the Listing.     

     The Advisor has the right to assign the Advisory Agreement to an Affiliate
subject to approval by the Independent Directors of the Company.  The Company
has the right to assign the Advisory Agreement to any successor to all of its
assets, rights, and obligations.

     The Advisor will not be liable to the Company or its stockholders or
others, except by reason of acts constituting bad faith, fraud, misconduct, or
negligence, and will not be responsible for any action of the Board of Directors
in following or declining to follow any advice or recommendation given by it.
The Company has agreed to indemnify the Advisor with respect to acts or
omissions of the Advisor undertaken in good faith, in accordance with the
foregoing standards and pursuant to the authority set forth in the Advisory
Agreement.  Any indemnification made to the Advisor may be made only out of the
net assets of the Company and not from stockholders.

                               WELLS MANAGEMENT

    
     It is expected that substantially all of the Company's properties will be
managed by Wells Management Company, Inc. the Management Company.  The officers
of the Management Company are as follows:     

    

<TABLE>
     <S>                           <C>   
     Leo F. Wells, III             President

     Brian M. Conlon               Executive Vice President

     Michael C. Berndt             Vice President and Chief Financial Officer

     M. Scott Meadows              Vice President - Property Management

     Michael L. Watson             Vice President - Construction

     Robert H. Stroud              Vice President - Leasing
</TABLE>

     
     

                                       38

<PAGE>
 
    
     The backgrounds of Messrs. Wells and Conlon are described above under
"Management -- Directors and Executive Officers."     

    
     MICHAEL C. BERNDT (50), Vice President and Chief Financial Officer of the
Management Company, joined in 1996.  He is responsible for asset management of
the Prior Wells Public Program portfolios.  Mr. Berndt is an attorney and a
Certified Public Accountant.  From 1990 to 1995, Mr. Berndt was with the
Investigations Unit of the Resolution Trust Corporation.  From 1985 to 1989, Mr.
Berndt was an independent real estate syndicator.  From 1982 to 1985, he was
President of Phoenix Financial Corporation, an NASD broker-dealer.  Previously,
he served as an accountant, attorney and securities analyst for various firms.
Mr. Berndt holds a B.S. in Accounting from Samford University, a J.D. from
Cumberland Law School and an L.L.M. in Taxation from New York University School
of Law.     

    
     M. SCOTT MEADOWS (33) is Vice President of Property Management for the
Management Company.  He is responsible for overseeing a 1.8 million square foot
portfolio of office and retail properties.  Prior to joining the Management
Company, Mr. Meadows served as Senior Property Manager for The Griffin Company,
a full-service commercial real estate firm in Atlanta, where he was responsible
for managing a half million square foot office and retail portfolio.  He also
served several years as Property Management for Sea Pines Plantation Company,
managing real estate around Harbour Town.  Mr. Meadows received a Bachelor of
Business Administration degree from the University of Georgia.  He is a Georgia
real estate broker and holds the Real Property Administrator (RPA) designation
of the Building Owners and Managers Institute International.     

    
     MICHAEL WATSON (age 52) is Vice President of Construction for the
Management Company.  Mr. Watson is responsible for overseeing construction and
tenant improvement projects for the Prior Wells Public Programs, including
design, engineering, and progress-monitoring functions.  With more than 25 years
of experience in the construction industry, Mr. Watson has supervised projects
ranging from high rises to neighborhood shopping centers.  Prior to joining the
Management Company in 1995, he was senior project management with Abrams
Construction in Atlanta.  Mr. Watson received a Bachelor's degree in civil
engineering from the University of Miami and keeps up with current practices by
periodically enrolling in supplemental college courses.     

    
     ROBERT H. STROUD (age 56), Vice President of Leasing and Associate Broker
for Wells & Associates, Inc., joined the Management Company in 1987.  Mr. Stroud
is responsible for leasing Atlanta office and retail properties on behalf of the
Prior Wells Public Programs.  With more than 20 years in commercial and
investment real estate, Mr. Stroud is experienced in many facets of the real
estate industry, including site selection, tenant and landlord representation,
investment sales, and assemblage and property management.  Prior to joining the
Management Company, Mr. Stroud was investment properties consultant with Royal
LePage Commercial Real Estate Services.  He received a Bachelor's degree in
management from Georgia State University and earned the MCRE Commercial Real
Estate designation from the University of Toronto.     

                       INVESTMENT OBJECTIVES AND CRITERIA

GENERAL

     The Company is a corporation that intends to elect to be taxed as a REIT
for federal income tax purposes.  The Company was organized to invest in
commercial real properties, including properties which are under development or
construction, are newly constructed or have been constructed and have operating
histories.  The Company's objectives are: (i) to maximize Cash Available for
Distribution; (ii) to preserve, protect and return the Invested Capital of the
shareholders; (iii) to realize capital appreciation upon the ultimate sale of
the Company's properties; and (iv) to provide shareholders with liquidity of
their investment, within 10 years after commencement of the Offering, through
either (a) the listing of the Shares, or (b) if Listing does not occur within
ten years following the commencement of the Offering, the dissolution of the
Company and the orderly liquidation of its assets.  No assurance can be given
that these objectives will be attained.

                                       39

<PAGE>
 
    
     Decisions relating to the purchase or sale of the Company's properties will
be made by the Advisor, subject to the oversight of the Board of Directors.  See
"The Advisor and the Advisory Agreement" for a description of the background and
experience of the Advisor.     

ACQUISITION AND INVESTMENT POLICIES

    
     The Company will seek to invest substantially all of the net Offering
proceeds available for Investment in Properties in the acquisition of commercial
real properties, which are under development or construction, are newly
constructed or which have been previously constructed and have operating
histories.  While not limited to such investments, the Advisor will generally
seek to invest in commercial properties such as office buildings, shopping
centers and industrial properties which are less than five years old, the space
in which has been leased or preleased to one or more large corporate tenants who
satisfy the Advisor' standards of creditworthiness.  Based on the Advisor's
prior experience with the Prior Wells Public Programs, the Company anticipates
that a majority of the tenants of the Company's properties will be U.S.
corporations (or other entities) each of which has a net worth in excess of
$100,000,000 or whose lease obligations are guaranteed by another corporation or
entity with a net worth in excess of $100,000,000.  The Company may, however,
invest in office buildings, shopping centers or industrial properties which are
not preleased to such tenants or in other types of commercial or industrial
properties such as hotels, motels, restaurants or business or industrial parks.
Notwithstanding the foregoing, under the REIT qualification rules, the Company
may not be actively engaged in the business of operating hotels, motels or
similar properties.     

     While the Company will seek to invest in properties that will satisfy the
primary objective of providing distributions of current cash flow to investors,
due to the fact that a significant factor in the valuation of income-producing
real properties is their potential for future income, the Advisor anticipates
that the majority of properties acquired by the Company will satisfy both
attributes of providing potential for capital appreciation and providing
distributions of current cash flow to investors.  To the extent feasible, the
Advisor will strive to invest in a diversified portfolio of properties that will
satisfy the Company's investment objectives of maximizing Cash Available for
Distribution, preserving investors' capital and realizing capital appreciation
upon the ultimate sale of the Company's properties.

    
     It is anticipated that approximately 84% of the Gross Proceeds of the
Offering will be used to acquire properties and the balance will be used to pay
various fees and expenses.  See "Estimated Use of Proceeds."     

     Investment in unimproved or non-income producing property may not exceed
10% of the Company's total assets.  A property which is expected to produce
income within two years of its acquisition will not be considered a non-income
producing property.

    
     Investment in property generally will take the form of fee title or of a
leasehold estate having a term, including renewal periods, of at least 40 years,
and may be made either directly or indirectly through investments in joint
ventures, general partnerships, co-tenancies or other co-ownership arrangements
with the developers of the properties, Affiliates of the Advisor or other
persons.  See "Joint Venture Investments" below.  In addition, the Company may
purchase properties and lease them back to the sellers of such properties.
While the Advisor will use its best efforts to structure any such sale-leaseback
transaction such that the lease will be characterized as a "true lease" and so
that the Company will be treated as the owner of the property for federal income
tax purposes, no assurance can be given that the Service will not challenge such
characterization.  In the event that any such sale-leaseback transaction is
recharacterized as a financing transaction for federal income tax purposes,
deductions for depreciation and cost recovery relating to such property would be
disallowed or significantly reduced.  See "Federal Income Tax 
Considerations."     

     The Company is not limited as to the geographic area where it may conduct
its operations, but the Advisor intends to cause the Company to invest primarily
in properties located in the United States.

                                       40

<PAGE>
 
     There are no specific limitations on the number or size of properties to be
acquired by the Company or on the percentage of net proceeds of this Offering
which may be invested in a single property.  The number and mix of properties
acquired will depend upon real estate and market conditions and other
circumstances existing at the time the Company is acquiring its properties and
the amount of the net proceeds of this Offering.

     In making investment decisions for the Company, the Advisor will consider
relevant real property and financial factors, including the location of the
property, its suitability for any development contemplated or in progress, its
income-producing capacity, the prospects for long-range appreciation, its
liquidity and income tax considerations.  In this regard, the Advisor will have
substantial discretion with respect to the selection of specific Company
investments.

     The Company will obtain independent appraisals for each property in which
it invests, and the purchase price of each such property will not exceed its
appraised value.  However, the Advisor and the Board of Directors will rely on
their own independent analysis and not on such appraisals in determining whether
to invest in a particular property.  It should be noted that appraisals are
estimates of value and should not be relied upon as measures of true worth or
realizable value.  Copies of these appraisals will be available for review and
duplication by shareholders at the office of the Company and will be retained
for at least five years.

     The Company's obligation to close the purchase of any investment will
generally be conditioned upon the delivery and verification of certain documents
from the seller or developer, including, where appropriate, plans and
specifications, environmental reports, surveys, evidence of marketable title
(subject only to such liens and encumbrances as are acceptable to the Advisor),
audited financial statements covering recent operations of any properties having
operating histories (unless such statements are not required to be filed with
the Securities and Exchange Commission and delivered to investors), title and
liability insurance policies and opinions of counsel in certain circumstances.
The Company will not close the purchase of any property unless and until it
obtains an environmental assessment (a minimum of a Phase I review) for each
property purchased and the Advisor is generally satisfied with the environmental
status of the property.

     The Company may also enter into arrangements with the seller or developer
of a property whereby the seller or developer agrees that if during a stated
period the property does not generate a specified cash flow, the seller or
developer will pay in cash to the Company a sum necessary to reach the specified
cash flow level, subject in some cases to negotiated dollar limitations.

     In determining whether to purchase a particular property, the Company may,
in accordance with customary practices, obtain an option on such property.  The
amount paid for an option, if any, is normally surrendered if the property is
not purchased and is normally credited against the purchase price if the
property is purchased.

    
     In purchasing, leasing and developing real properties, the Company will be
subject to risks generally incident to the ownership of real estate, including
changes in general economic or local conditions, changes in supply of or demand
for similar or competing properties in an area, changes in interest rates and
availability of permanent mortgage funds which may render the sale of a property
difficult or unattractive, and changes in tax, real estate, environmental and
zoning laws.  Periods of high interest rates and tight money supply may make the
sale of properties more difficult.  The Company may experience difficulty in
keeping the properties fully leased due to tenant turnover, general overbuilding
or excess supply in the market area.  Development of real properties is subject
to risks relating to the builders' ability to control construction costs or to
build in conformity with plans, specifications and timetables.  See "Risk
Factors -- Real Estate Risks."     

DEVELOPMENT AND CONSTRUCTION OF PROPERTIES

     The Company may invest substantially all of the net proceeds available for
Investment in Properties on which improvements are to be constructed or
completed although the Company may not invest in excess of 10% of total assets
in properties which are not expected to produce income within two years of their
acquisition.  To help 

                                       41

<PAGE>
 
ensure performance by the builders of properties which are under construction,
completion of properties under construction, the Advisor may rely upon the
substantial net worth of the contractor or developer or a personal guarantee
accompanied by financial statements showing a substantial net worth provided by
an Affiliate of the person entering into the construction or development
contract, or, in certain circumstances, the Advisor may require an adequate
completion bond or performance bond.

     The Company may make periodic progress payments or other cash advances to
developers and builders of its properties prior to completion of construction
only upon receipt of an architect's certification as to the percentage of the
project then completed and as to the dollar amount of the construction then
completed.  The Company intends to use such additional controls on its
disbursements to builders and developers as it deems necessary or prudent.

     The Company may directly employ one or more project managers to plan,
supervise and implement the development of any unimproved properties which it
may acquire.  Such persons would be compensated directly by the Company and,
other than through such employment, will not be affiliated with the Advisor.

    
TERMS OF LEASES AND LESSEE CREDITWORTHINESS     

    
     The terms and conditions of any lease entered into by the Company with
regard to a tenant may vary substantially from those described herein.  However,
a majority of leases are expected to be what is generally referred to as "triple
net" leases, which means that the lessee will be required to pay or reimburse
the Company for all real estate taxes, sales and use taxes, special assessments,
utilities, insurance and building repairs as well as lease payments.     

     The Advisor has developed specific standards for determining the
creditworthiness of potential lessees of Company Properties.  While authorized
to enter into leases with any type of lessee, the Advisor anticipates that a
majority of the tenants of the Company Properties will be top U.S. corporations
or other entities each of which has a net worth in excess of $100,000,000 or
whose lease obligations are guaranteed by another corporation or entity with a
net worth in excess of $100,000,000.

BORROWING POLICIES

    
     The Company may incur indebtedness in connection with the development or
acquisition of properties, which indebtedness may be secured by one or more of
the Company's properties.  The Company also may borrow funds (a) for Company
operating purposes in the event of unexpected circumstances in which the
Company's working capital reserves and other cash resources available to the
Company become insufficient for the maintenance and repair of its properties or
for the protection or replacement of the Company's assets, and (b) in order to
finance improvement of and improvements to its properties, when the Advisor
deems such improvements to be necessary or appropriate to protect the capital
previously invested in the properties, to protect the value of the Company's
investment in a particular property, or to make a particular property more
attractive for sale or lease.  The aggregate borrowing of the Company, secured
and unsecured, shall be reasonable in relation to Net Assets of the Company and
shall be reviewed by the Board of Directors at least quarterly.  Such
indebtedness may be in the form of secured and unsecured bank borrowings, and
publicly and privately placed debt offerings.  Borrowings may be incurred
through either the Operating Partnership or the Company.  The Board of Directors
anticipates that the aggregate amount of any borrowing will not exceed 50% of
Real Estate Asset Value, provided, however, that such level may be exceeded on
an individual property basis.  Any excess in borrowing over such 50% level shall
occur only with approval by a majority of the Independent Directors and will be
disclosed and explained to stockholders in the first quarterly report of the
Company prepared after such approval occurs.     

    
     The Company may borrow funds from the Advisor or their Affiliates in such
situations only if the following qualifications are met: (a) any such borrowing
cannot constitute a "financing" as that term is defined under the NASAA
Guidelines, i.e., all indebtedness encumbering Company Properties or incurred by
the Company, the principal amount of which is scheduled to be paid over a period
of not less than 48 months, and not      

                                       42

<PAGE>
 
more than 50% of the principal amount of which is scheduled to be paid during
the first 24 months; (b) interest and other financing charges or fees must not
exceed the amounts which would be charged by unrelated lending institutions on
comparable financing for the same purpose in the same locality as the Company's
principal place of business; and (c) no prepayment charge or penalty shall be
required.

JOINT VENTURE INVESTMENTS

    
     The Company is likely to enter into one or more joint ventures with
Affiliated entities for the acquisition, development or improvement of
properties, under the conditions described below.  The Company may invest some
or all of the proceeds of the Offering in such joint ventures.  In this
connection, the Company may enter into joint ventures with future programs
sponsored by the Advisor or its Affiliates or Prior Wells Public Programs.  The
Advisor also has the authority to enter into joint ventures, general
partnerships, co-tenancies and other participations with real estate developers,
owners and others for the purpose of developing, owning and operating properties
in accordance with the Company's investment policies.  See "Risk Factors" and
"Conflicts of Interest."  In determining whether to invest in a particular joint
venture, the Advisor will evaluate the real property which such joint venture
owns or is being formed to own under the same criteria described herein for the
selection of real property investments of the Company.  See " -- Acquisition and
Investment Policies," " -- Development and Construction of Properties," " --
Terms of Leases and Lessee Creditworthiness," and " -- Borrowing Policies."     

     At such time as the Advisor believes that a reasonable probability exists
that the Company will enter into a joint venture with a Prior Wells Public
Program for the acquisition or development of a specific material property, this
Prospectus will be supplemented to disclose the terms of such proposed
investment transaction.  Based upon the Advisor's experience, in connection with
the development of a property which is currently owned by a Prior Wells Public
Program, this would normally occur upon the signing of legally binding leases
with one or more major tenants for commercial space to be developed on such
property, but may occur before or after any such signing, depending upon the
particular circumstances surrounding each potential investment.  It should be
understood that the initial disclosure of any such proposed transaction cannot
be relied upon as an assurance that the Company will ultimately consummate such
proposed transaction nor that the information provided in any such supplement to
this Prospectus concerning any such proposed transaction will not change after
the date of the supplement.

    
     The Company may enter into a partnership, joint venture or co-tenancy with
unrelated parties if (i) the management of such partnership, joint venture or
co-tenancy is under the control of the Company; (ii) the Company, as a result of
such joint ownership or partnership ownership of a property, is not charged,
directly or indirectly, more than once for the same services; (iii) the joint
ownership, partnership or co-tenancy agreement does not authorize or require the
Company to do anything as a partner, joint venturer or co-tenant with respect to
the property which the Company or the Advisor could not do directly because of
the Company Agreement; and (iv) the Advisor and its Affiliates are prohibited
from receiving any compensation, fees or expenses which are not permitted to be
paid under the Advisory Agreement.  In the event that any such co-ownership
arrangement contains a provision giving each party a right of first refusal to
purchase the other party's interest, the Company may not have sufficient capital
to finance any such buy-out.  See "Risk Factors."     

     The Company intends to enter into joint ventures with other publicly
registered Affiliated entities for the acquisition of properties, but may only
do so provided that (i) each such co-venturer has substantially identical
investment objectives as those of the Company; (ii) the Company, as a result of
such joint ownership or partnership ownership of a property, is not charged,
directly or indirectly, more than once for the same services; (iii) compensation
payable to the Company by such Affiliate is substantially identical to that
payable to the Advisor by the Company; (iv) the Company will have a right of
first refusal to buy if such co-venturer elects to sell its interest in the
property held by the joint venture; and (v) the investment by the Company and
such Affiliate are on substantially the same terms and conditions, and each such
entity's ownership interest in such joint venture or partnership shall be based
upon the respective proportion of funds invested in such joint venture or
partnership by the Company and such Affiliate.  In the event that the co-
venturer were to elect to sell property held in any such 

                                       43

<PAGE>
 
    
joint venture, however, the Company may not have sufficient funds to exercise
its right of first refusal to buy the other co-venturer's interest in the
property held by the joint venture. In the event that any joint venture with an
Affiliated entity holds interests in more than one property, the interest in
each such property may be specially allocated based upon the respective
proportion of funds invested by each co-venturer in each such property. Entering
into such joint ventures with Affiliated entities will result in certain
conflicts of interest. See "Risk Factors" and "Conflicts of Interest -- Joint
Ventures with Affiliates of the Advisor."     

OTHER POLICIES

    
     The Company will not invest as a limited partner in limited partnerships.
The Company may in the future issue senior securities.  The Company may,
pursuant to the Reinvestment Plan, repurchase or otherwise reacquire its common
stock.     

     Except in connection with sales of properties by the Company where purchase
money obligations may be taken by the Company as partial payment, the Company
will not make loans to any person, nor will the Company underwrite securities of
other issuers, in exchange for property, or invest in securities of other
issuers for the purpose of exercising control.  Notwithstanding the foregoing,
the Company may invest in joint ventures or partnerships as described above and
in a corporation where real estate is the principal asset and its acquisition
can best be effected by the acquisition of the stock of such corporation,
subject to the limitations set forth below.

     The Company will not: (i) make investments in real estate mortgages (except
in connection with the sale or other disposition of a property); (ii) make loans
to the Advisor or its Affiliates; (iii) invest in or underwrite the securities
of other issuers, including any publicly offered or traded limited partnership
interests, except for investments in joint ventures as described herein and
except for permitted temporary investments pending utilization of Company funds,
provided that following one year after the commencement of operations of the
Company no more than 45% of the value of the Company's total assets (exclusive
of Government securities and cash items) will consist of, and no more than 45%
of the Company's net income after taxes (for the last four fiscal quarters
combined) will be derived from, securities other than (A) Government securities,
or (B) securities in a corporation where real estate is the principal asset and
the acquisition of such real estate can best be effected by the acquisition of
the stock of such corporation, provided that any such corporation is either (x)
a corporation which is a majority owned subsidiary of the Company and which is
not an investment company as defined by the Investment Company Act of 1940, as
amended, or (y) a corporation which is controlled primarily by the Company,
through which corporation the Company engages in the business of acquisition and
operation of real estate and which is not an investment company.

                           REAL PROPERTY INVESTMENTS

     As of the date of this Prospectus, the Company has not acquired nor
contracted to acquire any specific real properties.  The Advisor is continually
evaluating various potential property investments and engaging in discussions
and negotiations with sellers, developers and potential tenants regarding the
purchase and development of properties for the Company and prior programs.  At
such time during the negotiations for a specific property as the Advisor
believes that a reasonable probability exists that the Company will acquire such
property, this Prospectus will be supplemented to disclose the negotiations and
pending acquisition.  Based upon the Advisor's experience and acquisition
methods, this will normally occur on the signing of a legally binding purchase
agreement for the acquisition of a specific property, but may occur before or
after such signing or upon the satisfaction or expiration of major contingencies
in any such purchase agreement, depending on the particular circumstances
surrounding each potential investment.  A supplement to this Prospectus will
describe any improvements proposed to be constructed thereon and other
information considered appropriate for an understanding of the transaction.
Further data will be made available after any pending acquisition is
consummated, also by means of a supplement to this Prospectus, if appropriate.
IT SHOULD BE UNDERSTOOD THAT THE INITIAL DISCLOSURE OF ANY PROPOSED ACQUISITION
CANNOT BE RELIED UPON AS AN ASSURANCE THAT THE COMPANY WILL ULTIMATELY
CONSUMMATE SUCH PROPOSED 

                                       44

<PAGE>
 
ACQUISITION NOR THAT THE INFORMATION PROVIDED CONCERNING THE PROPOSED
ACQUISITION WILL NOT CHANGE BETWEEN THE DATE OF SUCH SUPPLEMENT AND ACTUAL
PURCHASE.

     It is intended that the proceeds of this Offering will be invested in
properties in accordance with the Company's investment policies.  Funds
available for Investment in Properties which are not expended or committed to
the acquisition or development of specific real properties on or before the
later of the second anniversary of the effective date of the Registration
Statement or one year after the termination of the Offering and not reserved for
working capital purposes will be returned to the shareholders.

     The Company intends to obtain adequate insurance coverage for all
properties in which it invests.

                              DISTRIBUTION POLICY

    
REIT STATUS     

    
     In order to qualify as a REIT for federal income tax purposes, among  other
things, the Company must make distributions each taxable year (not including any
return of capital for federal income tax purposes) equal to at least 95% of its
real estate investment trust taxable income, although the Board of Directors, in
its discretion, may increase that percentage as it deems appropriate.  See
"Federal Income Tax Considerations -- Requirements for Qualification."  The
declaration of distributions is within the discretion of the Board of Directors
and depends upon the Company's Cash Available for Distribution, current and
projected cash requirements, tax considerations and other factors.     

     The Company intends to make regular quarterly distributions to holders of
the Shares.  Distributions will be made to those stockholders who are
stockholders as of the record date selected by the Directors.  Distributions
will be declared monthly and paid on a quarterly basis during the Offering
period and declared and paid quarterly thereafter.  Generally, income
distributed to stockholders will not be taxable to the Company under federal
income tax laws if the Company distributes at least 95% of its annual taxable
income.  If Cash Available for Distribution is insufficient to pay such
distributions, the Company may obtain the necessary funds by borrowing, issuing
new securities, or selling assets.  These methods of obtaining funds could
affect future distributions by increasing operating costs.  To the extent that
distributions to stockholders exceed the Company's current and accumulated
earnings and profits, such amounts will constitute a return of capital for
federal income tax purposes, although such distributions will not reduce
stockholders' aggregate Invested Capital.

     Distributions will be made at the discretion of the Directors, depending
primarily on Cash Available for Distribution and the general financial condition
of the Company, subject to the obligation of the Directors to cause the Company
to qualify and remain qualified as REIT for federal income tax purposes.  The
Company intends to increase distributions in accordance with increases in Cash
Available for Distribution.

    
STOCK DIVIDENDS     

    
     In addition to the distributions of cash set forth above, the Board of
Directors may, in its sole discretion and from time to time, declare dividends
of Common Stock payable in respect of the then-outstanding shares of Common
Stock of the Company.  However, there can be no assurances that such stock
dividends will be ever be declared.     

                                       45

<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF

    
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS     

    
     As of the date of this Prospectus, the Company had not yet commenced active
operations.  Subscription proceeds may be released to the Company as accepted
and applied to investment in properties and the payment or reimbursement of
Selling Commissions and other Organization and Offering Expenses.  See
"Estimated Use of Proceeds."  The Company will experience a relative increase in
liquidity as additional subscriptions for Shares are received, and a relative
decrease in liquidity as net Offering proceeds are expended in connection with
the acquisition, development and operation of properties.     

    
     As of the initial date of this Prospectus, the Company has not entered into
any arrangements creating a reasonable probability that any specific property
will be acquired by the Company.  The number of Company Properties to be
acquired by the Company will depend upon the number of Shares sold and the
resulting amount of the net proceeds available for investment in properties
available to the Company.  See "Risk Factors."     

     The Company is not aware of any material trends or uncertainties, favorable
or unfavorable, other than national economic conditions affecting real estate
generally, which may be reasonably anticipated to have a material impact on
either capital resources or the revenues or income to be derived from the
operation of the Company's properties.

     Until required for the acquisition, development or operation of properties,
net Offering proceeds will be kept in short-term, liquid investments.  Because
the vast majority of leases for the properties acquired by the Company will
provide for tenant reimbursement of operating expenses, it is not anticipated
that a permanent reserve for maintenance and repairs of Company properties will
be established.  However, to the extent that the Company has insufficient funds
for such purposes, the Advisor may contribute to the Company an aggregate amount
of up to 1% of Gross Offering Proceeds for maintenance and repairs of the
Company's properties.  The Advisor also may, but is not required to, establish
reserves from Gross Offering Proceeds, out of cash flow generated by operating
properties or out of Nonliquidating Net Sale Proceeds.

                          DESCRIPTION OF CAPITAL STOCK

    
     Under its Articles of Incorporation, the Company has authority to issue
common stock, $.01 par value per share (the "Common Stock"), and 5,000,000
shares are preferred stock, $.01 par value per share (the "Preferred 
Stock").     

COMMON STOCK

    
     The holders of Shares are entitled to one vote per share on all matters
voted on by shareholders, including elections of directors.  Except as otherwise
required by law or provided in any resolution adopted by the Board of Directors
with respect to any series of Preferred Stock, the holders of such shares
exclusively possess all voting power.  The Articles of Incorporation do not
provide for cumulative voting in the election of directors.  Subject to any
preferential rights of any outstanding series of Preferred Stock, the holders of
Shares are entitled to such dividends as may be declared from time to time by
the Board of Directors from funds available therefor, and upon liquidation are
entitled to receive pro rata all assets of the Company available for
distribution to such holders.  All Shares issued in the Offering will be fully
paid and nonassessable and the holders thereof will not have preemptive 
rights.     

    
PREFERRED STOCK     

    
     The Articles of Incorporation authorize the Board of Directors to designate
and issue from time to time one or more classes or series of Preferred Shares
without stockholder approval.  The Board of Directors may determine the relative
rights, preferences and privileges of each class or series of Preferred Stock 
so     

                                       46

<PAGE>
 
    
issued, which may be more beneficial than those of the Common Stock.  However,
the voting rights for each share of Preferred Stock shall not exceed voting
rights of the Common Stock.  The issuance of Preferred Stock could have the
effect of delaying or preventing a change in control of the Company.  The Board
of Directors has no present plans to issue any Preferred Stock, but may
nevertheless do so in the future.     

SOLICITING DEALER WARRANTS

    
     The Company has agreed to issue and sell, and the Dealer Manager has agreed
to purchase for the price of $.0008 per warrant, warrants (the "Soliciting
Dealer Warrants") to purchase one Share per Soliciting Dealer Warrant equal to
2.5% of the total number of Shares sold by the Dealer Manager (and/or the
Soliciting Dealers) up to a maximum of 375,000 Soliciting Dealer Warrants.  The
Soliciting Dealer Warrants will be issued on a quarterly basis commencing 60
days after the date on which the Shares are first sold pursuant to this
Offering.  The Dealer Manager may retain or reallow all Soliciting Dealer
Warrants to the Soliciting Dealers, unless such issuance of the Soliciting
Dealer Warrants is prohibited by either federal or state securities laws.  The
Soliciting Dealer Warrants to be issued in connection with this Offering, as
well as the Shares issuable upon exercise of the Soliciting Dealer Warrants, are
being registered as part of this Offering.     

    
     Each Soliciting Dealer will receive from the Dealer Manager one Soliciting
Dealer Warrant for each 40 Shares sold by such Soliciting Dealer during this
Offering.  All Shares sold by the Company other than through the Reinvestment
Plan will be included in the computation of the number of Shares sold to
determine the number of Soliciting Dealer Warrants to be issued.  The holder of
a Soliciting Dealer Warrant will be entitled to purchase one Share from the
Company at a price of $12 (120% of the public offering price per Share) during
the time period beginning from the date the Soliciting Dealer Warrants are
issued and ending five years after the date of issuance (the "Exercise Period").
A Soliciting Dealer Warrant may not be exercised unless the Shares to be issued
upon the exercise of the Soliciting Dealer Warrant have been registered or are
exempt from registration in the state of residence of the holder of the
Soliciting Dealer Warrant or if a prospectus required under the laws of such
state cannot be delivered to the buyer on behalf of the Company.
Notwithstanding the foregoing, no Soliciting Dealer Warrants will be exercisable
until one year from the date of issuance.  In addition, holders of Soliciting
Dealer Warrants may not exercise the Soliciting Dealer Warrants to the extent
such exercise would jeopardize the Company's status as a REIT under the 
Code.     

     The terms of the Soliciting Dealer Warrants, including the exercise price
and the number and type of securities issuable upon exercise of a Soliciting
Dealer Warrant and the number of such warrants may be adjusted in the event of
stock dividends, certain subdivisions, combinations and reclassification of
Shares or the issuance to shareholders of rights, options or warrants entitling
them to purchase Shares or securities convertible into Shares.  The terms of the
Soliciting Dealer Warrants also may be adjusted if the Company engages in
certain merger or consolidation transactions or if all or substantially all of
the Company's assets are sold.  Soliciting Dealer Warrants are not transferable
or assignable except by the Dealer Manager, the Soliciting Dealers, their
successors in interest, or to individuals who are both officers and directors of
such a person.  Exercise of these Soliciting Dealer Warrants will be under the
terms and conditions detailed in this Prospectus and in the Warrant Purchase
Agreement, which is an exhibit to the Registration Statement.

     Holders of Soliciting Dealer Warrants do not have the rights of
stockholders, may not vote on Company matters and are not entitled to receive
distributions until such time as such warrants are exercised.


ARTICLES OF INCORPORATION AND BYLAW PROVISIONS

  Restrictions on Ownership and Transfer

     For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of capital
stock.  Specifically, not more than 50% in value of the Company's outstanding
shares of capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the last
half of a taxable year, and the Company must be beneficially

                                       47

<PAGE>
 
    
owned by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year. See "Federal
Income Tax Considerations -- Requirements for Qualification." In addition, the
Company must meet certain requirements regarding the nature of its gross income
in order to qualify as a REIT. One such requirement is that at least 75% of the
Company's gross income for each year must consist of "rents from real property"
and income from certain other real property investments. No rent that the
Company receives from a tenant in which it owns 10% or more of the ownership
interests will qualify as "rents from real property." See "Federal Income Tax
Considerations -- Requirements for Qualification -- Income Tests."     

    
     Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Articles of Incorporation, subject to certain
exceptions described below, provide that no person may own, or be deemed to own
by virtue of the attribution provisions of the Code, more than 9.8% (the
"Ownership Limitation") of the number of outstanding Shares or more than 9.8% of
the number of outstanding shares of any class of preferred stock.     

    
     Any transfer of Shares that would (i) result in any person owning, directly
or indirectly, Shares in excess of the Ownership Limitation, (ii) result in
Shares being owned by fewer than 100 persons (determined without reference to
any rules of attribution), (iii) result in the Company being "closely held"
within the meaning of section 856(h) of the Code, or (iv) cause the Company to
own, actually or constructively, 10% or more of the ownership interests in a
tenant of the Company's or the Operating Partnership's real property, within the
meaning of section 856(d)(2)(B) of the Code, will be null and void, and the
intended transferee will acquire no rights in such Shares.     

    
     Subject to certain exceptions described below, any purported transfer of
Shares that would (i) result in any person owning, directly or indirectly,
Shares in excess of the Ownership Limitation, (ii) result in the Shares being
owned by fewer than 100 persons (determined without reference to any rules of
attribution), (iii) result in the Company being "closely held" within the
meaning of section 856(h) of the Code, or (iv) cause the Company to own,
actually or constructively, 10% or more of the ownership interests in a tenant
of the Company's or the Operating Partnership's real property, within the
meaning of section 856(d)(2)(B) of the Code, will be designated as "Shares-in-
Trust" and will be transferred automatically to a trust (a "Trust"), effective
on the day before the purported transfer of such Shares.  The record holder of
the Shares that are designated as Shares-in-Trust (the "Prohibited Owner") will
be required to submit such number of Shares to the Company for registration in
the name of the trustee of the Trust (the "Trustee").  The Trustee will be
designated by the Company, but will not be affiliated with the Company.  The
beneficiary of a Trust (the "Beneficiary") will be one or more charitable
organizations named by the Company.     

     Shares-in-Trust will remain issued and outstanding Shares and will be
entitled to the same rights and privileges as all other shares of the same class
or series.  The Trustee will receive all dividends and distributions on the
Shares-in-Trust and will hold such dividends or distributions in trust for the
benefit of the Beneficiary.  The Trustee will vote all Shares-in-Trust.  The
Trustee will designate a permitted transferee of the Shares-in-Trust, provided
that the permitted transferee (i) purchases such Shares-in-Trust for valuable
consideration and (ii) acquires such Shares-in-Trust without such acquisition
resulting in another transfer to another Trust.

     The Prohibited Owner with respect to Shares-in-Trust will be required to
repay to the Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares became
Shares-in-Trust.  The Prohibited Owner generally will receive from the Trustee
the lesser of (i) the price per share such Prohibited Owner paid for the Shares
that were designated as Shares-in-Trust (or, in the case of a gift or devise,
the Market Price (as defined below) per share on the date of such transfer) or
(ii) the price per share received by the Trustee from the sale of such Shares-
in-Trust.  Any amounts received by the Trustee in excess of the amounts to be
paid to the Prohibited Owner will be distributed to the Beneficiary.

                                       48

<PAGE>
 
     The Shares-in-Trust will be deemed to have been offered for sale to the
Company, or its designee, at a price per share equal to the lesser of (i) the
price per share in the transaction that created such Shares-in-Trust (or, in the
case of a gift or devise, the Market Price per share on the date of such
transfer) or (ii) the Market Price per share on the date that the Company, or
its designee, accepts such offer.  The Company will have the right to accept
such offer for a period of ninety days after the later of (i) the date of the
purported transfer which resulted in such Shares-in-Trust or (ii) the date the
Company determines in good faith that a transfer resulting in such Shares-in-
Trust occurred.

    
     "Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date.  The "Closing Price" on
any date shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the Shares are not listed or admitted to trading on
the NYSE, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Shares are listed or admitted to trading or, if the Shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then be
in use or, if the Shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Shares selected by the Board of Directors, or, if no such
market maker exists, as determined in good faith by the Board of Directors.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Shares are listed or admitted to trading is open for the
transaction of business or, if the Shares are not listed or admitted to trading
on any national securities exchange, shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.     

     Any person who acquires or attempts to acquire Shares in violation of the
foregoing restrictions, or any person who owned Shares that were transferred to
a Trust, will be required (i) to give immediately written notice to the Company
of such event and (ii) to provide to the Company such other information as the
Company may request in order to determine the effect, if any, of such transfer
on the Company's status as a REIT.

     All persons who own, directly or indirectly, more than 5% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding Shares must, within 30 days after January 1 of each year, provide to
the Company a written statement or affidavit stating (i) the name and address of
such direct or indirect owner, (ii) the number of Shares owned directly or
indirectly, and (iii) a description of how such shares are held.  In addition,
each direct or indirect shareholder shall provide to the Company such additional
information as the Company may request in order to determine the effect, if any,
of such ownership on the Company's status as a REIT and to ensure compliance
with the Ownership Limitation.

     The Ownership Limitation generally will not apply to the acquisition of
Shares by an underwriter that participates in a public offering of such shares.
In addition, the Board of Directors, upon receipt of a ruling from the Service
or an opinion of counsel and upon such other conditions as the Board of
Directors may direct, may exempt a person from the Ownership Limitation under
certain circumstances.  The foregoing restrictions will continue to apply until
(i) the Board of Directors determines that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT and
(ii) there is an affirmative vote of a majority of the number of Shares entitled
to vote on such matter at a regular or special meeting of the shareholders of
the Company.

     All certificates representing Shares will bear a legend referring to the
restrictions described above.

     The Ownership Limitation could have the effect of discouraging a takeover
or other transaction in which holders of some, or a majority, of the Shares
might receive a premium from their Shares over the then prevailing market price
or which such holders might believe to be otherwise in their best interest.

                                       49

<PAGE>
 
  Number of Directors; Removal; Filling Vacancies

    
     The Articles of Incorporation and Bylaws provide that the number of
directors will consist of not less than [3] nor more than 15 persons, subject to
increase or decrease by the affirmative vote of 80% of the members of the entire
Board of Directors.  At all times a majority of the directors shall be
Independent Directors, except that upon the death, removal or resignation of an
Independent Director, such requirement shall not be applicable for 60 days.
Upon completion of the Offering, there will be five directors, three of whom
shall be Independent Directors.  The shareholders shall be entitled to vote on
the election or removal of directors, with each share entitled to one vote.  The
Bylaws provide that, subject to any rights of holders of any class of preferred
stock, and unless the Board of Directors otherwise determines, any vacancies
will be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum, provided that Independent Directors shall nominate
and approve directors to fill vacancies created by Independent Directors.
Accordingly, the Board of Directors could temporarily prevent any shareholder
from enlarging the Board of Directors and filling the new directorships with
such shareholder's own nominees.  Any directors so elected shall hold office
until the next annual meeting of shareholders.     

     A director may be removed with or without cause by the vote of the holders
of 75% of the outstanding shares of capital stock entitled to vote for the
election of directors at a special meeting of the shareholders called for the
purpose of removing such director.

LIMITATION OF LIABILITY AND INDEMNIFICATION

     The MGCL permits a Maryland corporation to include in its Articles of
Incorporation a provision limiting the liability of its directors and officers
to the corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action.  The Articles of
Incorporation of the Company contain such a provision which eliminates such
liability to the maximum extent permitted by Maryland law.

     The Articles of Incorporation obligate the Company, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to any person (or the
estate of any person) who is or was a party to, or is threatened to be made a
party to, and threatened, pending or completed action, suit or proceeding
whether or not by or in the right of the Company, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director, officer, trustee, partner, member,
agent or employee of another corporation, partnership, limited liability
company, association, joint venture, trust or other enterprise.  The Articles of
Incorporation also permit the Company to indemnify and advance expenses to any
person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.

     The MGCL requires a Maryland corporation (unless its Articles of
Incorporation provide otherwise, which the Company's Articles of Incorporation
does not) to indemnify a director or officer who has been successful, on the
merits or otherwise, in the defense of any proceeding to which he is made a
party by reason of his service in that capacity.  The MGCL permits a Maryland
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities unless it
is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or omission was
unlawful.  However, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the corporation.  In addition, the MGCL
requires the Company, as a condition to advancing expenses, to obtain (a) a
written affirmation by the director or officer of his good faith belief that he
has 

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<PAGE>
 
met the standard of conduct necessary for indemnification by the Company as 
authorized by the Bylaws and (b) a written statement by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met.  Indemnification under the
provisions of the MGCL is not deemed exclusive of any other rights, by
indemnification or otherwise, to which an officer or director may be entitled
under the Company's Articles of Incorporation or Bylaws, or under resolutions of
stockholders or directors, contract or otherwise.  It is the position of the
Commission that indemnification of directors an officers for liabilities arising
under the Securities Act is against public policy and is unenforceable pursuant
to Section 14 of the Securities Act.

     The Company also has purchased and maintains insurance on behalf of all of
its directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Company, whether or not
the Company is required or has the power to indemnify them against the same
liability.

BUSINESS COMBINATIONS

    
     Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting power
of such corporation's shares or an affiliate of such corporation who, at any
time with in the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting shares of such corporation (an "Interested Stockholder") or an affiliate
thereof are prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder.  Thereafter, any such
business combination must be recommended by the board of directors of such
corporation and approved by the affirmative vote of at least (a) 80% of the
votes entitled to be cast by holders of outstanding voting shares of such
corporation and (b) two-thirds of the votes entitled to be cast by holders of
voting shares of such corporation other than shares held by the Interested
Stockholder with whom (or with whose affiliate) the business combination is to
be effected, unless, among other conditions, the corporation's stockholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares.  These provisions of the MGCL do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.     

CONTROL SHARE ACQUISITION STATUTE

    
     The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror, by officers or by directors who are
employees of the corporation.  "Control Shares" are voting shares which, if
aggregated with all other such shares previously acquired by the acquiror, or in
respect of which the acquiror is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power:  (i) one-fifth or more but less than one-
third, (ii) one-third or more but less than a majority, or (iii) a majority or
more of all voting power.  Control Shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval.  A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.     

     A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares.  If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.

     If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then
subject to certain conditions and limitations, the corporation may 

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<PAGE>
 
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of stockholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.

     The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange, if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the Articles of
Incorporation or bylaws of the corporation.

     The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's common stock.  There can be no assurance that such provision will not
be amended or eliminated at any time in the future.

AMENDMENT TO THE ARTICLES OF INCORPORATION

     The Articles of Incorporation of the Company may be amended by the
affirmative vote of holders of shares entitled to cast a majority of all votes
entitled to be cast on such an amendment; provided, however, (i) no term or
provision of the Articles of Incorporation may be added, amended or repealed in
any respect that would, in the determination of the Board of Directors, cause
the Company not to qualify as a REIT under the Code, (ii) certain provisions of
the Articles of Incorporation, including provisions relating to the removal of
directors, Independent Directors, preemptive rights of holders of stock and the
indemnification and limitation of liability of officers and directors may not be
amended or repealed and (iii) provisions imposing a cumulative voting in the
election of directors may not be added to the Articles of Incorporation, unless,
in each such case, such action is approved by the affirmative vote of the
holders of not less than two-thirds of all the votes entitled to be cast on the
matter.

DISSOLUTION OF THE COMPANY

     The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be cast
on the matter.  Under the Articles of Incorporation, the Company will
automatically terminate and dissolve on __________, 2007 (ten years after the
initial date of this Prospectus), unless the Listing occurs, in which event the
Company will automatically become a perpetual life entity.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

     The Bylaws of the Company provide that (a) with respect to an annual
meeting of stockholders, nominations of persons for election to the Board of
Directors and the proposal of business to be considered by stockholders may be
made only (i) pursuant to the Company's notice of the meeting, (ii) by the Board
of Directors or (iii) by a stockholder who is entitled to vote at the meeting
and has complied with the advance notice procedures set forth in the Bylaws and
(b) with respect to special meetings of stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of the meeting,
(ii) by the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a stockholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.

MEETING OF STOCKHOLDERS

     The Company's Bylaws provide that annual meetings of stockholders shall be
held on a date and at the time set by the Board of Directors during the month of
May each year (commencing in May 1998).  Special 

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<PAGE>
 
meetings of the stockholders may be called by (i) the President of the Company,
(ii) the Chief Executive Officer or (iii) the Board of Directors. As permitted
by the MGCL, the Bylaws of the Company provide that special meetings must be
called by the Secretary of the Company upon the written request of the holders
of shares entitled to cast not less than a majority of all votes entitled to be
cast at the meeting.

OPERATIONS

     The Articles of Incorporation require the Board of Directors generally to
use commercially reasonable efforts to cause the Company to qualify as a REIT.

    
     The business combination provisions and, if the applicable provision in the
Bylaws is rescinded, the control share acquisition provisions of the MGCL, the
provisions of the Articles of Incorporation on removal of directors and the
advance notice provisions of the Bylaws could delay, defer or prevent a
transaction or a change in control of the Company that might involve a premium
price for holders of Shares or otherwise be in their best interests.     

INSPECTION OF BOOKS AND RECORDS

     The Advisor will keep, or cause to be kept, on behalf of the Company, full
and true books of account on an accrual basis of accounting, in accordance with
generally accepted accounting principles.  All of such books of account,
together with all other records of the Company, including a copy of the Articles
of Incorporation and any amendments thereto, will at all times be maintained at
the principal office of the Company, and will be open to inspection,
examination, and, for a reasonable charge, duplication upon reasonable notice
and during normal business hours by a stockholder or his agent.

     As a part of its books and records, the Company will maintain at its
principal office an alphabetical list of names of stockholders, along with their
addresses and telephone numbers and the number of Shares held by each
stockholder.  Such list shall be updated at least quarterly and shall be
available for inspection at the Company's home office by a stockholder or his or
her designated agent upon such stockholder's request.  Such list also shall be
mailed to any stockholder requesting the list within 10 days of a request.  The
Company may require the stockholder requesting the stockholder list to represent
that he or she will not make any commercial distribution of such list or the
information disclosed through such inspection.  The Company may impose a
reasonable charge for expenses incurred in reproducing such list.  The list may
not be sold or used for commercial purposes.

    
RESTRICTIONS ON "ROLL-UP" TRANSACTIONS     

    
     In connection with a proposed "Roll-Up Transaction," which, in general
terms, is any transaction involving the acquisition, merger, conversion, or
consolidation, directly or indirectly, of the Company and the issuance of
securities of an entity that would be created or would survive after the
successful completion of the Roll-Up Transaction (a "Roll-Up Entity"), an
appraisal of all of the Company's properties shall be obtained from an
independent appraiser.  In order to qualify as an independent appraiser for this
purpose(s), the person or entity shall have no material current or prior
business or personal relationship with the Advisor or Directors and shall be
engaged to a substantial extent in the business of rendering opinions regarding
the value of assets of the type held by the Company.  The Company's properties
shall be appraised on a consistent basis, and the appraisal shall be based on
the evaluation of all relevant information and shall indicate the value of the
Company's properties as of a date immediately prior to the announcement of the
proposed Roll-Up Transaction.  The appraisal shall assume an orderly liquidation
of Properties over a 12-month period.  The terms of the engagement of such
Independent Expert shall clearly state that the engagement is for the benefit of
the Company and the stockholders.  A summary of the independent appraisal,
indicating all material assumptions underlying the appraisal, shall be included
in a report to stockholders in connection with a proposed Roll-Up Transaction.
In connection with a proposed Roll-Up Transaction which has not been approved by
a least two-thirds of the stockholders, the person sponsoring the Roll-Up
Transaction shall offer to stockholders who vote against the proposal the choice
of:     

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<PAGE>
 
     (i)    accepting the securities of the Roll-Up Entity offered in the
            proposed Roll-Up Transaction; or

     (ii)   one of the following:

               a.   remaining stockholders of the Company and preserving their
     interests therein on the same terms and conditions as existed previously;
     or

               (B)  receiving cash in an amount equal to the stockholder's pro
     rata share of the appraised value of the net assets of the Company.

     The Company is prohibited from participating in any proposed Roll-Up
Transaction:

     (i)    which would result in the stockholders having democracy rights in
the Roll-Up Entity that are less than those provided in the Company's Articles
of Incorporation and described elsewhere in this Prospectus, including rights
with respect to the election and removal of Directors, annual reports, annual
and special meetings, amendment of the Articles of Incorporation, and
dissolution of the Company;

     (ii)   which includes provisions that would operate as a material
impediment to, or frustration of, the accumulation of shares by any purchaser of
the securities of the Roll-Up Entity (except to the minimum extent necessary to
preserve the tax status of the Roll-Up Entity), or which would limit the ability
of an investor to exercise the voting rights of its securities of the Roll-Up
Entity on the basis of the number of shares held by that investor;

    
     (iii)  in which investor's rights to access of records of the Roll-Up
Entity will be less than those provided in the Company's Articles of
Incorporation and described in "Inspection of Books and Records," above; or     

     (iv)   in which any of the costs of the Roll-Up Transaction would be borne
by the Company if the Roll-Up Transaction is not approved by the stockholders.

                                       54

<PAGE>
 
                       FEDERAL INCOME TAX CONSIDERATIONS

     The following is a summary of material federal income tax considerations
that may be relevant to a prospective holder of Shares in the Company.  Hunton &
Williams has acted as counsel to the Company and has reviewed this summary and
is of the opinion that it fairly summarizes the federal income tax
considerations that will be material to a holder of Shares. The discussion
contained herein does not address all aspects of taxation that may be relevant
to particular shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations, and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax laws.

     The statements in this discussion and the opinion of Hunton & Williams are
based on current provisions of the Code, existing, temporary, and currently
proposed Treasury Regulations promulgated under the Code, the legislative
history of the Code, existing administrative rulings and practices of the
Service, and judicial decisions.  No assurance can be given that future
legislative, judicial, or administrative actions or decisions, which may be
retroactive in effect, will not affect the accuracy of any statements in this
Prospectus with respect to the transactions entered into or contemplated prior
to the effective date of such changes.

    
     EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP, AND
SALE OF SHARES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REIT, INCLUDING
THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE, AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX 
LAWS.     

TAXATION OF THE COMPANY

     The Company currently has in effect an election to be taxed as a pass-
through entity under Subchapter S of the Code, but intends to revoke its S
election on the day prior to the date on which the Offering commences.  The
Company plans to make an election to be taxed as a REIT under sections 856
through 860 of the Code, effective for its short taxable year beginning on the
day prior to the date on which the Offering commences and ending on December 31,
1997.  The Company believes that, commencing with such taxable year, it will be
organized and will operate in such a manner as to qualify for taxation as a REIT
under the Code, and the Company intends to continue to operate in such a manner,
but no assurance can be given that the Company will operate in a manner so as to
qualify or remain qualified as a REIT.

     The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex.  The following discussion sets forth the
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its shareholders.  The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change prospectively or retroactively.

     Hunton & Williams has acted as counsel to the Company in connection with
the Offering and the Company's election to be taxed as a REIT.  In the opinion
of Hunton & Williams, assuming that the elections and other procedural steps
described in this discussion of "Federal Income Tax Considerations" are
completed by the Company in a timely fashion,  the Company's organization and
proposed method of operation will enable it to qualify to be taxed as a REIT
under the Code commencing with the Company's short taxable year beginning the
day prior to the date on which the Offering commences and ending December 31,
1997, and for its future taxable years.  Investors should be aware, however,
that opinions of counsel are not binding upon the Service or any court.  It must
be emphasized that Hunton & Williams' opinion is based on various assumptions
and is conditioned upon certain representations made by the Company as to
factual matters, including representations regarding the nature of the Company's
properties and the future conduct of its business.  Such factual assumptions and
representations 

                                       55

<PAGE>
 
are described below in this discussion of "Federal Income Tax Considerations"
and are set out in the federal income tax opinion that has been delivered by
Hunton & Williams. Moreover, such qualification and taxation as a REIT depends
upon the Company's ability to meet on a continuing basis, through actual annual
operating results, distribution levels, and share ownership, the various
qualification tests imposed under the Code discussed below. Hunton & Williams
will not review the Company's compliance with those tests on a continuing basis.
Accordingly, no assurance can be given that the actual results of the Company's
operations for any particular taxable year will satisfy such requirements. For a
discussion of the tax consequences of failure to qualify as a REIT, see "Failure
to Qualify."

    
     If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income tax on its net income that is distributed
currently to its shareholders.  That treatment substantially eliminates the
"double taxation" (i.e., taxation at both the corporate and shareholder levels)
that generally results from investment in a corporation.  However, the Company
will be subject to federal income tax in the following circumstances.  First,
the Company will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains.  Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax" on its undistributed items of tax preference, if any.  Third, if the
Company has (i) net income from the sale or other disposition of "foreclosure
property" that is held primarily for sale to customers in the ordinary course of
business or (ii) other nonqualifying income from foreclosure property, it will
be subject to tax at the highest corporate rate on such income.  Fourth, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business), such income will be subject to a 100% tax.  Fifth, if the Company
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and nonetheless has maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amount by which the
Company fails the 75% or 95% gross income test. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
the Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.  Seventh, the Company may
elect to retain and pay income tax on the net long-term capital gain it receives
in a taxable year.  Finally, if the Company acquires any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a transaction in which the basis of the asset in the Company's hands is
determined by reference to the basis of the asset (or any other asset) in the
hands of the C corporation and the Company recognizes gain on the disposition of
such asset during the 10-year period beginning on the date on which such asset
was acquired by the Company, then to the extent of such asset's "built-in-gain"
(i.e., the excess of the fair market value of such asset at the time of
acquisition by the Company over the adjusted basis in such asset at such time),
such gain will be subject to tax at the highest regular corporate rate
applicable (as provided in Treasury Regulations that have not yet been
promulgated).  The results described above with respect to the recognition of
"built-in-gain" assume that the Company will make an election pursuant to IRS
Notice 88-19 if it were to make any such acquisition.     

REQUIREMENTS FOR QUALIFICATION

     The Code defines a REIT as a corporation, trust, or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding shares of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the Service that must be met in order
to elect and maintain REIT status; (viii) that uses a calendar year for federal
income tax purposes and complies with the recordkeeping requirements of the Code
and Treasury Regulations promulgated thereunder; and (ix) that meets certain
other tests, 

                                       56

<PAGE>
 
described below, regarding the nature of its income and assets. The Code
provides that conditions (i) to (iv), inclusive, must be met during the entire
taxable year and that condition (v) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Conditions (v) and (vi) will not apply until after the
first taxable year for which an election is made by the Company to be taxed as a
REIT. For purposes of determining stock ownership under the 5/50 Rule, a
supplemental unemployment compensation benefits plan, a private foundation, or a
portion of a trust permanently set aside or used exclusively for charitable
purposes generally is considered an individual. A trust that is a qualified
trust under Code section 401(a), however, generally is not considered an
individual and beneficiaries of such trust are treated as holding shares of a
REIT in proportion to their actuarial interests in such trust for purposes of
the 5/50 Rule.

    
     The Company anticipates issuing sufficient Shares with sufficient diversity
of ownership pursuant to the Offering to allow it to satisfy requirements (v)
and (vi) after its 1997 taxable year.  In addition, the Company's Articles of
Incorporation provide for restrictions regarding transfer of Shares that are
intended to assist the Company in continuing to satisfy the share ownership
requirements described in clauses (v) and (vi) above.  Such transfer
restrictions are described in "Description of Capital Stock -- Articles of
Incorporation and Bylaw Provisions -- Restrictions on Ownership and 
Transfer."     

    
     The Company currently does not have any corporate subsidiaries, but may
have corporate subsidiaries in the future.  Code section 856(i) provides that a
corporation that is a "qualified REIT subsidiary" will not be treated as a
separate corporation, and all assets, liabilities, and items of income,
deduction, and credit of a "qualified REIT subsidiary" will be treated as
assets, liabilities, and items of income, deduction, and credit of the REIT.  A
"qualified REIT subsidiary" is a corporation, all of the capital stock of which
is owned by the REIT.  Thus, in applying the requirements described herein, any
qualified REIT subsidiaries of the Company will be ignored and all assets,
liabilities, and items of income, deduction, and credit of such subsidiaries
will be treated as assets, liabilities, and items of income, deduction, and
credit of the Company.     

     In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share.  In addition, the assets
and gross income of the partnership will retain the same character in the hands
of the REIT for purposes of section 856 of the Code, including satisfying the
gross income and asset tests described below.  Thus, the Company's proportionate
share of the assets, liabilities and items of income of the Operating
Partnership will be treated as assets, liabilities and items of income of the
Company for purposes of applying the requirements described herein

  Income Tests

    
     In order for the Company to qualify and to maintain its qualification as a
REIT, two requirements relating to the Company's gross income must be satisfied
annually.  First, at least 75% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must consist of
defined types of income derived directly or indirectly from investments relating
to real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest) or temporary investment
income.  Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property or temporary investments, and from dividends, other types of
interest, and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing.   The specific application of these tests to
the Company is discussed below.     

     The rent received by the Company from its tenants ("Rent") will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met.  First, the amount of
rent must not be based, in whole or in part, on the income or profits of any
person.  However, an amount received or accrued generally will not be excluded
from the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales.  Second, the Code provides
that rents received from a tenant will not qualify as "rents from real property"
in satisfying the gross income tests if the Company, or a 

                                       57

<PAGE>
 
    
direct or indirect owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for the Rent to qualify as
"rents from real property," the Company generally must not operate or manage its
properties or furnish or render services to the tenants of such properties,
other than through an "independent contractor" who is adequately compensated and
from whom the Company derives no revenue. The "independent contractor"
requirement, however, does not apply to the extent the services provided by the
Company are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant." In addition, The Company may render a de minimic amount of
noncustomary services to its tenants, or manage or operate property, as long as
the amount received with respect to the services or management does not exceed
1% of The Company's income from the property.     

     The Company has represented that it will not charge Rent for any portion of
any property that is based, in whole or in part, on the income or profits of any
person to the extent that the receipt of such Rent would jeopardize the
Company's status as a REIT.  In addition, the Company has represented that, to
the extent that it receives Rent from a Related Party Tenant, such Rent will not
cause the Company to fail to satisfy either the 75% or 95% gross income test.
The Company also has represented that it will not allow the Rent attributable to
personal property leased in connection with any lease of real property to exceed
15% of the total Rent received under the lease, if the receipt of such Rent
would cause the Company to fail to satisfy either the 75% or 95% gross income
test.

     The Company may provide certain services to its tenants.  The Company
believes and has represented that all such services will be considered "usually
or customarily rendered" in connection with the rental of space for occupancy
only and will not otherwise be considered "rendered to the occupant," so that
the provision of such services will not jeopardize the qualification of the Rent
as "rents from real property."  In the case of any services that are not "usual
and customary" under the foregoing rules, the Company intends to employ
qualifying independent contractors to provide such services to the extent that
the provision of such services would cause the Company to fail to satisfy either
the 75% or 95% gross income test.

    
     If any portion of the Rent does not qualify as "rents from real property"
because the Rent attributable to personal property leased in connection with any
lease of real property exceeds 15% of the total Rent received under the lease
for a taxable year, the portion of the Rent that is attributable to personal
property will not be qualifying income for purposes of either the 75% or 95%
gross income test.  Thus, if the Rent attributable to personal property, plus
any other income received by the Company during a taxable year that is not
qualifying income for purposes of the 95% gross income test, exceeds 5% of the
Company's gross income during such year, the Company likely would lose its REIT
status.  If, however, any portion of the Rent received under a lease does not
qualify as "rents from real property" because either (i) the Rent is considered
based on the income or profits of any person or (ii) the tenant is a Related
Party Tenant, none of the Rent received by the Company under such lease would
qualify as "rents from real property."  In that case, if the Rent received by
the Company under such lease, plus any other income received by the Company
during the taxable year that is not qualifying income for purposes of the 95%
gross income test, exceeds 5% of the Company's gross income for such year, the
Company likely would lose its REIT status.  Finally, if any portion of the Rent
does not qualify as "rents from real property" because the Company furnishes
noncustomary services with respect to a property other than through a qualifying
independent contractor, and the amount received with respect to the services
exceeds 1% of The Company's income from the property, none of the Rent received
by the Company with respect to the related property would qualify as "rents from
real property."  In that case, if the Rent received by the Company with respect
to the related property, plus any other income received by the Company during
the taxable year that is not qualifying income for purposes of the 95% gross
income test, exceeds 5% of the Company's gross income for such year, the Company
would lose its REIT status.     

     Based on the foregoing, Hunton & Williams is of the opinion that the Rent
will qualify as "rents from real property" for purposes of the 75% and 95% gross
income tests, and that the Company's proposed method of operation will enable it
to satisfy the 75% and 95% gross income tests.  As described above, the opinion
of Hunton 

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<PAGE>
 
& Williams is based upon an analysis of all the facts and circumstances and upon
rulings and judicial decisions involving situations that are considered to be
analogous, as well as representations by the Company and assumptions that are
described above and set out in the federal income tax opinion of Hunton &
Williams that has been delivered to the Company. Opinions of counsel are not
binding upon the Service or any court. Accordingly, there can be no complete
assurance that the Service will not assert successfully a contrary position and,
therefore, prevent the Company from qualifying as a REIT.

    
     In addition to the Rent, the Company's tenants will be required to pay
additional charges, such as late fees (the "Additional Charges").  To the extent
that the Additional Charges represent either (i) reimbursements of amounts that
a tenant is obligated to pay to third parties or (ii) penalties for nonpayment
or late payment of such amounts, the Additional Charges should qualify as "rents
from real property."  To the extent that Additional Charges represent interest
that is accrued on the late payment of the Rent or Additional Charges, such
Additional Charges should be treated as interest that qualifies for the 95%
gross income test, but not the 75% gross income test.     

    
     The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person.  However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.  Furthermore, to the extent that interest from a loan that is based on
the residual cash proceeds from sale of the property securing the loan
constitutes a "shared appreciation provision" (as defined in the Code), income
attributable to such participation feature will be treated as gain from the sale
of the secured property.     

    
     The net income derived from any prohibited transaction is subject to a 100%
tax.  The term "prohibited transaction" generally includes a sale or other
disposition (whether by the Company or the Operating Partnership) of property
(other than foreclosure property) that is held primarily for sale to customers
in the ordinary course of a trade or business.  The Company believes no asset
owned by the Company or the Operating Partnership will be held for sale to
customers and that a sale of any such asset will not be in the ordinary course
of business of the Company or the Operating Partnership.  Whether property is
held "primarily for sale to customers in the ordinary course of a trade or
business" depends, however, on the facts and circumstances in effect from time
to time, including those related to a particular property.  Nevertheless, the
Company will attempt to comply with the terms of safe-harbor provisions in the
Code prescribing when asset sales will not be characterized as prohibited
transactions.  Complete assurance cannot be given, however, that the Company can
comply with the safe-harbor provisions of the Code or avoid owning property that
may be characterized as property held "primarily for sale to customers in the
ordinary course of a trade or business."     

    
     The Company will be subject to tax at the maximum corporate rate on any
income from foreclosure property (other than income that would be qualified
income under the 75% gross income test), less expenses directly connected with
the production of such income.  However, gross income from such foreclosure
property will be qualifying income under the 75% and 95% gross income tests.
"Foreclosure property" is defined as any real property (including interests in
real property) and any personal property incident to such real property (i) that
is acquired by a REIT as the result of such REIT having bid in such property at
foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law, after there was a default (or default
was imminent) on a lease of such property or on an indebtedness that such
property secured and (ii) for which such REIT makes a proper election to treat
such property as foreclosure property.  However, a REIT will not be considered
to have foreclosed on a property where such REIT takes control of the property
as a mortgagee-in-possession and cannot receive any profit or sustain any loss
except as a creditor of the mortgagor.  Under the Code, property generally
ceases to be foreclosure property with respect to a REIT on the date that is two
years after the date such REIT acquired such property (or longer if an extension
is granted by the Secretary of the Treasury).  The foregoing grace period is
terminated and foreclosure property ceases to be foreclosure property on the
first day (i) on which a lease is entered into with respect to such property
that, by its terms, will give rise to income that does not qualify under the 75%
gross income test or any amount is received or accrued, directly or indirectly,
pursuant to a lease entered into on or after such day that will give rise to
income that does not qualify under the 75% gross      

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<PAGE>
 
income test, (ii) on which any construction takes place on such property (other
than completion of a building, or any other improvement, where more than 10% of
the construction of such building or other improvement was completed before
default became imminent) or (iii) which is more than 90 days after the day on
which such property was acquired by the REIT and the property is used in a trade
or business that is conducted by the REIT (other than through an independent
contractor from whom the REIT itself does not derive or receive any income).

    
     It is possible that, from time to time, the Company will enter into hedging
transactions with respect to one or more of its assets or liabilities.  Any such
hedging transactions could take a variety of forms, including interest rate swap
contracts, interest rate cap or floor contracts, futures or forward contracts,
and options.  To the extent that the Company enters into an interest rate swap
or cap contract to hedge any variable rate indebtedness incurred to acquire or
carry real estate assets, any periodic income or gain from the disposition of
such contract should be qualifying income for purposes of the 95% gross income
test, but not the 75% gross income test.  To the extent that the Company hedges
with other types of financial instruments or in other situations, it may not be
entirely clear how the income from those transactions will be treated for
purposes of the various income tests that apply to REITs under the Code.  The
Company intends to structure any hedging transactions in a manner that does not
jeopardize its status as a REIT.     

    
     If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it nevertheless may qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code.  Those relief
provisions generally will be available if the Company's failure to meet such
tests is due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax.  It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of those relief provisions.  As
discussed above in "Federal Income Tax Considerations -- Taxation of the
Company," even if those relief provisions apply, a 100% tax would be imposed on
the net income attributable to the greater of the amount by which the Company
fails the 75% or 95% gross income test.     

  Asset Tests

     The Company, at the close of each quarter of each taxable year, also must
satisfy two tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must be represented by cash or cash
items (including certain receivables), government securities, "real estate
assets," or, in cases where the Company raises new capital through stock or
long-term (at least five-year) debt offerings, temporary investments in stock or
debt instruments during the one-year period following the Company's receipt of
such capital.  The term "real estate assets" includes interests in real
property, interests in mortgages on real property to the extent the principal
balance of a mortgage does not exceed the value of the associated real property,
and shares of other REITs. For purposes of the 75% asset test, the term
"interest in real property" includes an interest in land and improvements
thereon, such as buildings or other inherently permanent structures (including
items that are structural components of such buildings or structures), a
leasehold of real property, and an option to acquire real property (or a
leasehold of real property).  Second, of the investments not included in the 75%
asset class, the value of any one issuer's securities owned by the Company may
not exceed 5% of the value of the Company's total assets and the Company may not
own more than 10% of any one issuer's outstanding voting securities (except for
its interests in the Operating Partnership and any qualified REIT subsidiary).

     The Company has represented that (i) at least 75% of the value of its total
assets will be represented by real estate assets, cash and cash items (including
receivables), and government securities and (ii) it will not own (A) securities
of any one issuer the value of which exceeds 5% of the value of the Company's
total assets or (B) more than 10% of any one issuer's outstanding voting
securities (except for its interests in the Operating Partnership and any
qualified REIT subsidiary).  In addition, the Company has represented that it
will not acquire or dispose, or cause the Operating Partnership to acquire or
dispose, of assets in the future in a way that would cause it to violate either
asset test.  Based on the foregoing, Hunton & Williams is of the opinion that
the Company will satisfy both asset tests for REIT status.

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<PAGE>
 
     If the Company should fail to satisfy the asset tests at the end of a
calendar quarter, such a failure would not cause it to lose its REIT status if
(i) it satisfied the asset tests at the close of the preceding calendar quarter
and (ii) the discrepancy between the value of the Company's assets and the asset
test requirements arose from changes in the market values of its assets and was
not wholly or partly caused by an acquisition of one or more nonqualifying
assets.  If the condition described in clause (ii) of the preceding sentence
were not satisfied, the Company still could avoid disqualification by
eliminating any discrepancy within 30 days after the close of the calendar
quarter in which it arose.

  Distribution Requirements

    
     The Company, in order to avoid corporate income taxation of the earnings it
distributes, is required to distribute with respect to each taxable year
dividends (other than capital gain dividends) to its shareholders in an
aggregate amount at least equal to (i) the sum of (A) 95% of its "REIT taxable
income" (computed without regard to the dividends paid deduction and its net
capital gain) and (B) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its
federal income tax return for such year and if paid on or before the first
regular dividend payment date after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at regular ordinary and capital gains corporate tax
rates. Furthermore, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% nondeductible excise tax on the excess of such required distribution over
the amounts actually distributed.  The Company may elect to retain and pay
income on the net long-term capital gain it receives in a taxable year.  Any
such retained capital gain will be treated as if it had been distributed to the
Company's shareholders for purposes of the 4% excise tax.  The Company intends
to make timely distributions sufficient to satisfy the annual distribution
requirements.     

     It is possible that, from time to time, the Company may experience timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of that income and deduction of such
expenses in arriving at its REIT taxable income.  Further, it is possible that,
from time to time, the Company may be allocated a share of net capital gain
attributable to the sale of depreciated property that exceeds its allocable
share of cash attributable to that sale. Therefore, the Company may have less
cash than is necessary to meet its annual 95% distribution requirement or to
avoid corporate income tax or the excise tax imposed on certain undistributed
income.  In such a situation, the Company may find it necessary to arrange for
short-term (or possibly long-term) borrowings or to raise funds through the
issuance of additional Shares.

     Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirements for a year by paying "deficiency
dividends" to its shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year.  Although the
Company may be able to avoid being taxed on amounts distributed as deficiency
dividends, it will be required to pay to the Service interest based upon the
amount of any deduction taken for deficiency dividends.

  Recordkeeping Requirements

    
     Pursuant to applicable Treasury Regulations, in order to be able to elect
to be taxed as a REIT, the Company must maintain certain records.  In addition,
in order to avoid a penalty, the Company must request, on an annual basis,
certain information from its shareholders designed to disclose the actual
ownership of its outstanding shares.  The Company intends to comply with such
requirements.     

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<PAGE>
 
  Partnership Anti-Abuse Rule

    
     The U.S. Department of the Treasury has issued a final regulation (the
"Anti-Abuse Rule") under the partnership provisions of the Code (the
"Partnership Provisions") that authorizes the Service, in certain abusive
transactions involving partnerships, to disregard the form of the transaction
and recast it for federal tax purposes as the Service deems appropriate. The
Anti-Abuse Rule applies where a partnership is formed or utilized in connection
with a transaction (or series of related transactions) with a principal purpose
of substantially reducing the present value of the partners' aggregate federal
tax liability in a manner inconsistent with the intent of the Partnership
Provisions.  The Anti-Abuse Rule states that the Partnership Provisions are
intended to permit taxpayers to conduct joint business (including investment)
activities though a flexible arrangement that accurately reflects the partners'
economic agreement and clearly reflects the partners' income without incurring
any entity-level tax.  The purposes for structuring a transaction involving a
partnership are determined based on all of the facts and circumstances,
including a comparison of the purported business purpose for a transaction and
the claimed tax benefits resulting from the transaction.  A reduction in the
present value of the partners' aggregate federal tax liability through the use
of a partnership does not, by itself, establish inconsistency with the intent of
the Partnership Provisions.     

     The Anti-Abuse Rule contains an example in which a corporation that elects
to be treated as a REIT contributes substantially all of the proceeds from a
public offering to a partnership in exchange for a general partnership interest.
The limited partners of the partnership contribute real property assets to the
partnership, subject to liabilities that exceed their respective aggregate bases
in such property.  In addition, some of the limited partners have the right,
beginning two years after the formation of the partnership, to require the
redemption of their limited partnership interests in exchange for cash or REIT
stock (at the REIT's option) equal to the fair market value of their respective
interests in the partnership at the time of the redemption.  The example
concludes that the use of the partnership is not inconsistent with the intent of
the Partnership Provisions and, thus, cannot be recast by the Service.  However,
the redemption rights associated with the OP Units will not conform in all
respects to the redemption rights contained in the foregoing example.  Moreover,
the Anti-Abuse Rule is extraordinarily broad in scope and is applied based on an
analysis of all of the facts and circumstances.  As a result, there can be no
assurance that the Service will not attempt to apply the Anti-Abuse Rule to the
Company.  If the conditions of the Anti-Abuse Rule are met, the Service is
authorized to take appropriate enforcement action, including disregarding the
Operating Partnership for federal tax purposes or treating one or more of the
partners as nonpartners.  Any such action potentially could jeopardize the
Company's status as a REIT.

FAILURE TO QUALIFY

     If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to the Company's shareholders in any year
in which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made.  In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company also
will be disqualified from taxation as a REIT for the four taxable years
following the year during which the Company ceased to qualify as a REIT.  It is
not possible to state whether in all circumstances the Company would be entitled
to such statutory relief.

TAXATION OF TAXABLE U.S. SHAREHOLDERS

     As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. shareholder" means a holder of Shares that for U.S.
federal income tax purposes is (i) a citizen or resident of the U.S., (ii) a
corporation, 

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<PAGE>
 
partnership, or other entity created or organized in or under the laws of the
U.S. or of any political subdivision thereof, or (iii) an estate whose income
from sources without the United States is includible in gross income for U.S.
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, or (iv) any trust with respect to
which (A) a U.S. court is able to exercise primary supervision over the
administration of such trust and (B) one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust.

    
     Distributions that are designated as capital gain dividends will be taxed
as long-term capital gains (to the extent they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the shareholder has held his Shares.  However, corporate shareholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income.  The Company may elect to retain and pay income tax on the net long-term
capital gain if received in a taxable year.  In that case, the Company's
shareholders would include in income as long-term capital gain their
proportionate Share of the Company's retained long-term capital gain.  In
addition, the shareholders would be deemed to have paid their proportionate
Share of the tax paid by the Company, which amount would be credited or refunded
to the shareholders.  Each shareholder's basis in his Shares would be increased
by the amount of the undistributed long-term capital gain included in the
shareholder's income, less the shareholder's Share of the tax paid by the
Company.     

     Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Shares, but rather will reduce the adjusted
basis of such Shares. To the extent that such distributions in excess of current
and accumulated earnings and profits exceed the adjusted basis of a
shareholder's Shares, such distributions will be included in income as long-term
capital gain (or short-term capital gain if the Shares have been held for one
year or less), assuming the Shares are capital assets in the hands of the
shareholder. In addition, any distribution declared by the Company in October,
November, or December of any year and payable to a shareholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the shareholder on December 31 of such year, provided that the
distribution is actually paid by the Company during January of the following
calendar year.

     Shareholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company. Instead, such losses would be
carried over by the Company for potential offset against its future income
(subject to certain limitations).  Taxable distributions from the Company and
gain from the disposition of the Shares will not be treated as passive activity
income and, therefore, shareholders generally will not be able to apply any
"passive activity losses" (such as losses from certain types of limited
partnerships in which a shareholder is a limited partner) against such income.
In addition, taxable distributions from the Company generally will be treated as
investment income for purposes of the investment interest limitations.  Capital
gains from the disposition of Shares (or distributions treated as such),
however, will be treated as investment income only if the shareholder so elects,
in which case such capital gains will be taxed at ordinary income rates.  The
Company will notify shareholders after the close of the Company's taxable year
as to the portions of the distributions attributable to that year that
constitute ordinary income, return of capital, and capital gain.

TAXATION OF SHAREHOLDERS ON THE DISPOSITION OF THE SHARES

     In general, any gain or loss realized upon a taxable disposition of Shares
by a shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if such Shares have been held for more than one year and
otherwise as short-term capital gain or loss.  However, any loss upon a sale or
exchange of Shares by a shareholder who has held such shares for six months or
less (after applying certain holding period rules), will be treated as a long-
term capital loss to the extent of distributions from the Company required to be
treated by such shareholder as long-term capital gain.  All or a portion of any
loss realized upon a taxable disposition of Shares may be disallowed if other
Shares are purchased within 30 days before or after the disposition.

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<PAGE>
 
CAPITAL GAINS AND LOSSES

    
     A capital asset generally must be held for more than one year in order for
gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss.  The highest marginal individual income tax rate is 39.6%.
The maximum tax rate on net capital gains applicable to individuals is 28% for
sales and exchanges of assets held for more than one year, but not more than 18
months, and 20% for sales and exchanges of assets held for more than 18 months.
Thus, the tax rate differential between capital gain and ordinary income for
individuals may be significant.  In addition, the characterization of income as
capital or ordinary may affect the deductibility of capital losses.  Capital
losses not offset by capital gains may be deducted against an individual's
ordinary income only up to a maximum annual amount of $3,000.  Unused capital
losses may be carried forward.  All net capital gain of a corporate taxpayer is
subject to tax at ordinary corporate rates. A corporate taxpayer can deduct
capital losses only to the extent of capital gains, with unused losses being
carried back three years and forward five years.     

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

     The Company will report to its U.S. shareholders and to the Service the
amount of distributions paid during each calendar year, and the amount of tax
withheld, if any.  Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to distributions
paid unless such holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules.  A shareholder who does not provide the Company with
his correct taxpayer identification number also may be subject to penalties
imposed by the Service.  Any amount paid as backup withholding will be
creditable against the shareholder's income tax liability.  In addition, the
Company may be required to withhold a portion of capital gain distributions to
any shareholders who fail to certify their nonforeign status to the Company.
The Service issued proposed regulations in April 1996 regarding the backup
withholding rules as applied to Non-U.S. shareholders.  Those proposed
regulations would alter the current system of backup withholding compliance and
are proposed to be effective for distributions made after December 31, 1997.
See "-- Taxation of Non-U.S. shareholders."

TAXATION OF TAX-EXEMPT SHAREHOLDERS

     Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI").  While many
investments in real estate generate UBTI, the Service has issued a published
ruling that dividend distributions from a REIT to an exempt employee pension
trust do not constitute UBTI, provided that the shares of the REIT are not
otherwise used in an unrelated trade or business of the exempt employee pension
trust.  Based on that ruling, amounts distributed by the Company to Exempt
Organizations generally should not constitute UBTI.  However, if an Exempt
Organization finances its acquisition of Shares with debt, a portion of its
income from the Company will constitute UBTI pursuant to the "debt-financed
property" rules.  Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans that are exempt from taxation under paragraphs (7), (9),
(17), and (20), respectively, of Code section 501(c) are subject to different
UBTI rules, which generally will require them to characterize distributions from
the Company as UBTI.  In addition, in certain circumstances, a pension trust
that owns more than 10% of the Company's shares is required to treat a
percentage of the dividends from the Company as UBTI (the "UBTI Percentage").
The UBTI Percentage is the gross income derived by the Company from an unrelated
trade or business (determined as if the Company were a pension trust) divided by
the gross income of the Company for the year in which the dividends are paid.
The UBTI rule applies to a pension trust holding more than 10% of the Company's
stock only if (i) the UBTI Percentage is at least 5%, (ii) the Company qualifies
as a REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding shares of the
Company in proportion to their actuarial interests in the pension trust, and
(iii) either (A) one pension trust owns more than 25% of the value of the
Company's shares or (B) a group of pension trusts individually holding more than
10% of the value of the Company's shares collectively

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<PAGE>
 
    
owns more than 50% of the value of the Company's shares. Because the Ownership
Limitation prohibits any shareholder from owning more than 9.8% of the number of
outstanding Shares or more than 9.8% of the number of outstanding Shares of any
class of preferred stock, no pension trust should hold more than 10% of the
value of the Company's Shares.    

TAXATION OF NON-U.S. SHAREHOLDERS

     The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders (collectively, "Non-U.S. shareholders") are complex and no attempt
will be made herein to provide more than a summary of such rules.  PROSPECTIVE
NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE IMPACT OF FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH REGARD TO AN
INVESTMENT IN THE SHARES, INCLUDING ANY REPORTING REQUIREMENTS.

     Distributions to Non-U.S. shareholders that are not attributable to gain
from sales or exchanges by the Company of U.S. real property interests and are
not designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company.  Such distributions ordinarily
will be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the Shares is treated as effectively
connected with the Non-U.S. Shareholder's conduct of a U.S. trade or business,
the Non-U.S. Shareholder generally will be subject to federal income tax at
graduated rates, in the same manner as U.S. shareholders are taxed with respect
to such distributions (and also may be subject to the 30% branch profits tax in
the case of a Non-U.S. Shareholder that is a non-U.S. corporation).  The Company
expects to withhold U.S. income tax at the rate of 30% on the gross amount of
any such distributions made to a Non-U.S. Shareholder unless (i) a lower treaty
rate applies and any required form evidencing eligibility for that reduced rate
is filed with the Company or (ii) the Non-U.S. Shareholder files an IRS Form
4224 with the Company claiming that the distribution is effectively connected
income.  The Service issued proposed regulations in April 1996 that would modify
the manner in which the Company complies with the withholding requirements.
Distributions in excess of current and accumulated earnings and profits of the
Company will not be taxable to a shareholder to the extent that such
distributions do not exceed the adjusted basis of the shareholder's Shares, but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a Non-U.S. Shareholder's Shares, such distributions will
give rise to tax liability if the Non-U.S. Shareholder would otherwise be
subject to tax on any gain from the sale or disposition of his Shares, as
described below.  Because it generally cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding at the same rate as a
dividend.  However, amounts so withheld are refundable to the extent it is
determined subsequently that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company.

     In August 1996, the U.S. Congress passed the Small Business Job Protection
Act of 1996, which requires the Company to withhold 10% of any distribution in
excess of its current and accumulated earnings and profits.  Consequently,
although the Company intends to withhold at a rate of 30% on the entire amount
of any distribution, to the extent that the Company does not do so, any portion
of a distribution not subject to withholding at a rate of 30% will be subject to
withholding at a rate of 10%.

     For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA").  Under
FIRPTA, distributions attributable to gain from sales of U.S. real property
interests are taxed to a Non-U.S. Shareholder as if such gain were effectively
connected with a U.S. business.  Non-U.S. shareholders thus would be taxed at
the normal capital gain rates applicable to U.S. shareholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals).  Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a non-U.S.
corporate shareholder not entitled to 

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<PAGE>
 
treaty relief or exemption. The Company is required to withhold 35% of any
distribution that is designated by the Company as a capital gains dividend. The
amount withheld is creditable against the Non-U.S. Shareholder's FIRPTA tax
liability.

     Gain recognized by a Non-U.S. Shareholder upon a sale of his Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by non-U.S. persons.  However, no assurance can be given that the
Company will be a "domestically controlled REIT." Furthermore, gain not subject
to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) investment in Shares
is effectively connected with the Non-U.S. Shareholder's U.S. trade or business,
in which case the Non-U.S. Shareholder will be subject to the same treatment as
U.S. shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is
a nonresident alien individual who was present in the U.S. for 183 days or more
during the taxable year and certain other conditions apply, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains.  If the gain on the sale of Shares were to be subject to taxation
under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident alien
individuals, and the possible application of the 30% branch profits tax in the
case of non-U.S. corporations).

OTHER TAX CONSEQUENCES

     The Company, the Operating Partnership, or the Company's shareholders may
be subject to state or local taxation in various state or local jurisdictions,
including those in which it or they own property, transact business, or reside.
The state and local tax treatment of the Company and its shareholders may not
conform to the federal income tax consequences discussed above.  CONSEQUENTLY,
PROSPECTIVE SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
EFFECT OF STATE AND LOCAL TAX LAWS ON AN INVESTMENT IN THE COMPANY.

TAX ASPECTS OF THE OPERATING PARTNERSHIP

     The following discussion summarizes certain federal income tax
considerations applicable to the Company's direct or indirect investment in the
Operating Partnership.  The discussion does not cover state or local tax laws or
any federal tax laws other than income tax laws.

  Classification as a Partnership

    
     The Company will be entitled to include in its income its distributive
share of the Operating Partnership's income and to deduct its distributive share
of the Operating Partnership's losses only if the Operating Partnership is
classified for federal income tax purposes as a partnership rather than as a
corporation or an association taxable as a corporation.  An entity will be
classified as a partnership rather than as a corporation or an association
taxable as a corporation for federal income tax purposes if the entity (i) is
treated as a partnership under Treasury regulations, effective January 1, 1997,
relating to entity classification (the "Check-the-Box Regulations") and (ii) is
not a "publicly traded" partnership.  In general, under the Check-the-Box
Regulations, an unincorporated entity with at least two members may elect to be
classified either as an association taxable as a corporation or as a
partnership.  If such an entity fails to make an election, it generally will be
treated as a partnership for federal income tax purposes.  The Operating
Partnership intends to be classified as a partnership for federal income tax
purposes and will not elect to be treated as an association taxable as a
corporation under the Check-the-Box Regulations.     

     A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market (or the substantial equivalent thereof).  A publicly traded partnership
will be treated as a corporation for federal income tax purposes unless at least
90% of such partnership's gross income for a taxable year consists of
"qualifying income" under Section 7704(d) of the Code, 

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<PAGE>
 
which generally includes any income that is qualifying income for purposes of
the 95% gross income test applicable to REITs (the "90% Passive-Type Income
Exception"). See "--Requirements for Qualification -- Income Tests." The U.S.
Treasury Department has issued regulations effective for taxable years beginning
after December 31, 1995 (the "PTP Regulations") that provide limited safe
harbors from the definition of a publicly traded partnership. Pursuant to one of
those safe harbors (the "Private Placement Exclusion"), interests in a
partnership will not be treated as readily tradable on a secondary market or the
substantial equivalent thereof if (i) all interests in the partnership were
issued in a transaction (or transactions) that was not required to be registered
under the Securities Act of 1933, as amended, and (ii) the partnership does not
have more than 100 partners at any time during the partnership's taxable year.
In determining the number of partners in a partnership, a person owning an
interest in a flow-through entity (i.e., a partnership, grantor trust, or S
                                   - -
corporation) that owns an interest in the partnership is treated as a partner in
such partnership only if (a) substantially all of the value of the owner's
interest in the flow-through entity is attributable to the flow-through entity's
interest (direct or indirect) in the partnership and (b) a principal purpose of
the use of the flow-through entity is to permit the partnership to satisfy the
100-partner limitation. The Operating Partnership qualifies for the Private
Placement Exclusion. If the Operating Partnership is considered a publicly
traded partnership under the PTP Regulations because it is deemed to have more
than 100 partners, the Operating Partnership should not be treated as a
corporation because it should be eligible for the 90% Passive-Type Income
Exception.

     The Company has not requested, and does not intend to request, a ruling
from the Service that the Operating Partnership will be classified as a
partnership for federal income tax purposes.  Instead, Hunton & Williams is of
the opinion that, based on certain factual assumptions and representations, the
Operating Partnership will be treated for federal income tax purposes as a
partnership and not as a corporation or an association taxable as a corporation,
or as a publicly traded partnership.  Unlike a tax ruling, an opinion of counsel
is not binding upon the Service, and no assurance can be given that the Service
will not challenge the status of the Operating Partnership as a partnership for
federal income tax purposes.  If such challenge were sustained by a court, the
Operating Partnership would be treated as a corporation for federal income tax
purposes, as described below.  In addition, the opinion of Hunton & Williams is
based on existing law, which is to a great extent the result of administrative
and judicial interpretation.  No assurance can be given that administrative or
judicial changes would not modify the conclusions expressed in the opinion.

     If for any reason the Operating Partnership were taxable as a corporation,
rather than as a partnership, for federal income tax purposes, the Company would
not be able to qualify as a REIT.  See "Federal Income Tax Considerations --
Requirements for Qualification -- Income Tests" and "-- Requirements for
Qualification --  Asset Tests." In addition, any change in the Operating
Partnership's status for tax purposes might be treated as a taxable event, in
which case the Company might incur a tax liability without any related cash
distribution. See "Federal Income Tax Considerations -- Requirements for
Qualification -- Distribution Requirements." Further, items of income and
deduction of the Operating Partnership would not pass through to its partners,
and its partners would be treated as shareholders for tax purposes.
Consequently, the Operating Partnership would be required to pay income tax at
corporate tax rates on its net income, and distributions to its partners would
constitute dividends that would not be deductible in computing the Operating
Partnership's taxable income.

  Income Taxation of the Operating Partnerships and its Partners

     Partners, Not a Partnership, Subject to Tax.  A partnership is not a
taxable entity for federal income tax purposes.  Rather, the Company will be
required to take into account its allocable share of the Operating Partnership's
income, gains, losses, deductions, and credits for any taxable year of the
Operating Partnership ending within or with the taxable year of the Company,
without regard to whether the Company has received or will receive any
distribution from the Operating Partnership.

     Partnership Allocations.  Although a partnership agreement generally will
determine the allocation of income and losses among partners, such allocations
will be disregarded for tax purposes under section 704(b) of the Code if they do
not comply with the provisions of section 704(b) of the Code and the Treasury
Regulations promulgated thereunder.  If an allocation is not recognized for
federal income tax purposes, the item subject to the allocation will be
reallocated in accordance with the partners' interests in the partnership, which
will be 

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<PAGE>
 
determined by taking into account all of the facts and circumstances relating to
the economic arrangement of the partners with respect to such item. The
Operating Partnership's allocations of taxable income and loss are intended to
comply with the requirements of section 704(b) of the Code and the Treasury
Regulations promulgated thereunder.

     Tax Allocations With Respect to Contributed Properties.  Pursuant to
section 704(c) of the Code, income, gain, loss, and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal income
tax purposes in a manner such that the contributor is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the property at the
time of the contribution.  The amount of such unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution.  The Treasury Department has issued
regulations requiring partnerships to use a "reasonable method" for allocating
items affected by section 704(c) of the Code and outlining several reasonable
allocation methods.  The Operating Partnership plans to elect to use the
traditional method for allocating Code section 704(c) items with respect to any
properties it acquires in exchange for OP Units.

     Under the Operating Partnership Agreement, depreciation or amortization
deductions of the Operating Partnership generally will be allocated among the
partners in accordance with their respective interests in the Operating
Partnership, except to the extent that the Operating Partnership is required
under Code section 704(c) to use a method for allocating tax depreciation
deductions attributable to its properties that results in the Company receiving
a disproportionately large share of such deductions.  Depending on the
allocation method elected under Code section 704(c), it is possible that the
Company (i) may be allocated lower amounts of depreciation deductions for tax
purposes with respect to contributed properties than would be allocated to the
Company if such properties were to have a tax basis equal to their fair market
value at the time of contribution and (ii) may be allocated taxable gain in the
event of a sale of such contributed properties in excess of the economic profit
allocated to the Company as a result of such sale.  These allocations may cause
the Company to recognize taxable income in excess of cash proceeds, which might
adversely affect the Company's ability to comply with the REIT distribution
requirements, although the Company does not anticipate that this event will
occur.  The foregoing principles also will affect the calculation of the
Company's earnings and profits for purposes of determining which portion of the
Company's distributions is taxable as a dividend.  The allocations described in
this paragraph may result in a higher portion of the Company's distributions
being taxed as a dividend than would have occurred had the Company purchased
such properties for cash.

     Basis in Operating Partnership Interest.  The Company's adjusted tax basis
in its partnership interest in the Operating Partnership generally is equal to
(i) the amount of cash and the basis of any other property contributed to the
Operating Partnership by the Company, (ii) increased by (A) its allocable share
of the Operating Partnership's income and (B) its allocable share of
indebtedness of the Operating Partnership, and (iii) reduced, but not below
zero, by (A) the Company's allocable share of the Operating Partnership's loss
and (B) the amount of cash distributed to the Company, including constructive
cash distributions resulting from a reduction in the Company's share of
indebtedness of the Operating Partnership.

     If the allocation of the Company's distributive share of the Operating
Partnership's loss would reduce the adjusted tax basis of the Company's
partnership interest in the Operating Partnership below zero, the recognition of
such loss will be deferred until such time as the recognition of such loss would
not reduce the Company's adjusted tax basis below zero.  To the extent that the
Operating Partnership's distributions, or any decrease in the Company's share of
the indebtedness of the Operating Partnership (such decrease being considered a
constructive cash distribution to the partners), would reduce the Company's
adjusted tax basis below zero, such distributions (including such constructive
distributions) will constitute taxable income to the Company.  Such
distributions and constructive distributions normally will be characterized as
capital gain, and, if the Company's partnership interest in the Operating
Partnership has been held for longer than the long-term capital gain holding
period (currently one year), the distributions and constructive distributions
will constitute long-term capital gain.

     Depreciation Deductions Available to the Operating Partnership.  Assuming
that the Minimum Offering is reached, immediately upon accepting a subscription,
the Company will make a cash contribution to the 

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<PAGE>
 
Operating Partnership in exchange for a general partnership interest in the
Operating Partnership. The Operating Partnership will use a portion of such
contributions to acquire interests in properties. To the extent that the
Operating Partnership acquires properties for cash, the Operating Partnership's
initial basis in such Properties for federal income tax purposes generally will
be equal to the purchase price paid by the Operating Partnership. The Operating
Partnership plans to depreciate such depreciable property for federal income tax
purposes under the alternative depreciation system of depreciation ("ADS").
Under ADS, the Operating Partnership generally will depreciate such buildings
and improvements over a 40-year recovery period using a straight line method and
a mid-month convention and will depreciate furnishings and equipment over a 12-
year recovery period. To the extent that the Operating Partnership acquires
properties in exchange for OP Units, the Operating Partnership's initial basis
in each such property for federal income tax purposes should be the same as the
transferor's basis in that property on the date of acquisition by the Operating
Partnership. Although the law is not entirely clear, the Operating Partnership
generally intends to depreciate such depreciable property for federal income tax
purposes over the same remaining useful lives and under the same methods used by
the transferors.

SALE OF THE OPERATING PARTNERSHIP'S PROPERTY

     Generally, any gain realized by the Operating Partnership on the sale of
property held for more than one year will be long-term capital gain, except for
any portion of such gain that is treated as depreciation or cost recovery
recapture.  Any gain recognized by the Operating Partnership upon the
disposition of a property acquired by the Operating Partnership for cash will be
allocated among the partners in accordance with their respective percentage
interests in the Operating Partnership.  The Bylaws of the Company provide that
any decision to sell any real estate asset in which a director, or officer of
the Company, or any Affiliate of the foregoing, has a direct or indirect
interest, will be made by a majority of the Directors including a majority of
the Independent Directors.  See "Policies with Respect to Certain Activities --
Conflict of Interest Policies -- Articles of Incorporation and Bylaw
Provisions."

     The Company's share of any gain realized by the Operating Partnership on
the sale of any property held by the Operating Partnership as inventory or other
property held primarily for sale to customers in the ordinary course of the
Operating Partnership's trade or business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax.  Such prohibited
transaction income also may have an adverse effect upon the Company's ability to
satisfy the income tests for REIT status.  See "Federal Income Tax
Considerations --  Requirements For Qualification -- Income Tests" above.  The
Company, however, does not presently intend to   acquire or hold or allow the
Operating Partnership to acquire or hold any property that represents inventory
or other property held primarily for sale to customers in the ordinary course of
the Company's or the Operating Partnership's trade or business.

                              ERISA CONSIDERATIONS

    
     The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of section 4975 of the Code that may be
relevant to a prospective purchaser of Shares (including, with respect to the
discussion contained in "ERISA Considerations -- Status of the Company and the
Operating Partnership under ERISA," to a prospective purchaser that is not an
employee benefit plan, another tax-qualified retirement plan, or an individual
retirement account or an individual retirement annuity ("IRA")).  The discussion
does not purport to deal with all aspects of ERISA or section 4975 of the Code
or, to the extent not preempted, state law that may be relevant to particular
shareholders (including plans subject to Title I of ERISA, other retirement
employee benefit plans and IRAs subject to the prohibited transaction provisions
of section 4975 of the Code, and governmental plans or church plans that are
exempt from ERISA and section 4975 of the Code but that may be subject to state
law requirements) in light of their particular circumstances.     

     The discussion is based on current provisions of ERISA and the Code,
existing and currently proposed regulations under ERISA and the Code, the
legislative history of ERISA and the Code, existing administrative 

                                       69

<PAGE>
 
    
rulings of the Department of Labor ("DOL") and reported judicial decisions. No
assurance can be given that legislative, judicial, or administrative changes
will not affect the accuracy of any statements herein with respect to
transactions entered into or contemplated prior to the effective date of such
changes.     

     A FIDUCIARY MAKING THE DECISION TO INVEST IN THE SHARES ON BEHALF OF A
PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE BENEFIT PLAN, A TAX-QUALIFIED
RETIREMENT PLAN, OR AN IRA SHOULD CONSULT ITS OWN LEGAL ADVISOR REGARDING THE
SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTION 4975 OF THE CODE, AND STATE
LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE SHARES BY SUCH PLAN
OR IRA.

EMPLOYEE BENEFIT PLANS, TAX-QUALIFIED RETIREMENT PLANS, AND IRAS

    
     Each fiduciary of a pension, profit-sharing, or other employee benefit plan
(an "ERISA Plan") subject to Title I of ERISA should consider carefully whether
an investment in the Shares is consistent with his fiduciary responsibilities
under ERISA.  In particular, the fiduciary requirements of Part 4 of Title I of
ERISA require an ERISA Plan's investments to be (i) prudent and in the best
interests of the ERISA Plan, its participants, and its beneficiaries, (ii)
diversified in order to minimize the risk of large losses, unless it is clearly
prudent not to do so, and (iii) authorized under the terms of the ERISA Plan's
governing documents (provided the documents are consistent with ERISA).  In
determining whether an investment in the Shares is prudent for purposes of
ERISA, the appropriate fiduciary of an ERISA Plan should consider all of the
facts and circumstances, including whether the investment is reasonably
designed, as a part of the ERISA Plan's portfolio for which the fiduciary has
investment responsibility, to meet the objectives of the ERISA Plan, taking into
consideration the risk of loss and opportunity for gain (or other return) from
the investment, the diversification, cash flow, and funding requirements of the
ERISA Plan, and the liquidity and current return of the ERISA Plan's portfolio.
A fiduciary also should take into account the nature of the Company's business,
the management of the Company, the Company's lack of operating history, the fact
that investment properties have not been identified yet, the possibility of the
recognition of UBTI, and other matters described under "Risk Factors."     

    
     The fiduciary of an IRA or of a qualified retirement plan not subject to
Title I of ERISA because it is a governmental or church plan or because it does
not cover common law employees (a "Non-ERISA Plan") should consider that such an
IRA or Non-ERISA Plan may only make investments that are authorized by the
appropriate governing documents and under applicable state law.     

    
     Fiduciaries of ERISA Plans and persons making the investment decision for
an IRA or other Non-ERISA Plan should consider the application of the prohibited
transaction provisions of ERISA and the Code in making their investment
decision.  A "party in interest" or "disqualified person" with respect to an
ERISA Plan or with respect to a Non-ERISA Plan or IRA subject to Code section
4975 is subject to (i) an initial 15% excise tax on the amount involved in any
prohibited transaction involving the assets of the plan or IRA and (ii) an
excise tax equal to 100% of the amount involved if any prohibited transaction is
not corrected.  If the disqualified person who engages in the transaction is the
individual on behalf of whom an IRA is maintained (or his beneficiary), the IRA
will lose its tax-exempt status and its assets will be deemed to have been
distributed to such individual in a taxable distribution (and no excise tax will
be imposed) on account of the prohibited transaction.  In addition, a fiduciary
who permits an ERISA Plan to engage in a transaction that the fiduciary knows or
should know is a prohibited transaction may be liable to the ERISA Plan for any
loss the ERISA Plan incurs as a result of the transaction or for any profits
earned by the fiduciary in the transaction.     

STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER ERISA

    
     The following section discusses certain principles that apply in
determining whether the fiduciary requirements of ERISA and the prohibited
transaction provisions of ERISA and the Code apply to an entity because one or
more investors in the equity interests in the entity is an ERISA Plan or is a
Non-ERISA Plan or IRA subject to section 4975 of the Code.  An ERISA Plan
fiduciary also should consider the relevance of those principles to ERISA's
prohibition on improper delegation of control over or responsibility for "plan
assets" and     

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<PAGE>
 
ERISA's imposition of co-fiduciary liability on a fiduciary who participates in,
permits (by action or inaction) the occurrence of, or fails to remedy a known
breach by another fiduciary.

    
     If the assets of the Company are deemed to be "plan assets" under ERISA,
(i) the prudence standards and other provisions of Part 4 of Title I of ERISA
would be applicable to any transactions involving the Company's assets, (ii)
persons who exercise any authority over the Company's assets, or who provide
investment advice to the Company, would (for purposes of the fiduciary
responsibility provisions of ERISA) be fiduciaries of each ERISA Plan that
acquires Shares, and transactions involving the Company's assets undertaken at
their direction or pursuant to their advice might violate their fiduciary
responsibilities under ERISA, especially with regard to conflicts of interest,
(iii) a fiduciary exercising his investment discretion over the assets of an
ERISA Plan to cause it to acquire or hold the Shares could be liable under Part
4 of Title I of ERISA for transactions entered into by the Company that do not
conform to ERISA standards of prudence and fiduciary responsibility, and (iv)
certain transactions that the Company might enter into in the ordinary course of
its business and operations might constitute "prohibited transactions" under
ERISA and the Code.     

    
     Regulations of the DOL defining "plan assets" (the "Plan Asset
Regulations") generally provide that when an ERISA Plan or Non-ERISA Plan or IRA
acquires a security that is an equity interest in an entity and the security is
neither a "publicly-offered security" nor a security issued by an investment
company registered under the Investment Company Act of 1940, the ERISA or Non-
ERISA Plan's or IRA's assets include both the equity interest and an undivided
interest in each of the underlying assets of the issuer of such equity interest,
unless one or more exceptions specified in the Plan Asset Regulations are
satisfied.     

    
     The Plan Asset Regulations define a publicly-offered security as a security
that is (i) "widely-held," (ii) "freely transferable," and (iii) either (A) part
of a class of securities registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or (B) sold
pursuant to an effective registration statement under the Securities Act
(provided the securities are registered under the Exchange Act within 120 days
after the end of the fiscal year of the issuer during which the offering
occurred, or such longer period as may be allowed by the Commission).  The
Shares are being sold pursuant to an effective registration statement under the
Securities Act and will be registered under the Exchange Act.  The Plan Asset
Regulations provide that a security is "widely held" only if it is part of a
class of securities that is owned by 100 or more investors independent of the
issuer and of one another.  A security will not fail to be widely held because
the number of independent investors falls below 100 subsequent to the initial
public offering as a result of events beyond the issuer's control.  The Company
anticipates that upon completion of the Offering, the Shares will be "widely
held."     

    
     The Plan Asset Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances.  The Plan Asset Regulations further provide
that where a security is part of an offering in which the minimum investment is
$10,000 or less (as is the case with this Offering), certain restrictions
ordinarily will not, alone or in combination, affect a finding that such
securities are freely transferable.  The restrictions on transfer enumerated in
the Plan Asset Regulations as not affecting that finding include: (i) any
restriction on or prohibition against any transfer or assignment that would
result in the termination or reclassification of an entity for federal or state
tax purposes, or that otherwise would violate any federal or state law or court
order, (ii) any requirement that advance notice of a transfer or assignment be
given to the issuer, (iii) any administrative procedure that establishes an
effective date, or an event (such as completion of an offering), prior to which
a transfer or assignment will not be effective, and (iv) any limitation or
restriction on transfer or assignment that is not imposed by the issuer or a
person acting on behalf of the issuer.  The Company believes that the
restrictions imposed under the Articles of Incorporation on the transfer of the
Shares will not result in the failure of the Shares to be "freely transferable."
The Company also is not aware of any other facts or circumstances limiting the
transferability of the Shares that are not enumerated in the Plan Asset
Regulations as those not affecting free transferability, and the Company does
not intend to impose in the future (or to permit any person to impose on its
behalf) any limitations or restrictions on transfer that would not be among the
enumerated permissible limitations or restrictions.  The Plan Asset Regulations
only establish a     

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<PAGE>
 
presumption in favor of a finding of free transferability, and no assurance can
be given that the DOL or the Treasury Department will not reach a contrary
conclusion.

    
     Assuming that the Shares will be "widely held" and that no other facts and
circumstances other than those referred to in the preceding paragraph exist that
restrict transferability of the Shares, the Shares should be publicly offered
securities and the assets of the Company should not be deemed to be "plan
assets" of any ERISA Plan, IRA, or Non-ERISA Plan that invests in the 
Shares.     

    
     The Plan Asset Regulations also will apply in determining whether the
assets of the Operating Partnership will be deemed to be "plan assets."  The
partnership interests in the Operating Partnership will not be publicly-offered
securities.  Nevertheless, if the Shares constitute publicly-offered securities,
the indirect investment in the Operating Partnership by ERISA Plans, IRAs, or
Non-ERISA Plans subject to section 4975 of the Code through their ownership of
Shares will not cause the assets of the Operating Partnership to be treated as
"plan assets" of such shareholders.     

                             PARTNERSHIP AGREEMENT

     The following summary of the Partnership Agreement, and the descriptions of
certain provisions thereof set forth elsewhere in this Prospectus, is qualified
in its entirety by reference to the Partnership Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.

MANAGEMENT

    
     The Operating Partnership has been organized as a Delaware limited
partnership pursuant to the terms of the Partnership Agreement.  Pursuant to the
Partnership Agreement, the Company, as the sole general partner of the Operating
Partnership (in such capacity, the "General Partner"), will have full, exclusive
and complete responsibility and discretion in the management and control of the
Operating Partnership, and the limited partners of the Operating Partnership
(the "Limited Partners"), in their capacity as such, will have no authority to
transact business for, or participate in the management activities or decisions
of, the Operating Partnership.  However, any amendment to the Partnership
Agreement that would (i) affect the Redemption Rights (as defined below), (ii)
adversely affect the Limited Partners' rights to receive cash distributions,
(iii) alter the Operating Partnership's allocations of income and loss or (iv)
impose on the Limited Partners any obligations to make additional contributions
to the capital of the Operating Partnership, would require the consent of
Limited Partners holding more than two-thirds of the OP Units.     

TRANSFERABILITY OF INTERESTS

     The Company may not voluntarily withdraw from the Operating Partnership or
transfer or assign its interest in the Operating Partnership unless the
transaction in which such withdrawal or transfer occurs results in the Limited
Partners' receiving property in an amount equal to the amount they would have
received had they exercised their Redemption Rights immediately prior to such
transaction, or unless the successor to the General Partner contributes
substantially all of its assets to the Operating Partnership in return for an
interest in the Operating Partnership.  A person may not be admitted as a
substitute or successor General Partner unless a majority-in-interest of the
Limited Partners (other than the Advisor) consent in writing to the admission of
such substitute or successor General Partner, which consent may be withheld in
the sole discretion of such Limited Partners.  With certain limited exceptions,
the Limited Partners may not transfer their interests in the Operating
Partnership, in whole or in part, without the written consent of the Company,
which consent may be withheld in the sole discretion of the Company.

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<PAGE>
 
CAPITAL CONTRIBUTION

     As the Company accepts subscriptions, it will contribute to the Operating
Partnership substantially all of the net proceeds thereof, in consideration of
which the Company will receive a general partnership interest in the Operating
Partnership.  The Advisor has contributed $200,000 to the Operating Partnership
and is the sole initial Limited Partner.  Although the Operating Partnership
will receive substantially all of the net proceeds of the Offering, the Company
will be deemed to have made capital contributions to the Operating Partnership
in the amount of the gross proceeds of the Offering and the Operating
Partnership will be deemed simultaneously to have paid the selling commissions
and other Organization and Offering Expenses.  The Partnership Agreement
provides that if the Operating Partnership requires additional funds at any time
or from time to time in excess of funds available to the Operating Partnership
from borrowing or capital contributions, the Company may borrow such funds from
a financial institution or other lender and lend such funds to the Operating
Partnership on the same terms and conditions as are applicable to the Company's
borrowing of such funds.  Moreover, the Company is authorized to cause the
Operating Partnership to issue partnership interests for less than fair market
value if the Company has concluded in good faith that such issuance is in the
best interests of the Company and the Operating Partnership.

REDEMPTION RIGHTS

    
     Pursuant to the Partnership Agreement, the Limited Partners, other than the
Advisor, will receive rights (the "Redemption Rights"), which will enable them
to cause the Operating Partnership to redeem each OP Unit for cash equal to the
value of one Share (or, at the Company's election, the Company may purchase each
OP Unit offered for redemption for one Share).  The Redemption Rights may not be
exercised, however, if and to the extent that the delivery of Shares upon
exercise of such rights (regardless of whether the Company would exercise its
rights to deliver Shares) would (i) result in any person owning, directly or
indirectly, Shares in excess of the Ownership Limitation, (ii) result in shares
of capital stock of the Company being owned by fewer than 100 persons
(determined without reference to any rules of attribution), (iii) result in the
Company being "closely held" within the meaning of section 856(h) of the Code,
(iv) cause the Company to own, actually or constructively, 10% or more of the
ownership interests in a tenant of the Company's or the Operating Partnership's
real property, within the meaning of section 856(d)(2)(B) of the Code, or (v)
cause the acquisition of Shares by such redeeming Limited Partner to be
"integrated" with any other distribution of Shares for purposes of complying
with the Securities Act.  The Redemption Rights may be exercised, at any time
after one year following the date of issuance of the related OP Units, provided
that not more than two redemptions may occur during each calendar year and each
Limited Partner may not exercise the Redemption Right for less than 1,000 OP
Units or, if such Limited Partner holds less than 1,000 OP Units, all of the OP
Units held by such Limited Partner.  The number of Shares issuable upon exercise
of the Redemption Rights will be adjusted upon the occurrence of share splits,
mergers, consolidations or similar pro rata share transactions, which otherwise
would have the effect of diluting the ownership interests of the Limited
Partners or the shareholders of the Company.  As of the date hereof, the Company
has not issued any OP Units other than to the Advisor and has no current
intentions to issue OP Units.     

OPERATIONS

    
     The Partnership Agreement requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT, to avoid any federal income or excise tax
liability imposed under the Code and to ensure that the Operating Partnership
will not be classified as a "publicly traded partnership" for purposes of
section 7704 of the Code.     

    
     In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, the Operating Partnership will pay all
administrative costs and expenses of the Company (the "Company Expenses") and
the Company Expenses will be treated as expenses of the Operating Partnership.
The Company Expenses generally will include (i) all expenses relating to the
formation and continuity of existence of the Company, (ii) all expenses relating
to the public offering and registration of securities by the Company, (iii) all
expenses associated with the preparation and filing of any periodic reports by
the Company under federal, state or      

                                       73

<PAGE>
 
local laws or regulations, (iv) all expenses associated with compliance by the
Company with laws, rules and regulations promulgated by any regulatory body and
(v) all other operating or administrative costs of the Company incurred in the
ordinary course of its business on behalf of the Operating Partnership. The
Company Expenses, however, will not include any administrative and operating
costs and expenses incurred by the Company that are attributable to properties
or partnership interests that are owned by the Company directly. The Company
currently does not anticipate owning any properties directly.

DISTRIBUTIONS AND ALLOCATIONS

     The Partnership Agreement will provide that the Operating Partnership will
distribute cash from operations (including net sale or refinancing proceeds, but
excluding net proceeds from the sale of the Operating Partnership's property in
connection with the liquidation of the Operating Partnership) on a quarterly
(or, at the election of the Company, more frequent) basis, in amounts determined
by the Company in its sole discretion, to the partners in accordance with their
respective percentage interests in the Operating Partnership.  Upon liquidation
of the Operating Partnership, after payment of, or adequate provision for, debts
and obligations of the Operating Partnership, including any partner loans, any
remaining assets of the Operating Partnership will be distributed to all
partners with positive capital accounts in accordance with their respective
positive capital account balances.  If the Company has a negative balance in its
capital account following a liquidation of the Operating Partnership, it will be
obligated to contribute cash to the Operating Partnership equal to the negative
balance in its capital account.

     Profit and loss of the Operating Partnership for each fiscal year of the
Operating Partnership generally will be allocated among the partners in
accordance with their respective interests in the Operating Partnership.
Taxable income and loss will be allocated in the same manner, subject to
compliance with the provisions of Code sections 704(b) and 704(c) and Treasury
Regulations promulgated thereunder.

TERM

     The Operating Partnership will continue until December 31, 2050, or until
sooner dissolved upon the sale or other disposition of all or substantially all
the assets of the Operating Partnership, the redemption of all limited
partnership interests in the Operating Partnership (other than those held by the
Advisor), or by the election by the Company.

TAX MATTERS

     Pursuant to the Partnership Agreement, the Company will be the tax matters
partner of the Operating Partnership and, as such, will have authority to handle
tax audits and to make tax elections under the Code on behalf of the Operating
Partnership.

                              PLAN OF DISTRIBUTION

    
     A maximum of 15,000,000 Shares are being offered to the public through the
Dealer Manager, a registered broker-dealer affiliated with the Advisor.  See
"Conflicts of Interest" and "Management Compensation."  The Shares are being
offered at a price of $10.00 per share on a "best efforts" basis (which means
generally that the Dealer Manager will be required to use only its best efforts
to sell the Shares and has no firm commitment or obligation to purchase any of
the Shares).  The Company and the Dealer Manager have determined the Offering
price of the Shares based on their analysis of other similar offferings and what
they believe the investing market is willing to pay for the Shares.     

     Except as provided below, the Dealer Manager will receive commissions of 7%
of the Gross Offering Proceeds.  In addition, the Company may reimburse the
expenses incurred by nonaffiliated dealers for actual due diligence purposes in
the maximum amount of 2.5% of the Gross Offering Proceeds.  The Company will not
pay 

                                       74

<PAGE>
 
    
referral or similar fees to any accountants, attorneys or other persons in
connection with the distribution of the Shares. Shareholders who elect to
participate in the Reinvestment Plan will be charged Selling Commissions on
Shares purchased pursuant to the Reinvestment Plan on the same basis as
shareholders purchasing Shares other than pursuant to the Reinvestment Plan.
Shares issued by the Company under the Reinvestment Plan will be available only
until the termination of the Offering, as described above. Soliciting Dealers
will also receive one Soliciting Dealer Warrant for each 40 Shares sold by such
Soliciting Dealer during the Offering, subject to federal and state securities
laws. The holder of a Soliciting Dealer Warrant will be entitled to purchase one
Share from the Company at a price of $12 during the period commencing with the
first date upon which the Soliciting Dealer Warrants are issued and ending five
years after the date of issuance. Subject to certain limitations, the Soliciting
Dealer Warrants may not be transferred, assigned, pledged or hypothecated for a
period of one year following issuance thereof. In addition, no Soliciting Dealer
Warrants will be exercisable until one year from the date of issuance. The
Soliciting Dealer Warrants to be issued in connection with the Offering, as well
as the Shares issuable upon exercise of the Soliciting Dealer Warrants, are
being registered as part of this Offering. For the life of the Soliciting Dealer
Warrants, the holders are given, at nominal cost, the opportunity to profit from
a rise in the market price for the Common Stock without assuming the risk of
ownership, with a resulting dilution in the interest of other security holders.
Moreover, the holders of the Soliciting Dealer Warrants might be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain needed capital by a new offering of its securities on terms more
favorable than those provided by the Soliciting Dealer Warrants. See
"Description of Capital Stock -- Soliciting Dealer Warrants."     

     The Dealer Manager may authorize certain other broker-dealers who are
members of the NASD to sell Shares.  In the event of the sale of Shares by such
other broker-dealers, the Dealer Manager may reallow its commissions in the
amount of up to 7% of the Gross Offering Proceeds to such participating broker-
dealers.

     In no event shall the total underwriting compensation, including Selling
Commissions and expense reimbursements, exceed 10% of Gross Offering Proceeds,
except for the additional 2.5% of Gross Offering Proceeds which may be paid by
the Company in connection with due diligence activities.

     The Company has agreed to indemnify the participating broker-dealers,
including the Dealer Manager, against certain liabilities arising under the
Securities Act of 1933, as amended.

     The broker-dealers are not obligated to obtain any subscriptions, and there
is no assurance that any Shares will be sold.

     The Advisor may at its option purchase Shares offered hereby at the public
offering price, in which case it would expect to hold such Shares as
shareholders for investment and not for distribution.  Shares purchased by the
Advisor or its Affiliates shall not be entitled to vote on any matter presented
to the shareholders for a vote.  No selling commissions will be payable by the
Company in connection with any Shares purchased by the Advisor.

    
     Payment for Shares should be made by check payable to "Wells Real Estate
Investment Trust, Inc.  Subscriptions will be effective only upon acceptance by
the Company, and the Company reserves the right to reject any subscription in
whole or in part.  In no event may a subscription for Shares be accepted until
at least five business days after the date the subscriber receives this
Prospectus.  Each subscriber will receive a confirmation of his purchase.
Except for purchase pursuant to the Reinvestment Plan, all accepted
subscriptions will be for whole Shares and for not less than 100 Shares
($1,000).  See "Investor Suitability Standards."  Except in Maine, Minnesota and
Washington, investors who have satisfied the minimum purchase requirement and
have purchased units in Prior Wells Public Programs may purchase less than the
minimum number of Shares discussed above, provided that such investors purchase
a minimum of 2.5 Shares ($25).  After investors have satisfied the minimum
purchase requirement, minimum additional purchases must be in increments of at
least 2.5 Shares ($25), except for purchases pursuant to the Reinvestment 
Plan.     

    
     Subscription proceeds will be placed in an interest-bearing account with
NationsBank, N.A. (the "Escrow Agent") until such subscriptions aggregating at
least $1,250,000 (exclusive of any subscriptions for      

                                       75

<PAGE>
 
    
Shares by the Advisor or its Affiliates) have been received and accepted by the
Advisor (the "Minimum Offering"). Any Shares purchased by the Advisor or its
Affiliates will not be counted in calculating the Minimum Offering. Subscription
proceeds held in the escrow account will be invested in obligations of, or
obligations guaranteed by, the United States government or bank money-market
accounts or certificates of deposit of national or state banks that have
deposits insured by the Federal Deposit Insurance Corporation (including
certificates of deposit of any bank acting as depository or custodian for any
such funds), as directed by the Advisor. Subscribers may not withdraw funds from
the escrow account.     

    
     Investors who desire to establish an IRA for purposes of investing in
Shares may do so by having Wells Advisors, Inc., a qualified non-bank IRA
custodian affiliated with the Advisor, act as their IRA custodian.  In the event
that an IRA is established having Wells Advisors, Inc. as the IRA custodian, the
authority of Wells Advisors, Inc. will be limited to holding the Shares on
behalf of the beneficiary of the IRA and making distributions or reinvestments
in Shares solely at the discretion of the beneficiary of the IRA.  Wells
Advisors, Inc. will not have the authority to vote any of the Shares held in an
IRA except strictly in accordance with the written instructions of the
beneficiary of the IRA.  See "Management."     

    
     If the Minimum Offering has not been received and accepted by ________ 1998
(one year after the date of this Prospectus), the Escrow Agent will promptly so
notify the Company and this Offering will be terminated.  In such event, the
Escrow Agent is obligated to use its best efforts to obtain an executed IRS Form
W-9 from each subscriber whose subscription is rejected.  No later than ten
business days after rejection of a subscription, the Escrow Agent will refund
and return all monies to rejected subscribers and any interest earned thereon
after deducting escrow expenses (except for Maine, Missouri, Ohio and
Pennsylvania residents).  In the event that a subscriber fails to remit an
executed IRS Form W-9 to the Escrow Agent prior to the date the Escrow Agent
returns the subscriber's funds, the Escrow Agent will be required to withhold
from such funds 31% of the earnings attributable to such subscriber in
accordance with IRS Regulations.  During any period in which subscription
proceeds are held in escrow, interest earned thereon will be allocated among
subscribers on the basis of the respective amounts of their subscriptions and
the number of days that such amounts were on deposit.  Such interest net of
escrow expenses will be paid to subscribers upon the termination of the escrow
period.     

     Initial subscribers may be admitted as shareholders of the Company and the
payments transferred from escrow to the Company at any time after the Company
has received and accepted the Minimum Offering, except that subscribers residing
in New York and Pennsylvania may not be admitted to the Company until
subscriptions have been received and accepted for 250,000 Shares ($2,500,000)
from all sources.  The funds representing subscriptions for Shares from New York
and Pennsylvania residents will not be released from the escrow account until
subscriptions for at least $2,500,000 have been received from all sources.
Subscriptions from New York residents may not be included in determining whether
subscriptions for the Minimum Offering have been obtained.  In addition, certain
other states may impose different requirements than those set forth herein.  Any
such additional requirements will be set forth in a supplement to this
Prospectus.

    
     The proceeds of this Offering will be received and held in trust for the
benefit of purchasers of Shares and will be retained in trust after closing to
be used only for the purposes set forth in the "Estimated Use of Proceeds"
section.  After the close of the Minimum Offering, subscriptions will be
accepted or rejected within 30 days of receipt by the Company, and if rejected,
all funds shall be returned to subscribers within 10 business days.  Investors
whose subscriptions are accepted will be admitted as shareholders of the Company
periodically (but not less often than quarterly).  Escrowed proceeds will be
released to the Company on the date that the applicable Shareholder is admitted
to the Company.  A Shareholder will not receive a Share certificate or other
evidence of his interest in the Company unless the Listing occurs, and then only
if requested by the Shareholder.     

     The Advisor may sell Shares to Retirement Plans of broker-dealers
participating in the Offering, to broker-dealers in their individual capacities,
to IRAs and Qualified Plans of their registered representatives or to any one of
their registered representatives in their individual capacities for 92% of the
Unit's public offering price in consideration of the services rendered by such
broker-dealers and registered representatives in the distribution.  

                                       76

<PAGE>
 
The net proceeds to the Company from such sales will be identical to the
Company's net proceeds from other sales of Shares.

    
     In connection with sales of 25,000 or more Shares ($250,000) to a
"purchaser" (as defined below), investors may agree with their registered
representatives to reduce the amount of selling commissions payable to
participating broker-dealers.  Such reduction will be credited to the purchaser
by reducing the total purchase price payable by such purchaser.  The following
table illustrates the various discount levels:     

    

<TABLE>
<CAPTION>
                                          SELLING COMMISSIONS
                                        ----------------------
                                                                                     
                                                                                  NET PROCEEDS
        DOLLAR VOLUME                                           PURCHASE PRICE    TO COMPANY      
       OF SHARES PURCHASED           PERCENT      PER SHARE       PER SHARE        PER SHARE                    
       -----------------------       -------      ---------       ---------        ---------
       <S>                           <C>          <C>           <C>                <C>
       Under $250,000                  7.0%       $  0.70          $ 10.00          $9.30
       $250,000-$649,999               6.0%       $0.5872          $9.7872          $9.30
       $650,000-$999,999               3.0%       $0.2845          $9.4845          $9.30
       $1,000,000-$1,999,999           1.0%       $0.0929          $9.2929          $9.30
       Over $2,000,000                 0.5%       $0.0462          $9.2462          $9.30
</TABLE>

     

     For example, if an investor purchases 100,000 Shares in the Company, he
could pay as little as $929,290 rather than $1,000,000 for the Shares, in which
event the commission on the sale of such Shares would be $9,290 ($0.0929 per
Share), and the Company would receive net proceeds of $930,000 ($9.30 per
Share).  The net proceeds to the Company will not be affected by volume
discounts.

     Because all investors will be deemed to have contributed the same amount
per Share to the Company for purposes of distributions of Cash Available for
Distribution, an investor qualifying for a volume discount will receive a higher
return on his investment in the Company than investors who do not qualify for
such discount.

    
     Subscriptions may be combined for the purpose of determining the volume
discounts in the case of subscriptions made by any "purchaser," as that term is
defined below, provided all such Shares are purchased through the same broker-
dealer.  The volume discount shall be prorated among the separate subscribers
considered to be a single "purchaser."  Any request to combine more than one
subscription must be made in writing, and must set forth the basis for such
request.  Any such request will be subject to verification by the Advisor that
all of such subscriptions were made by a single "purchaser."     

    
     For the purposes of such volume discounts, the term "purchaser" includes
(i) an individual, his or her spouse and their children under the age of 21 who
purchase the Shares for his, her or their own accounts; (ii) a corporation,
partnership, association, joint-stock company, trust fund or any organized group
of persons, whether incorporated or not; (iii) an employees' trust, pension,
profit sharing or other employee benefit plan qualified under Section 401(a) of
the Code; and (iv) all commingled trust funds maintained by a given bank.     

    
     Notwithstanding the above, in connection with volume sales made to
investors in the Company, the Company may, in its sole discretion, waive the
"purchaser" requirements and aggregate subscriptions (including subscriptions to
Prior Wells Public Programs) as part of a combined order for purposes of
determining the number of Shares purchased, provided that any aggregate group of
subscriptions must be received from the same broker-dealer, including the Dealer
Manager.  Any such reduction in selling commission will be prorated among the
separate subscribers except that, in the case of purchases through the Dealer
Manager, the Dealer Manager may allocate such reduction among separate
subscribers considered to be a single "purchaser" as it deems appropriate.  An
investor may reduce the amount of his purchase price to the net amount shown in
the foregoing table, if applicable.  If such investor does not reduce the
purchase price, the excess amount submitted over the discounted purchase price
shall be returned to the actual separate subscribers for Shares.  Except as
provided in this paragraph, separate subscriptions will not be cumulated,
combined or aggregated.     

                                       77

<PAGE>
 
     In addition, in order to encourage purchases in amounts of 500,000 or more
Shares, a potential purchaser who proposes to purchase at least 500,000 Shares
in the Company may agree with the Advisor and the Dealer Manager to have the
Acquisition and Advisory Fees payable to the Advisor with respect to the sale of
such Shares reduced to 0.5%, and to have the Selling Commissions payable with
respect to the sale of such Shares reduced to 0.5%, in which event the aggregate
fees payable with respect to the sale of such Shares would be reduced by $0.90
per Share, and the purchaser of such Shares would be required to pay a total of

$9.10 per Share purchased, rather than $10.00 per Share.  The net proceeds to
the Company would not be affected by such fee reductions.  Of the $9.10 paid per
Share, it is anticipated that approximately $8.15 per Share (or approximately
90%) will be used to acquire properties and pay required acquisition expenses
relating to the acquisition of properties.  All such sales must be made through
registered broker-dealers.

     California residents should be aware that volume discounts will not be
available in connection with the sale of Shares made to California residents to
the extent such discounts do not comply with the provisions of Rule 260.140.51
adopted pursuant to the California Corporate Securities Law of 1968.  Pursuant
to this Rule, volume discounts can be made available to California residents
only in accordance with the following conditions: (i) there can be no variance
in the net proceeds to the Company from the sale of the Shares to different
purchasers of the same offering, (ii) all purchasers of the Shares must be
informed of the availability of quantity discounts, (iii) the same volume
discounts must be allowed to all purchasers of Shares which are part of the
offering, (iv) the minimum amount of Shares as to which volume discounts are
allowed cannot be less than $10,000, (v) the variance in the price of the Shares
must result solely from a different range of commissions, and all discounts
allowed must be based on a uniform scale of commissions, and (vi) no discounts
are allowed to any group of purchasers.  Accordingly, volume discounts for
California residents will be available in accordance with the foregoing table of
uniform discount levels based on dollar volume of Shares purchased, but no
discounts are allowed to any group of purchasers, and no subscriptions may be
aggregated as part of a combined order for purposes of determining the number of
Shares purchased.

     Investors who, in connection with their purchase of Shares, have engaged
the services of a registered investment advisor with whom the investor has
agreed to pay a fee for investment advisory services in lieu of normal
commissions based on the volume of securities sold may agree with the
participating broker-dealer selling such Shares and the Dealer Manager to reduce
the amount of selling commissions payable with respect to such sale to zero.
The net proceeds to the Company will not be affected by eliminating the
commissions payable in connection with sales to investors purchasing through
such investment advisors.  All such sales must be made through registered
broker-dealers.

     Neither the Dealer Manager nor its Affiliates will directly or indirectly
compensate any person engaged as an investment advisor by a potential investor
as an inducement for such investment advisor to advise favorably for investment
in the Company.

    
     In addition, subscribers for Shares may agree with their participating
broker-dealers and the Dealer Manager to have selling commissions due with
respect to the purchase of their Shares paid over a seven year period pursuant
to a deferred commission arrangement (the "Deferred Commission Option").
Shareholders electing the Deferred Commission Option will be required to pay a
total of $9.40 per Share purchased upon subscription, rather than $10.00 per
Share, with respect to which $0.10 per Share will be payable as commissions due
upon subscription.  For each of the six years following termination of the
Offering, $0.10 per Share will be paid by the Company as deferred commissions
with respect to Shares sold pursuant to the Deferred Commission Option, which
amounts will be deducted from and paid out of distributions of Cash Available
for Distribution otherwise payable to shareholders holding such Shares.  The net
proceeds to the Company will not be affected by the election of the Deferred
Commission Option.  Under this arrangement, a Shareholder electing the Deferred
Commission Option will pay a 1% commission upon subscription, rather than an 7%
commission, and an amount equal to a 1% commission per year thereafter for the
next six years will be deducted from and paid by the Company out of Cash
Available for Distribution otherwise distributable to such Shareholder.     

                                       78

<PAGE>
 
    
     Taxable participants electing the Deferred Commission Option will incur tax
liability for Company income allocated to them with respect to their Shares even
though distributions of Cash Available for Distribution otherwise distributable
to such shareholders will instead be paid to third parties to satisfy the
deferred commission obligations with respect to such Shares for a period of
seven years after the termination of the Offering.  See "Risk Factors - Federal
Tax Risks - Risk of Taxable Income Without Cash Distributions."     

     As set forth above, in no event shall the total underwriting compensation,
including sales commissions, the dealer manager fee and expense reimbursements,
exceed 10% of Gross Offering Proceeds, except for the additional 2% of Gross
Offering Proceeds which may be paid by the Company in connection with due
diligence activities.

                          SUPPLEMENTAL SALES MATERIAL

     In addition to this Prospectus, the Company may utilize certain sales
material in connection with the Offering of the Shares, although only when
accompanied by or preceded by the delivery of this Prospectus.  In certain
jurisdictions, some or all of such sales material may not be available.  This
material may include information relating to this Offering, the past performance
of the Advisor and its Affiliates, property brochures and articles and
publications concerning real estate.  In addition, the sales material may
contain certain quotes from various publications without obtaining the consent
of the author or the publication for use of the quoted material in the sales
material.

     The Offering of Shares in the Company is made only by means of this
Prospectus.  Although the information contained in such sales material does not
conflict with any of the information contained in this Prospectus, such material
does not purport to be complete, and should not be considered a part of this
Prospectus or the Registration Statement of which this Prospectus is a part, or
as incorporated by reference in this Prospectus or said Registration Statement
or as forming the basis of the Offering of the Shares.

                                 LEGAL MATTERS

    
     The legality of the Shares being offered hereby has been passed upon for
the Company by Hunton & Williams, Atlanta, Georgia ("Counsel").  The statements
under the caption "Federal Income Tax Consequences" as they relate to federal
income tax matters have been reviewed by Counsel, and Counsel has opined as to
certain income tax matters relating to an investment in the Company.  Counsel
has represented the Advisor, as well as Affiliates of the Advisor, in other
matters and may continue to do so in the future.  See "Conflicts of 
Interest."     

                                    EXPERTS
    
     The balance sheet of the Company as of July 23, 1997, included in this
Prospectus has been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and is included
herein in reliance upon the authority of such firm as an expert in giving such
report.     

                            ADDITIONAL INFORMATION

    
     The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, with respect to the Shares offered pursuant
to this Prospectus.  This Prospectus does not contain all the information set
forth in the Registration Statement and the exhibits related thereto filed with
the Commission, reference to which is hereby made.  Copies of the Registration
Statement and exhibits related thereto, as well as periodic reports and     

                                       79

<PAGE>
 
information filed by the Company, may be obtained upon payment of the fees
prescribed by the Commission, or may be examined at the offices of the
Commission without charge, at (i) the public reference facilities in Washington,
D.C. at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, (ii) the Northeast Regional Office in New York at 7 World Trade Center,
Suite 1300, New York, New York 10048, and (iii) the Midwest Regional Office in
Chicago, Illinois at 500 West Madison Street, Suite 1400, Chicago, Illinois
66661-2511. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (the address of such site is
http://www.sec.gov).

                                   GLOSSARY

     The following are definitions of certain terms used in this Prospectus and
not otherwise defined herein or in the Company Agreement:

    
     "ACQUISITION EXPENSES" means expenses incurred in connection with the
selection and acquisition of properties, whether or not acquired, including, but
not limited to, legal fees and expenses, travel and communications expenses,
costs of appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses and title insurance and other miscellaneous costs
and expenses relating to the selection and acquisition of properties.     

    
     "ACQUISITION FEES" means the total of all fees and commissions paid by any
party to any person in connection with the purchase, development or construction
of property by the Company, including Acquisition and Advisory Fees payable to
the Advisor or their Affiliates, real estate brokerage commissions, investment
advisory fees, finder's fees, selection fees, development fees, construction
fees, nonrecurring management fees, or any other fees of a similar nature,
however designated, except development fees and construction fees paid to a
person not affiliated with the Sponsor in connection with the actual development
or construction of a Company property.     

    
     "AFFILIATE" means (i) any person directly or indirectly controlling,
controlled by or under common control with a person, (ii) any person owning or
controlling 10% or more of the outstanding voting securities of a person, (iii)
any officer, director or partner of a person, and (iv) if such other person is
an officer, director or partner, any company for which such person acts in any
such capacity.     

    
     "CASH AVAILABLE FOR DISTRIBUTION"  means Funds from Operations adjusted for
certain non-cash items, less reserves for capital expenditures.     

    
     "CODE" means the Internal Revenue Code of 1986, as amended.     

    
     "COMPANY" means Wells Real Estate Investment Trust, Inc., a Maryland
corporation.     

    
     "DEFERRED COMMISSION OPTION" means an agreement among a subscriber for
Shares, such subscriber's participating broker-dealer and the Dealer Manager to
have sales commissions due with respect to the purchase of the subscriber's
Shares paid over an seven year period, in the manner described in the "Plan of
Distribution" section of the Prospectus.     

    
     "EXCESS SHARES" means the excess shares exchanged for Shares transferred or
proposed to be transferred in excess of the Ownership Limitation or which would
otherwise jeopardize the Company's status as a REIT under the Code.     

    
     "FRONT-END FEES" means fees and expenses paid by any party for any services
rendered during the Company's organizational or acquisition phase including
Organization and Offering Expenses, Acquisition Fees, Acquisition Expenses,
interest on deferred fees and expenses, if applicable, and any other similar
fees, however designated.     

                                       80

<PAGE>
 
    
     "FUNDS FROM OPERATIONS" means income (loss) before minority interest
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation an amortization (excluding amortization of
financing costs), and after adjustments for consolidated partnerships and joint
ventures.     

    
     "GAIN ON SALE" means the taxable income or gain for federal income tax
purposes in the aggregate for each fiscal year from the sale or exchange of all
or any portion of a Company asset after netting losses from such sales or
exchanges against the gains from such transactions.     

    
     "GROSS OFFERING PROCEEDS" means the total gross proceeds from the sale of
the Shares.     

    
     "INVESTMENT IN PROPERTIES" means the amount of Gross Offering Proceeds
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Company, including the purchase of
properties, working capital reserves allocable thereto (except that working
capital reserves in excess of 5% shall not be included) and other cash payments
such as interest and taxes, but excluding Front-End Fees.     

    
     "IRA" means an Individual Retirement Account established pursuant to
Section 408 of the Code.     

    
     "LIQUIDATING DISTRIBUTIONS" means the net cash proceeds received by the
Company from (a) the sale, exchange, condemnation, eminent domain taking,
casualty or other disposition of substantially all of the assets of the Company
or the last remaining assets of the Company or (b) a liquidation of the
Company's assets in connection with a dissolution of the Company, after (i)
payment of all expenses of such sale, exchange, condemnation, eminent domain
taking, casualty, other disposition or liquidation, including real estate
commissions, if applicable, (ii) the payment of any outstanding indebtedness and
other liabilities of the Company, (iii) any amounts used to restore any such
assets of the Company, and (iv) any amounts set aside as reserves which the
Company may deem necessary or desirable.     

    
     "NASAA GUIDELINES" means the Statement of Policy Regarding Real Estate
Investment Trusts of the North American Securities Administrators Association,
Inc. as revised and adopted on September 29, 1993.     

    
     "NET INCOME" or "NET LOSS" means the net income or loss realized or
recognized by the Company for a fiscal year, as determined for federal income
tax purposes, including any income exempt from tax, but excluding all deductions
for depreciation, amortization and cost recovery and Gain on Sale.     

    
     "NET SALE PROCEEDS" means, collectively, Nonliquidating Net Sale Proceeds
and Liquidating Distributions.     

    
     "NONLIQUIDATING NET SALE PROCEEDS" means the net cash proceeds received by
the Company from a sale, exchange, condemnation, eminent domain taking, casualty
or other disposition of assets of the Company, which does not constitute
substantially all of the remaining assets of the Company, after (i) the payment
of all expenses of such sale, exchange, condemnation, eminent domain taking,
casualty, sale or other disposition, including real estate commissions, if
applicable, (ii) the payment of any outstanding indebtedness and other Company
liabilities relating to such assets, (iii) any amounts used to restore any such
assets of the Company, and (iv) any amounts set aside as reserves which the
Company may deem necessary or desirable.     

    
     "OFFERING" means the offering and sale of the Shares pursuant to the terms
and conditions of this Prospectus.     

    
     "OPERATING PARTNERSHIP" means Wells Operating Partnership, L.P., a Delaware
limited partnership.     

    
     "OP UNITS" means units of limited partnership interest in the Operating
Partnership.     

                                       81

<PAGE>
 
    
     "ORGANIZATION AND OFFERING EXPENSES" means those expenses incurred in
connection with organizing the Company, preparing the Company for registration
and subsequently offering and distributing the Shares to the public, including
without limitation, legal and accounting fees, sales commissions paid to broker-
dealers in connection with the distribution of the Shares and all advertising
expenses.     

    
     "OWNERSHIP LIMITATION" means the ownership of more than 9.8% of any class
of the Company's outstanding capital stock.     

    
     "PARTNERS" means, collectively, the Company and any person who contributes
property to the Company in exchange for OP Units.     

    
     "PARTNERSHIP AGREEMENT" means the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership.     

    
     "PRIOR WELLS PUBLIC PROGRAMS" means the prior public real estate limited
partnership programs sponsored by the Advisor or its Affiliates having
substantially identical investment objectives as the Company, specifically,
Wells Real Estate Fund I, Wells Real Estate Fund II, Wells Real Estate Fund II-
OW, Wells Real Estate Fund III, L.P., Wells Real Estate Fund IV, L.P., Wells
Real Estate Fund V, L.P., Wells Real Estate Fund VI, L.P., Wells Real Estate
Fund VII, L.P., Wells Real Estate Fund VIII, L.P., and Wells Real Estate Fund
IX, L.P., Wells Real Estate Fund X, L.P.     

    
     "QUALIFIED PLAN" means a qualified sole proprietorship, partnership or
corporate pension or profit sharing plan established under Section 401(a) of the
Code.     

    
     "REGISTRATION STATEMENT" means the Registration Statement on Form S-11
filed by the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, in order to register the Shares for sale to
the public.     

    
     "REINVESTMENT PLAN" means the Company's Dividend Reinvestment Plan.     

    
     "RESIDUAL PROCEEDS" means any Sale Proceeds available for distribution to
the shareholders after the shareholders have first received distributions of
Sale Proceeds in an amount equal to 100% of their Invested Capital plus their
Common Return (reduced by all prior distributions of Cash Available for
Distribution) and after the Advisor has received distributions of Sale Proceeds
in an amount equal to 100% of its capital contribution to the Operating
Partnership.     

    
     "RETIREMENT PLANS" means Individual Retirement Accounts ("IRAs")
established under Section 408 of the Code and Qualified Plans.     

    
     "SERVICE" means the U.S. Internal Revenue Service.     

    
     "WELLS CAPITAL" means Wells Capital, Inc., a Georgia corporation which
serves as the Company's Advisor.     

                                       82

<PAGE>
 
                                  APPENDIX I



                   WELLS REAL ESTATE INVESTMENT TRUST, INC.



                       BALANCE SHEET AS OF JULY 23, 1997

    
                                 TOGETHER WITH     

    

                               AUDITORS' REPORT     


                                      F-1

<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholder of

    
Wells Real Estate Investment Trust, Inc.:     

We have audited the accompanying balance sheet of WELLS REAL ESTATE INVESTMENT
TRUST, INC. as of July 23, 1997.  This balance sheet is the responsibility of
the Company's management.  Our responsibility is to express an opinion on this
financial statement based on our audit.
    
We conducted our audit in accordance with generally accepted auditing standards.
Those standards required that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet.  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
audit provides a reasonable basis for our opinion.     

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Wells Real Estate Investment Trust,
Inc. as of July 23, 1997, in conformity with generally accepted accounting
principles.

                                         ARTHUR ANDERSEN LLP

Atlanta, Georgia

    
July 23, 1997     


                                      F-2

<PAGE>
 
                   WELLS REAL ESTATE INVESTMENT TRUST, INC.

                                 BALANCE SHEET

                                 JULY 23, 1997


<TABLE>
<CAPTION> 
                                    ASSETS
<S>                                                     <C>  
     CASH                                                       $1,000
                                                                ======
                                                    
                                                    
                             SHAREHOLDER'S EQUITY   
                                                    
     SHAREHOLDER'S EQUITY:                               
       Common shares, $.01 par value; 5,000 shares         
         authorized, 100 shares issued and outstanding          $1,000
                                                                ======
</TABLE>


      The accompanying notes are an integral part of this balance sheet.

                                      F-3

<PAGE>
 
    
                    WELLS REAL ESTATE INVESTMENT TRUST, INC.     

    
                            NOTES TO BALANCE SHEET     

    
                                 JULY 23, 1997     

(1)  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    
     Wells Real Estate Investment Trust, Inc. (the "Company"), is a newly formed
     Maryland corporation that intends to qualify as a real estate investment
     trust ("REIT").  The Company intends to offer for sale a maximum of
     15,000,000 (exclusive of 1,500,000 shares available pursuant to the
     Company's dividend reinvestment plan) common shares at a price of $10 per
     share.  The Company has sold 100 shares to Wells Capital, Inc. (the
     "Advisor"), at the initial public offering price of $10 per share.  The
     Company will seek to acquire and operate commercial properties, including,
     but without limitation to, office buildings, shopping centers, business and
     industrial parks, and other commercial and industrial properties, including
     properties which are under construction or development, are newly
     constructed, or have been constructed and have operating histories.  All
     such properties may be acquired, developed and operated by the Company
     alone or jointly with another party.  The Company is likely to enter into
     one or more joint ventures with affiliated entities for the acquisition of
     properties.  In this connection, the Company may enter into joint ventures
     for the acquisition of properties with prior or future real estate limited
     partnership programs sponsored by the Advisor or its affiliates.  As of the
     date of this prospectus, the Company has neither purchased nor contracted
     to purchase any properties, nor has the Advisor identified any properties
     in which there is a reasonable probability that the Company will 
     invest.     

     In connection with the offering, the existence of certain risk factors
     should be considered by prospective investors.  These risk factors are
     detailed elsewhere in this prospectus.

(2)  INCOME TAXES

     The Company expects to qualify as a REIT under the Internal Revenue Code of
     1986, as amended.  As a REIT, the Company generally will not be subject to
     federal income tax on net income that it distributes to its shareholders.
     The Company intends to make timely distributions sufficient to satisfy the
     annual distribution requirements.

                                      F-4

<PAGE>
 
                                   EXHIBIT A

                           PRIOR PERFORMANCE TABLES

    
     The following Prior Performance Tables (the "Tables") provide information
relating to real estate investment programs sponsored by the Advisor and its
Affiliates ("Prior Programs") which have investment objectives similar to the
Company.     

    
     Prospective investors should read these Tables carefully together with the
summary information concerning the Prior Programs as set forth in "PRIOR
PERFORMANCE SUMMARY" elsewhere in this Prospectus.     

    
     INVESTORS IN THE COMPANY WILL NOT OWN ANY INTEREST IN THE PRIOR PROGRAMS
AND SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO
THOSE EXPERIENCED BY INVESTORS IN THE PRIOR PROGRAMS.     

    
     These Tables present actual results of Wells Prior Public Programs that
have investment objectives similar to those of the Company.  The Company's
investment objectives are to maximize Net Cash From Operations; to preserve
original Capital Contributions; and to realize capital appreciation over a
period of time.  All of the Wells Prior Public Programs have used a substantial
amount of capital and not acquisition indebtedness to acquire their 
properties.     

    
     The Advisor is responsible for the acquisition, operation, maintenance and
resale of the Partnership Properties.  The financial results of the Prior
Programs thus provide an indication of the Advisor's performance of its
obligations during the periods covered.  However, general economic conditions
affecting the real estate industry and other factors contribute significantly to
financial results.     

     The following tables are included herein:

     TABLE I - Experience in Raising and Investing Funds (As a Percentage of
Investment)

     TABLE II - Compensation to Sponsor (in Dollars)

     TABLE III - Annual Operating Results of Prior Programs

     TABLE IV (Results of completed programs) and TABLE V (sales or disposals of
property) have been omitted since none of the Prior Programs have sold any of
their properties to date.

    
     Additional information relating to the acquisition of properties by the
Prior Programs is contained in TABLE VI, which is included in the Registration
Statement which the Company has filed with the Securities and Exchange
Commission.  As described above, no Wells Prior Public Program has sold or
disposed of any property held by it.  Copies of any or all information will be
provided to prospective investors at no charge upon request, including copies of
the Form 10-K Annual Report for any or all of the Prior Programs for any
available year.     

     The following are definitions of certain terms used in the Tables:

    
     "ACQUISITION FEES" shall mean fees and commissions paid by a partnership in
connection with its purchase or development of a property, except development
fees paid to a person not affiliated with the partnership or with a general
partner of the partnership in connection with the actual development of a
project after acquisition of the land by the partnership.     

    
     "ORGANIZATION EXPENSES" shall include legal fees, accounting fees,
securities filing fees, printing and reproduction expenses and fees paid to the
general partners or their affiliates in connection with the planning and
formation of the partnership.     

    
     "UNDERWRITING FEES" shall include selling commissions and wholesaling fees
paid to broker-dealers for services provided by the broker-dealers during the
offering.     

                                      A-1

<PAGE>
 
                                    TABLE I
    
                                  (UNAUDITED)     

                   EXPERIENCE IN RAISING AND INVESTING FUNDS

    
     This Table provides a summary of the experience of the General Partners and
their Affiliates in Prior Programs for which offerings have been completed since
December 31, 1993.  Information is provided with regard to the manner in which
the proceeds of the offerings have been applied.  Also set forth is information
pertaining to the timing and length of these offerings, the time period over
which the proceeds have been invested in the properties, as well as the
percentage of offerings sold and the expenses related to the offerings.     

    

<TABLE>
<CAPTION>
                                             Wells Real              Wells Real              Wells Real             Wells Real
                                             Estate Fund             Estate Fund             Estate Fund            Estate Fund
                                              VI, L.P.                VII, L.P.              VIII, L.P.              IX, L.P.
                                          -----------------       -----------------       -----------------      -----------------
<S>                                       <C>                     <C>                     <C>                    <C>
Dollar Amount Offered                     $25,000,000/(3)/        $25,000,000/(4)/        $35,000,000/(5)/       $35,000,000/(6)/
Dollar Amount Raised                      $25,000,000/(3)/        $24,180,174/(4)/        $32,042,689/(5)/       $35,000,000/(6)/
                                          ================        ================        ================       ================
Percentage Amount Raised                        100.0%/(3)/              96.7%/(4)/              91.6%/(5)/            100.0%/(6)/
Less Offering Expenses                                                                                      
    Underwriting Fees                            10.0%                   10.0%                   10.0%                  10.0%
    Organizational Expenses                       5.0%                    5.0%                    5.0%                   5.0%
Reserves/(1)/                                     1.0%                    1.0%                    0.0%                   0.0%
                                          -----------             ------------            -----------            -----------
   Percent Available for Investment              84.0%                                                 
Acquisition and Development Costs                                                                           
   Prepaid Items and Fees related to              0.3%                    0.0%                    0.0%                   0.0%
   Purchase of Property                                                                                       
   Cash Down Payment                             40.4%                   16.3%                    6.3%                   7.0%
   Acquisition Fees/(2)/                          3.7%                    3.5%                    4.0%                   4.0%
   Development and Construction Costs            39.6%                   64.2%                   50.3%                  30.0%
Reserve for Payment of Indebtedness               0.0%                    0.0%                    0.0%                   0.0%
                                          -----------             -----------             -----------            -----------
Total Acquisition and Development Cost           84.0%                   84.0%                   60.6%/(7)/             41.0%/(8)/
                                          -----------             -----------             -----------            ----------- 
Percent Leveraged                                 0.0%                    0.0%                    0.0%                   0.0%
                                          ===========             ===========             ===========            ===========     
Date Offering Began                          04/05/93                04/24/94                01/06/95                 1/5/96
Length of Offering                            12 mo.                  12 mo.                  12 mo.                 12 mo.
Months to Invest 90% of Amount                15 mo.                  12 mo.                          /(7)/                  /(8)/
 Available for Investment (Measured                                                                         
 from Beginning of Offering)                                                                                
Number of Investors                             1,791                   1,865                   2,086                  2,098
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     

    
      

(1)  Does not include General Partner contributions held as part of reserves.
(2)  Includes development fees, real estate commissions, general contractor fees
     and/or architectural fees paid to Affiliates of the General Partners.
(3)  Total dollar amount registered and available to be offered was $25,000,000.
     Wells Real Estate Fund VI, L.P. closed its offering on April 4, 1994 and
     the total dollar amount raised was $25,000,000.
(4)  Total dollar amount registered and available to be offered was $25,000,000.
     Wells Real Estate Fund VII, L.P. closed its offering on January 5, 1995 and
     the total dollar amount raised was $24,180,174.
(5)  Total dollar amount registered and available to be offered was $35,000,000.
     Wells Real Estate Fund VIII, L.P. closed its offering on January 4, 1996
     and the total dollar amount raised was $32,042,689.
(6)  Total dollar amount registered and available to be offered was $35,000,000.
     Wells Real Estate Fund IX, L.P. closed its offering on December 30, 1996
     and the total dollar amount raised was $35,000,000.

    
(7)  As of December 31, 1996, Wells Real Estate Fund VIII, L.P. had not yet
     invested 90% of the amount available for investment. The amount invested in
     properties (including Acquisition Fees paid but not yet associated with a
     specific property) at December 31, 1996 was 44% of the total dollar amount
     raised. The amount invested and/or committed to be invested in properties
     (including Acquisition Fees paid but not yet associated with a specific
     property) at December 31, 1996 was 60.6% of the total dollar amount 
     raised.     

    
(8)  As of December 31, 1996, Wells Real Estate Fund IX, L.P. had not yet
     invested 90% of the amount available for investment. The amount invested in
     properties (including Acquisition Fees paid but not yet associated with a
     specific property) at December 31, 1996 was 17% of the total dollar amount
     raised. The amount invested and/or committed to be invested in properties
     (including Acquisition Fees paid but not yet associated with a specific
     property) at December 31, 1996 was 41.0% of the total dollar amount 
     raised.     

                                      A-2

<PAGE>
 
                                   TABLE II
                                  (UNAUDITED)

                            COMPENSATION TO SPONSOR

     The following sets forth the compensation received by General Partners or
Affiliates of the General Partners, including compensation paid out of offering
proceeds and compensation paid in connection with the ongoing operations of
Prior Programs having similar or identical investment objectives the offerings
of which have been completed since December 31, 1993.  These partnerships have
not sold or refinanced any of their properties to date.  All figures are as of
December 31, 1996.

    

<TABLE>
<CAPTION>
                                                       Wells Real    Wells Real    Wells Real    Wells Real       Other
                                                      Estate Fund   Estate Fund   Estate Fund   Estate Fund      Public
                                                        VI, L.P.     VII, L.P.     VIII, L.P.     IX, L.P.    Programs/(1)/
                                                        --------     ---------     ----------     --------    -------------
<S>                                                   <C>           <C>           <C>           <C>           <C>
Date Offering Commenced                                   04/05/93      04/06/94      01/06/95      01/05/96             --
                                                    
Dollar Amount Raised                                   $25,000,000   $24,180,174   $32,042,689   $35,000,000   $125,018,232
to Sponsor from Proceeds of Offering:               
Underwriting Fees/(2)/                                 $   119,936   $   178,122   $   174,295   $   309,556   $    451,803
Acquisition Fees                                          
  Real Estate Commissions/(5)/                                  --            --            --            --             --
                                                          
  Acquisition and Advisory  Fees/(3)/                  $   932,216   $   846,306   $ 1,281,708   $ 1,400,000   $  7,099,169
                                                    
Dollar Amount of Cash Generated from  Operations          
Before Deducting Payments to Sponsor/(4)/              $ 2,780,262   $ 1,943,504   $ 1,228,747   $   161,427   $ 21,533,226
                                                           
Amount Paid to Sponsor from Operations:              
  Property Management Fee/(1)/                         $    78,975   $    58,433   $    26,780   $       486   $    791,998
                                                           
Partnership Management Fee                                      --            --            --            --             --
Reimbursements/(6)/                                    $    92,825   $    90,160   $    48,429   $     8,332   $  1,138,583
Leasing Commissions/(1)/                               $    41,428   $    39,494   $    25,209   $     1,459   $    817,520
General Partner Distributions                                   --            --            --            --         15,205
Other                                                           --            --            --            --             --

Dollar Amount of Property Sales and Refinancing        
Payments to Sponsors:
Cash                                                            --            --            --            --             --
Notes                                                           --            --            --            --             --
                                                              
Amount Paid to Sponsor from Property  Sales                   
and Refinancing:                                              
   Real Estate Commissions                                      --            --            --            --             -- 
                                                              
  Incentive Fees                                                --            --            --            --             --
  Other                                                         --            --            --            --             --
</TABLE>

     

    
(1)  Includes compensation paid to General Partners from Wells Real Estate Fund
     II, Wells Real Estate Fund II-OW, Wells Real Estate Fund III, L.P., Wells
     Real Estate Fund IV, L.P. and Wells Real Estate Fund V, L.P. during the
     past three years.  General Partners of Wells Real Estate Fund I are
     entitled to certain property management and leasing fees but have elected
     to defer the payment of such fees until a later year on properties owned by
     Fund I and properties owned jointly by Fund I and Fund II.  At December 31,
     1996, the amount of such fees due the General Partners totaled $1,897,184
     and are not included in Table II.     
(2)  Includes net underwriting compensation and commissions paid to Wells
     Investment Securities, Inc. in connection with the offerings of Wells Real
     Estate Funds VI, VII, VIII and IX, which were not reallowed to
     participating broker-dealers.
(3)  Fees paid to the General Partners or their Affiliates for acquisition
     advisory services in connection with the review and evaluation of potential
     real property acquisitions.
(4)  Includes $125,314 in net cash used by operating activities, $2,692,348 in
     distributions paid to limited partners and $213,228 in payments to sponsors
     for Wells Real Estate Fund VI, L.P.; $32,869 in net cash used by operating
     activities, $1,732,250 in distributions paid to limited partners and
     $188,087 in payments to sponsor for Wells Real Estate Fund VII, L.P.;
     $2,443 in net cash used by operating activities, $1,130,772 in
     distributions paid to limited partners and $100,418 in payments to sponsor
     for Wells Real Estate Fund VIII, L.P.; $1,725 in net cash provided by
     operating activities, $149,425 in distributions paid to limited partners
     and $10,277 in payments to sponsor for Wells Real Estate Fund IX, L.P.; and
     $855,331 in net cash provided by operating activities, $19,618,669 in
     distributions paid to limited partners and $2,763,306 in payments to
     sponsor for other public programs.
    
(5)  The sponsor does not receive any real estate commission for the acquisition
     of any property.     
    
(6)  Certain salaries and other employee-related expenses, travel and other out-
     of-pocket expenses of personnel (other than controlling persons of the
     General Partner or their Affiliates) may be reimbursed to the extent such
     expenses are directly related to a specific Partnership Property.     

                                      A-3

<PAGE>
 
                                   TABLE III
                                  (UNAUDITED)

     The tables on the following five (5) pages set forth operating results of
prior programs sponsored by the General Partners the offerings of which have
been completed since December 31, 1991.  The information relates only to public
programs with investment objectives similar to those of the Partnership.  All
figures are as of December 31 of the year indicated.

                                      A-4

<PAGE>
 
                                   TABLE III
                                  (UNAUDITED)
                      OPERATING RESULTS OF PRIOR PROGRAMS
                        WELLS REAL ESTATE FUND V, L.P.

                               

<TABLE>
<CAPTION>
                                                                     1996         1995           1994           1993           1992
                                                                     ----         ----           ----           ----           ----
<S>                                                            <C>          <C>           <C>            <C>            <C>
Gross Revenues/(1)/                                            $  590,839      764,624    $   656,958    $   458,213    $    58,640
                                                              
Profit on Sale of Properties                                           --           --             --             --             --
                                                              
Less: Operating Expenses/(2)/                                      78,939       68,735         88,987         96,964         71,521
                                                              
 Depreciation and Amortization/(3)/                                 6,250        6,250          6,250          6,250          5,208
                                                               ----------   ----------    -----------    -----------    -----------
                                                              
Net Income (Loss) GAAP Basis/(4)/                              $  505,650   $  689,639    $   561,721    $   354,999    $   (18,089)

                                                               ==========   ==========    ===========    ===========    ===========
                                                              
Taxable Income (Loss): Operations                              $  666,780   $  676,367    $   528,025    $   280,000    $   (18,089)

                                                               ==========   ==========    ===========    ===========    ===========
 Cash Generated (Used By):                                        (65,728)     (46,235)       (10,395)       112,594        (33,006)

Operations                                                    
 Joint Ventures                                                 1,072,835    1,020,905        653,729         54,154             --
                                                               ----------   ----------    -----------    -----------    -----------
                                                               $1,007,107   $  974,670    $   643,334    $   166,748    $   (33,006)

                                                              
 Less Cash Distributions to Investors:                          1,007,107   $  969,011        643,334        151,336             --
Operating Cash Flow                      
 Return of Capital                                                     --           --         44,257             --             --
 Undistributed Cash Flow from Prior Year  Operations                3,672           --          5,412             --             --
                                                                ----------  ----------    -----------
Cash Generated (Deficiency) after Cash  Distributions          $   (3,672)  $    5,659    $   (59,669)   $    15,412    $   (33,006)


Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions                                          --           --             --             --             --
Limited Partner Contributions                                          --           --             --      5,589,786     11,416,234
                                                               ----------   ----------    -----------    -----------    -----------
                                                                       --   $    5,659    $   (59,699)   $ 5,605,198    $11,383,228
                                                            
Use of Funds:                                                           
 Sales Commissions and Offering Expenses                                            --             --        764,599      1,377,645
 Return of Original Limited Partner's                                               --             --             --            100
 Investment                                               
  Property Acquisitions and Deferred Project Costs                   (225)    (233,501)     2,366,507      7,755,116      4,181,338
                                                               ----------   ----------    -----------    -----------    -----------
  Cash Generated (Deficiency) after Cash Distributions and     $   (3,897)  $ (227,842)   $(2,426,206)   $(2,914,517)   $ 5,824,145
                                                               ==========   ==========    ===========    ===========    ===========
 Special Items

Net Income and Distributions Data per $1,000 Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
 - Operations Class A Units                                            71           73             58             29              0
 - Operations Class B Units                                          (378)        (272)          (180)           (54)           (65)

 Capital Gain (Loss)                            
Tax and Distributions Data per $1,000 Invested: 
Federal Income Tax Results:                     
 Ordinary Income (Loss)                         
 - Operations Class A Units                                            69           69             55             36             --
                                                
 - Operations Class B Units                                          (260)        (246)          (181)           (58)           (21)

                                                
 Capital Gain (Loss)                                                                               --             --             --
Cash Distributions to Investors:                
Source (on GAAP Basis)                          
 - Investment Income Class A Units                                     65           63             46             10             --
 - Return of Capital Class A Units                                     --           --             --             --             --
 - Return of Capital Class B Units                                     --           --             --             --             --
 Source (on Cash Basis)                                                                                                          --
 - Operations Class A Units                                            65           63             43             10             --
 - Return of Capital Class A Units                                     --           --              3             --             --
 - Operations Class B Units                                            --           --             --             --             --

Amount (in Percentage Terms) Remaining Invested in Program            100%
Properties at the end of the Last Year Reported in the Table
</TABLE>
 
     

___________________
    
(See notes on following page)     

                                      A-5

<PAGE>
 
(1)  Includes $19,125 in equity in loss of joint ventures and $77,765 from
     investment of reserve funds in 1992; $207,234 in equity in earnings of
     joint ventures and $250,979 from investment of reserve funds in 1993;
     $592,902 in equity in earnings of joint ventures and $64,056 from
     investment of reserve funds in 1994; $745,173 in equity in earnings of
     joint ventures and $19,451 from investment of reserve funds in 1995; and
     $577,128 in equity in earnings of joint ventures and $13,711 from
     investment of reserve funds in 1996. At December 31, 1996, the leasing
     status of all developed property was 92%.

(2)  Includes partnership administrative expenses.
(3)  Included in equity in earnings of joint ventures in gross revenue is
     depreciation and amortization of $100,796 for 1993, $324,578 for 1994,
     $440,333 for 1995 and $591,390 for 1996.
(4)  In accordance with the partnership agreement, net income or loss,
     depreciation and amortization are allocated as follows:  $(17,908) to Class
     B Limited Partners and $(181) to General Partners for 1992; $442,135 to
     Class A Limited Partners, $(87,868) to Class B Limited Partners and $732 to
     General Partners for 1993; $879,232 to Class A Limited Partners, $(316,460)
     to Class B Limited Partners and $(1,051) to General Partners for 1994;
     $1,124,203 to Class A Limited Partners and $(434,564) to Class B Limited
     Partners and $0 for 1995; and $1,095,296 to Class A Limited Partners and
     $(589,646) to Class B Limited Partners for 1996.

                                      A-6

<PAGE>
 
                                   TABLE III
                                  (UNAUDITED)
                      OPERATING RESULTS OF PRIOR PROGRAMS
                        WELLS REAL ESTATE FUND VI, L.P.

    

<TABLE>
<CAPTION>
                                              1996           1995           1994           1993       1992
                                          ------------  --------------  -------------  -------------  ----
<S>                                       <C>           <C>             <C>            <C>            <C>
Gross Revenues/(1)/                        $  675,782    $  1,002,567    $   819,535    $    82,723    N/A
Profit on Sale of Properties                       --              --             --             --
Less: Operating Expenses/(2)/                  80,479          94,489        112,389         46,608
 Depreciation and Amortization/(3)/             6,250           6,250          6,250          4,687
                                           ----------    ------------    -----------    -----------
Net Income (Loss) GAAP Basis/(4)/          $  589,053    $    901,828    $   700,896    $    31,428
                                           ==========    ============    ===========    ===========
Taxable Income (Loss): Operations          $  809,389    $    916,531    $   667,682    $    31,428
                                           ==========    ============    ===========    ===========
 Cash Generated (Used By):                     (2,716)       (278,728)      (276,376)        (2,478)
 Operations
 Joint Ventures                             1,044,891         766,212        203,543             --
                                           ----------    ------------    -----------    -----------
                                           $1,042,175    $  1,044,940    $   479,919    $    (2,478)
 Less Cash Distributions to Investors:
Operating Cash Flow                         1,042,175    $  1,044,940        245,800             --
 Return of Capital                            125,314              --             --             --
 Undistributed Cash Flow from Prior Year       18,027         216,092             --             --
  Operations                               ----------    ------------    -----------    -----------
Cash Generated (Deficiency) after Cash     $ (143,341)   $   (216,092)   $   234,119    $    (2,478)
  Distributions

 Special Items (not including sales and
  financing):
Source of Funds:
General Partner Contributions                      --              --             --             --
Limited Partner Contributions                      --              --     12,163,461     12,836,539
                                           ----------    ------------    -----------    -----------
                                          $        --    $         --    $12,397,580    $12,834,061
Use of Funds:
 Sales Commissions and Offering Expenses                           --      1,776,909      1,781,724
 Return of Original Limited Partner's                              --             --            100
  Investment
  Property Acquisitions and Deferred          234,924      10,721,376      5,912,454      3,856,239
   Project Costs                           ----------    ------------    -----------    -----------
Cash Generated (Deficiency) after Cash     
  Distributions and Special Items          $ (378,265)   $(10,937,468)   $(4,708,217)   $(7,195,998)   
                                           ==========    ============    ===========    ===========     

Net Income and Distributions Data per
 $1,000 Invested:
Net Income on GAAP Basis:
 Ordinary Income (Loss)
 - Operations Class A Units                        59              57             43              9
 - Operations Class B Units                      (160)            (60)           (12)            (5)
 Capital Gain (Loss)                               --              --             --              0
Tax and Distributions Data per $1,000
 Invested:
Federal Income Tax Results:
  Ordinary Income (Loss)
 - Operations Class A Units                        56              56             41              1
 - Operations Class B Units                       (99)            (51)           (22)            --
 Capital Gain (Loss)                               --              --             --             --
Cash Distributions to Investors:
Source (on GAAP Basis)
- - Investment Income Class A Units                  56              57             14             --
- - Return of Capital Class A Units                  --               4             --             --
- - Return of Capital Class B Units                  --              --             --             --
Source (on Cash Basis)
- - Operations Class A Units                         50              61             14             --
- - Return of Capital Class A Units                   6              --             --             --
- - Operations Class B Units                         --
Amount (in Percentage Terms) Remaining            100%
 Invested in Program
Properties at the end of the Last Year
 Reported in the Table
</TABLE>

     

_______________
    
(See notes on following page)     

                                      A-7

<PAGE>
 
(1)  Includes $3,436 in equity in loss of joint ventures and $86,159 from
     investment of reserve funds in 1993, $285,711 in equity in earnings of
     joint ventures and $533,824 from investment of reserve funds in 1994,
     $681,033 in equity in earnings of joint ventures and $321,534 from
     investment of reserve funds in 1995 and $607,214 in equity in earnings of
     joint ventures and $68,568 from investment of reserve funds in 1996. At
     December 31, 1996, the leasing status was 93%.

(2)  Includes partnership administrative expenses.

(3)  Included in equity in loss of joint ventures in gross revenues is
     depreciation of $3,436 for 1993, $107,807 for 1994, and $264,866 for 1995
     and $648,478 for 1996.

(4)  In accordance with the partnership agreement, net income or loss,
     depreciation and amortization are allocated $39,551 to Class A Limited
     Partners, $(8,042) to Class B Limited Partners and $(81) to the General
     Partner for 1993; $762,218 to Class A Limited Partners, $(62,731) to Class
     B Limited Partners and $1,409 to the General Partners for 1994; $1,172,944
     to Class A Limited Partners, $(269,288) to Class B Limited Partners and
     $(1,828) to the General Partners for 1995; and $1,234,717 to Class A
     Limited Partners, $(645,664) to Class B Limited Partners and $0 to the
     General Partners for 1996.

                                      A-8

<PAGE>
 
                             TABLE III (UNAUDITED)
                      OPERATING RESULTS OF PRIOR PROGRAMS
                       WELLS REAL ESTATE FUND VII, L.P.

    

<TABLE>
<CAPTION>
                                             1996           1995            1994       1993  1992
                                          -----------  --------------  --------------  ----  ----
<S>                                       <C>          <C>             <C>             <C>   <C>
Gross Revenues/(1)/                        $ 543,291         925,246    $    286,371    N/A   N/A
Profit on Sale of Properties                      --                              --
Less: Operating Expenses/(2)/                 84,265         114,953          78,420
 Depreciation and Amortization/(3)/            6,250           6,250           4,688
                                           ---------    ------------    ------------
Net Income (Loss) GAAP Basis/(4)/          $ 452,776    $    804,043    $    203,263
                                           =========    ============    ============
Taxable Income (Loss): Operations          $ 657,443    $    812,402    $    195,067
                                           =========    ============    ============
 Cash Generated (Used By):                    20,883         431,728          47,595
  Operations
 Joint Ventures                              760,628         424,304          14,243
                                           ---------    ------------    ------------
                                           $ 781,511    $    856,032    $     61,838
 Less Cash Distributions to Investors:       781,511    $    856,032          52,195
 Operating Cash Flow
 Return of Capital                            10,805          22,064              --
 Undistributed Cash Flow from Prior Year       
  Operations                                      --           9,643              --              
                                            --------    ------------   -------------
Cash Generated (Deficiency) after Cash     
 Distributions                             $ (10,805)   $    (31,707)   $     (9,643)
Special Items (not including sales and
 financing):
Source of Funds:
General Partner Contributions                                     --              --
Limited Partner Contributions              $      --         805,212      23,374,961
                                                        ------------    ------------
                                           $      --    $    773,505    $ 23,384,604
Use of Funds:
 Sales Commissions and Offering Expenses          --         244,207       3,351,569
 Return of Original Limited Partner's             
   Investment                                     --             100              --
  Property Acquisitions and Deferred       
   Project Costs                             736,960      14,971,002       4,477,765  
                                           ---------    ------------    ------------   
Cash Generated (Deficiency) after Cash    
  Distributions and                        $(747,765)   $(14,441,804)   $(15,555,270)  
                                           =========    ============    ============    
Special Items
Net Income and Distributions Data per
 $1,000 Invested:
Net Income on GAAP Basis:
 Ordinary Income (Loss)
 - Operations Class A Units                       62              57              29
 - Operations Class B Units                      (98)            (20)             (9)
Capital Gain (Loss)                                                               --
Tax and Distributions Data per $1,000
 Invested:
 Federal Income Tax Results:
 Ordinary Income (Loss)
- - Operations Class A Units                        55              55              28
- - Operations Class B Units                       (58)            (16)            (17)
Capital Gain (Loss)                               --              --              --
Cash Distributions to Investors:
Source (on GAAP Basis)
- - Investment Income Class A Units                 43              52               7
- - Return of Capital Class A Units                 --              --              --
- - Return of Capital Class B Units                 --              --              --
Source (on Cash Basis)
- - Operations Class A Units                        42              51               7
- - Return of Capital Class A Units                  1               1              --
- - Operations Class B Units                        --              --              --
Source (on a Priority Distribution
 Basis)/(5)/                                    
- - Investment income Class A Units                 29              30               4       
- - Return of Capital Class A Units                 14              22               3
- - Return of Capital Class B Units                 --              --              --
Amount (in Percentage Terms) Remaining           
 Invested in Program                             100%
Properties at the end of the Last Year
 Reported in the Table
</TABLE>
     

(See notes on following page)

                                      A-9

<PAGE>
 
(1)  Includes $78,799 in equity in earnings of joint ventures and $207,572 from
     investment of reserve funds in 1994, and $403,325 in equity in earnings of
     joint ventures and $521,921 from investment of reserve funds in 1995 and
     $457,144 in equity in earnings of joint ventures and $86,147 from
     investment of reserve funds in 1996.  At December 31, 1996, the leasing
     status was 90% including developed property in initial lease up.

(2)  Includes partnership administrative expenses.

(3)  Included in equity in earnings of joint ventures in gross revenues is
     depreciation of $25,468 for 1994, $140,533 for 1995 and $605,247 for 1996.

(4)  In accordance with the partnership agreement, net income or loss,
     depreciation and amortization are allocated $233,337 to Class A Limited
     Partners, $(29,854) to Class B Limited Partners and $(220) to the General
     Partner for 1994; $950,826 to Class A Limited Partners, $(146,503) to Class
     B Limited Partners and $(280) to the General Partners for 1995; and
     $1,062,605 to Class A Limited Partners, $(609,829) to Class B Limited
     Partners and $0 to the General Partners for 1996.

(5)  Pursuant to the terms of the partnership agreement, an amount equal to the
     cash distributions paid to Class A Limited Partners is payable as priority
     distributions out of the first available net proceeds from the sale of
     partnership properties to Class B Limited Partners.  The amount of cash
     distributions paid per Unit to Class A Limited Partners is shown as a
     return of capital to the extent of such priority distributions payable to
     Class B Limited Partners.  As of December 31, 1996, the aggregate amount of
     such priority distributions payable to Class B Limited Partners totalled
     $659,487.

                                     A-10

<PAGE>
 
                                   TABLE III
                                  (UNAUDITED)
                      OPERATING RESULTS OF PRIOR PROGRAMS
                       WELLS REAL ESTATE FUND VIII, L.P.
    

<TABLE>
<CAPTION>
                                                 1996             1995       1994      1993    1992
                                                 ----             ----       ----      ----    ----
<S>                                        <C>            <C>                <C>       <C>     <C> 
Gross Revenues/(1)/                        $ 1,057,694    $    402,428       N/A       N/A     N/A  
Profit on Sale of Properties                        --
Less: Operating Expenses/(2)/                  114,854         122,264
 Depreciation and Amortization/(3)/              6,250           6,250
                                           -----------    ------------
Net Income (Loss) GAAP Basis/(4)/          $   936,590    $    273,914
                                           ===========    ============
Taxable Income (Loss): Operations          $ 1,001,974    $    404,348
                                           ===========    ============
  Cash Generated (Used By):                    623,268         204,790
Operations
  Joint Ventures                               279,984          20,287
                                           -----------    ------------
                                           $   903,252    $    225,077
  Less Cash Distributions to Investors:        903,252              --
 Operating Cash Flow
  Return of Capital                              2,443              --
  Undistributed Cash Flow from Prior Year  
  Operations                               $   222,077    $ 
                                           -----------    ------------
Cash Generated (Deficiency) after Cash     
 Distributions                             $  (227,520)   $    225,077 
Special Items (not including sales and
 financing):
Source of Funds:
General Partner Contributions                       --              --
Limited Partner Contributions                1,898,147      30,144,542
                                           -----------    ------------
                                           $ 1,670,627    $ 30,369,619
Use of Funds:
Sales Commissions and Offering Expenses        464,760       4,310,028
Return of Original Limited Partner's                
 Investment                                         --              -- 
  Property Acquisitions and Deferred         
   Project Costs                             7,931,566       6,618,273 
                                           -----------    ------------
 Cash Generated (Deficiency) after Cash    
Distributions and Special Items            $(6,725,699)   $(19,441,318)
                                           ===========    ============  

Net Income and Distributions Data per
 $1,000 Invested:
Net Income on GAAP Basis:
 Ordinary Income (Loss)
 - Operations Class A Units                         46              28
 - Operations Class B Units                        (47)             (3)
Capital Gain (Loss)
Tax and Distributions Data per $1,000
 Invested:
 Federal Income Tax Results:
 Ordinary Income (Loss)
 - Operations Class A Units                         46              17
 - Operations Class B Units                        (33)             (3)
Capital Gain (Loss)                                 --
Cash Distributions to Investors:
Source (on GAAP Basis)
 - Investment Income Class A Units                  43              --
 - Return of Capital Class A Units                  --              --
 - Return of Capital Class B Units                  --              --
Source (on Cash Basis)
 - Operations Class A Units                         32              --
 - Return of Capital Class A Units                  11              --
 - Operations Class B Units                         --              --
Source (on a Priority Distribution
 Basis)/(5)/
 - Investment Income Class A Units                  33              --
 - Return of Capital Class A Units                  10              --
 - Return of Capital Class B Units                  --              --
Amount (in Percentage Terms) Remaining             100%
 Invested in Program
Properties at the end of the Last Year
 Reported in the Table
</TABLE>

     

    
(See notes on following page)     


                                    A-11

<PAGE>
 
(1) Includes $28,377 in equity in earnings of joint ventures and $374,051 from
    investment of reserve funds in 1995 and $241,819 in equity in earnings of
    joint ventures and $815,875 from investment of reserve funds in 1996.  At
    December 31, 1996, the leasing status was 93% including developed property
    in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
    depreciation of $14,058 for 1995 and $265,259 for 1996.
(4) In accordance with the partnership agreement, net income or loss,
    depreciation and amortization are allocated $294,221 to Class A Limited
    Partners, $(20,104) to Class B Limited Partners and $(203) to the General
    Partners for 1995; and $1,207,540  to Class A Limited Partners, $(270,653)
    to Class B Limited Partners and $(297) to the General Partners for 1996.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
    cash distributions paid to Class A Limited Partners is payable as priority
    distributions out of the first available net proceeds from the sale of
    partnership properties to Class B Limited Partners.  The amount of cash
    distributions paid per Unit to Class A Limited Partners is shown as a return
    of capital to the extent of such priority distributions payable to Class B
    Limited Partners.  As of December 31, 1996, the aggregate amount of such
    priority distributions payable to Class B Limited Partners totalled
    $250,776.

                                     A-12

<PAGE>
 
                                   TABLE III
                                  (UNAUDITED)
                      OPERATING RESULTS OF PRIOR PROGRAMS
                        WELLS REAL ESTATE FUND IX, L.P.
    

<TABLE>
<CAPTION>
                                                  1996      1995    1994   1993   1992
                                                  ----      ----    -----  ----   ---- 
<S>                                       <C>               <C>     <C>    <C>    <C>
Gross Revenues/(1)/                        $   406,891      N/A     N/A    N/A    N/A
Profit on Sale of Properties                        --
Less: Operating Expenses/(2)/                  101,885
 Depreciation and Amortization/(3)/              6,250
                                           -----------
Net Income (Loss) GAAP Basis/(4)/          $   298,756
                                           ===========
Taxable Income (Loss): Operations          $   304,552
                                           ===========
 Cash Generated (Used By):
Operations                                     151,150
 Joint Ventures                                     --
                                           -----------
                                           $   151,150
 Less Cash Distributions to Investors:
Operating Cash Flow                            149,425
                                           -----------
Cash Generated (Deficiency) after Cash     
 Distributions                             $     1,725 
Special Items (not including sales and
 financing):
Source of Funds:
General Partner Contributions                       --
Limited Partner Contributions               35,000,000
                                           -----------
                                           $35,001,725
Use of Funds:
Sales Commissions and Offering Expenses      4,900,321
Return of Original Limited Partner's                
 Investment                                         --
Property Acquisitions and Deferred         
 Project Costs                               6,544,019
                                           -----------
Cash Generated (Deficiency) after Cash     
 Distributions and Special Items           $23,557,385                         
                                           =========== 
Net Income and Distributions Data per
 $1,000 Invested:
Net Income on GAAP Basis:
 Ordinary Income (Loss)
- - Operations Class A Units                          28
- - Operations Class B Units                         (11)
Capital Gain (Loss)                                 --
Tax and Distributions Data per $1,000
 Invested:
 Federal Income Tax Results:
 Ordinary Income (Loss)
- - Operations Class A Units                          26
- - Operations Class B Units                         (48)
Capital Gain (Loss)                                 --
Cash Distributions to Investors:
Source (on GAAP Basis)
- - Investment Income Class A Units                   13
- - Return of Capital Class A Units                   --
- - Return of Capital Class B Units                   --
Source (on Cash Basis)
- - Operations Class A Units                          13
- - Return of Capital Class A Units                   --
- - Operations Class B Units                          --
Source (on a Priority Distribution
 Basis)/(5)/
- - Investment Income Class A Units                   10
- - Return of Capital Class A Units                    3
- - Return of Capital Class B Units                   --
Amount (in Percentage Terms) Remaining             100%
 Invested in Program
Properties at the end of the Last Year
 Reported in the Table
</TABLE>

     

    
________________

(1)  Includes $23,077 in equity in earnings of joint ventures and $383,884 from
     investment of reserve funds in 1996.  At December 31, 1996, the leasing
     status was 100% including developed property in initial lease up.
(2)  Includes partnership administrative expenses.
(3)  Included in equity in earnings of joint ventures in gross revenues is
     depreciation of $25,286 for 1996.     

                                     A-13

<PAGE>
 
(4)  In accordance with the partnership agreement, net income or loss,
     depreciation and amortization are allocated $330,270 to Class A Limited
     Partners, $(31,220) to Class B Limited Partners and $(294) to the General
     Partners for 1996.
(5)  Pursuant to the terms of the partnership agreement, an amount equal to the
     cash distributions paid to Class A Limited Partners is payable as priority
     distributions out of the first available net proceeds from the sale of
     partnership properties to Class B Limited Partners. The amount of cash
     distributions paid per Unit to Class A Limited Partners is shown as a
     return of capital to the extent of such priority distributions payable to
     Class B Limited Partners. As of December 31, 1996, the aggregate amount of
     such priority distributions payable to Class B Limited Partners totalled
     $36,355.

                                     A-14

<PAGE>
 
                                   EXHIBIT B

                            SUBSCRIPTION AGREEMENT

To:  Wells Real Estate Investment Trust, Inc.
     3885 Holcomb Bridge Road
     Norcross, Georgia  30092

Ladies and Gentlemen:

    
     The undersigned, by signing and delivering a copy of the attached
Subscription Agreement Signature Page, hereby tenders this subscription and
applies for the purchase of the number of shares of common stock of limited
partnership interest ("Shares") in Wells Real Estate Investment Trust, Inc., a
Maryland corporation (the "Company"), set forth on such Subscription Agreement
Signature Page.  Payment for the Shares is hereby made by check payable to
"Nationsbank (South), N.A., as Agent."     

     Payments for Shares will be held in escrow until the Company has received
and accepted subscriptions for 125,000 Shares ($1,250,000), except with respect
to residents of the States of New York and Pennsylvania, whose payments for
Shares will be held in escrow until the Company has received and accepted
subscriptions for 250,000 Shares ($2,500,000) from all investors.

    
     I hereby acknowledge receipt of the Prospectus for the Company dated
__________, 1997 (the "Prospectus").     

     I agree that if this subscription is accepted, it will be held, together
with the accompanying payment, on the terms described in the Prospectus.
Subscriptions may be rejected in whole or in part by the Company in its sole and
absolute discretion.

     Prospective investors are hereby advised of the following:

     (a)  The assignability and transferability of the Shares is restricted and
will be governed by the Company's Articles of Incorporation and Bylaws and all
applicable laws as described in the Prospectus.

     (b)  Prospective investors should not invest in Shares unless they have an
adequate means of providing for their current needs and personal contingencies
and have no need for liquidity in this investment.

     (c)  There will be no public market for the Shares, and accordingly, it may
not be possible to readily liquidate an investment in the Company.

                                      B-1

<PAGE>
 
                 SPECIAL NOTICE FOR CALIFORNIA RESIDENTS ONLY
                   CONDITIONS RESTRICTING TRANSFER OF SHARES

     260.141.11     Restrictions on Transfer.
                    ------------------------ 

    
     (a)  The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 of the Rules
(the "Rules") adopted under the California Corporate Securities Law (the "Code")
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.     

     (b)  It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260,141.12 of the Rules), except:

          (1)   to the issuer;

          (2)   pursuant to the order or process of any court;

          (3)   to any person described in subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of the Rules;

          (4)   to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;

          (5)   to holders of securities of the same class of the same issuer;

    
          (6)   by way of gift or donation inter vivos or on death;     

          (7)   by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the broker-
dealer, nor actually present in this state if the sale of such securities is not
in violation of any securities laws of the foreign state, territory or country
concerned;

          (8)   to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter syndicate or selling group;

          (9)   if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;

          (10)  by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;

          (11)  by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;

          (12)  by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;

          (13)  between residents of foreign states, territories or countries
who are neither domiciled or actually present in this state;

          (14)  to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state;

                                      B-2

<PAGE>
 
          (15)  by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;

          (16)  by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;

          (17)  by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.

     (c)  The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:

    
     "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
     INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
     PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
     CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."     

[Last amended effective January 21, 1988.]

                SPECIAL NOTICE FOR MASSACHUSETTS RESIDENTS ONLY

     In no event may a subscription for Shares be accepted until at least five
business days after the date the subscriber received the Prospectus.  Residents
of the State of Massachusetts who first received the Prospectus only at the time
of subscription may receive a refund of the subscription amount upon request to
the Company within five days of the date of subscription.

                                      B-3

<PAGE>
 
                      STANDARD REGISTRATION REQUIREMENTS

     The following requirements have been established for the various forms of
registration.  Accordingly, complete Subscription Agreements and such supporting
material as may be necessary must be provided.

TYPE OF OWNERSHIP AND SIGNATURE(S) REQUIRED

(3)  INDIVIDUAL:  One signature required.

(4)  JOINT TENANTS WITH RIGHT OF SURVIVORSHIP:  All parties must sign.

(5)  TENANTS IN COMMON:  All parties must sign.

(6)  COMMUNITY PROPERTY:  Only one investor signature required.

(7)  PENSION OR PROFIT SHARING PLANS:  The trustee signs the Signature Page.

(8)  TRUST:  The trustee signs the Signature Page.  Provide the name of the
     trust, the name of the trustee and the name of the beneficiary.

    
(9)  COMPANY:  Identify whether the entity is a general or limited partnership.
     The general partners must be identified and their signatures obtained on
     the Signature Page.  In the case of an investment by a general partnership,
     all partners must sign (unless a "managing partner") has been designated
     for the partnership, in which case he may sign on behalf of the partnership
     if a certified copy of the document granting him authority to invest on
     behalf of the partnership is submitted).     

(10) CORPORATION:  The Subscription Agreement must be accompanied by (1) a
     certified copy of the resolution of the Board of Directors designation the
     officer(s) of the corporation authorized to sign on behalf of the
     corporation and (2) a certified copy of the Board's resolution authorizing
     the investment.

(11) IRA AND IRA ROLLOVERS:  Requires signature of authorized signer (e.g., an
     officer) of the bank, trust company, or other fiduciary.  The address of
     the trustee must be provided in order for the trustee to receive checks and
     other pertinent information regarding the investment.

(12) KEOGH (HR 10):  Same rules as those applicable to IRAs.

(13) UNIFORM GIFT TO MINORS ACT (UGMA) or UNIFORM TRANSFERS TO MINORS ACT
     (UTMA):  The required signature is that of the custodian, not of the parent
     (unless the parent has been designated as the custodian).  Only one child
     is permitted in each investment under UGMA or UTMA.  In addition, designate
     the state under which the gift is being made.

                                      B-4

<PAGE>
 
             INSTRUCTIONS TO SUBSCRIPTION AGREEMENT SIGNATURE PAGE
      TO WELLS REAL ESTATE INVESTMENT TRUST, INC. SUBSCRIPTION AGREEMENT
 
- --------------------------------------------------------------------------------
INVESTMENT               Please follow these instructions carefully. Failure to
INSTRUCTIONS             do so may result in the rejection of your subscription.
                         All information on the Subscription Agreement 
                         Signature Page should be completed as follows:
- --------------------------------------------------------------------------------
    
1.  INVESTMENT           A minimum investment of $1,000 (100 Shares) is
                         required, except for certain states which require a
                         higher minimum investment. A CHECK FOR THE FULL
                         PURCHASE PRICE OF THE SHARES SUBSCRIBED FOR SHOULD BE
                         MADE PAYABLE TO THE ORDER OF "NATIONSBANK (SOUTH),
                         N.A., AS AGENT." Shares may be purchased only by
                         persons meeting the standards set forth under the
                         Section of the Prospectus entitled "WHO SHOULD INVEST -
                         SUITABILITY STANDARDS." Please indicate the state in
                         which the sale was made.     
- --------------------------------------------------------------------------------
2.  TYPE OF              Please check the appropriate box to indicate the
  OWNERSHIP              type of entity or type of individuals subscribing.
- --------------------------------------------------------------------------------
3.  REGISTRATION         Please enter the exact name in which the Shares are to
  NAME AND               be held. For joint tenants with right of survivorship
  ADDRESS                or tenants in common, include the names of both
                         investors. In the case of partnerships or corporations,
                         include the name of an individual to whom
                         correspondence will be addressed. Trusts should include
                         the name of the trustee. All investors must complete
                         the space provided for taxpayer identification number
                         or social security number. By signing in Section 6, the
                         investor is certifying that this number is correct.
                         Enter the mailing address and telephone numbers of the
                         registered owner of this investment. In the case of a
                         Qualified Plan or trust, this will be the address of
                         the trustee. Indicate the birthday and occupation of
                         the registered owner unless the registered owner is a
                         partnership, corporation or trust.
- --------------------------------------------------------------------------------
4.  INVESTOR NAME        Complete this Section only if the investor's name and
  AND ADDRESS            address is different from the registration name and
                         address provided in Section 4. If the Shares are
                         registered in the name of a trust, enter the name,
                         address, telephone number, social security number,
                         birthdate and occupation of the beneficial owner of the
                         trust.
- --------------------------------------------------------------------------------
5.  SUBSCRIBER           Please separately initial each representation made by
  SIGNATURE              the investor where indicated.  Except in the
                         case of fiduciary accounts, the investor may not grant
                         any person a power of attorney to make such
                         representations on his or her behalf. Each investor
                         must sign and date this Section. If title is to be held
                         jointly, all parties must sign. If the registered owner
                         is a partnership, corporation or trust, a general
                         partner, officer or trustee of the entity must sign.
                         PLEASE NOTE THAT THESE SIGNATURES DO NOT HAVE TO BE
                         NOTARIZED. 
- --------------------------------------------------------------------------------
    
6.  ADDITIONAL           Please check if you plan to make one or more additional
  INVESTMENTS            investments in the Company. All additional investments
                         must be increments of at least $25. Additional
                         investments by residents of Maine must be for the
                         minimum amounts stated under "WHO SHOULD INVEST -
                         SUITABILITY STANDARDS" in the Prospectus, and residents
                         of Maine must execute a new Subscription Agreement
                         Signature Page to make additional investments in the
                         Company. If additional investments in the Company are
                         made, the investor agrees to notify the Company and the
                         Broker-Dealer named on the Subscription Agreement
                         Signature Page in writing if at any time he fails to
                         meet the applicable suitability standards or he is
                         unable to make any other representations or warranties
                         set forth in the Prospectus or the Subscription
                         Agreement. The investor acknowledges that the Broker-
                         Dealer named in the Subscription Agreement Signature
                         Page may receive a commission not to exceed 8% of any
                         such additional investments in the Company.     
- --------------------------------------------------------------------------------
7.  DISTRIBUTIONS        a.  DISTRIBUTION REINVESTMENT PLAN: By electing the
                             Distribution Reinvestment Plan, the investor elects
                             to reinvest all distributions of Cash Available for
                             Distribution in the Company. The investor agrees to
                             notify the Company and the Broker-Dealer named on
                             the Subscription Agreement Signature Page in
                             writing if at any time he fails to meet the
                             applicable suitability standards or he is unable to
                             make 

                                      B-5

<PAGE>
 
- --------------------------------------------------------------------------------
                             any other representations and warranties as set
                             forth in the Prospectus or Subscription Agreement.
                             The investor acknowledges that the Broker-Dealer
                             named in the Subscription Agreement Signature Page
                             may receive a commission not to exceed 8% of any
                             reinvested distributions.
 
                         b.  DISTRIBUTION ADDRESS: If cash distributions are to
                             be sent to an address other than that provided in
                             Section 5 (i.e., a bank, brokerage firm or savings
                             and loan, etc.), please provide the name, account
                             number and address.
- --------------------------------------------------------------------------------
8.  BROKER-DEALER   This Section is to be completed by the Registered
                    Representative. Please complete all BROKER-DEALER
                    information contained in Section 9 including suitability
                    certification. SIGNATURE PAGE MUST BE SIGNED BY AN
                    AUTHORIZED REPRESENTATIVE.
- --------------------------------------------------------------------------------
 
     The Subscription Agreement Signature Page, which has been delivered with
this Prospectus, together with a check for the full purchase price, should be
delivered or mailed to your Broker-Dealer.  Only original, completed copies of
Subscription Agreements can be accepted.  Photocopied or otherwise duplicated
Subscription Agreements cannot be accepted by the Company.

               IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS
                    SUBSCRIPTION AGREEMENT SIGNATURE PAGE,
                          PLEASE CALL 1-800-448-1010


                                      B-6

<PAGE>
 
                                   EXHIBIT C

                          DIVIDEND REINVESTMENT PLAN

    
Wells Real Estate Investment Trust, Inc., a Maryland corporation (the
"Company"), pursuant to its Articles of Incorporation, as amended and restated
to date (the "Articles"), has adopted a Dividend Reinvestment Program (the
"DRP"), the terms and conditions of which are set forth below.  Capitalized
terms shall have the same meaning as set forth in the Articles unless otherwise
defined herein.     

    
     1.   As agent for stockholders ("Stockholders") of the Company who purchase
shares of the Company's common stock (the "Shares") pursuant to the Company's
public offering which will commence immediately upon declaration of
effectiveness of its Registration Statement filed with the SEC July 25, 1997,
which offering is expected to be completed within one year from the date of such
effectiveness (the "Offering") and who elect to participate in the DRP (the
"Participants), the Company will apply all dividends and other distributions
declared and paid in respect of the Shares held by each Participant (the
"Distributions"), including Distributions paid with respect to any full or
fractional Shares acquired under the DRP, to the purchase of the Shares for such
Participants directly, if permitted under state securities laws and, if not,
through the Dealer-Manager for Participating Dealers registered in the
Participant's state of residence.  Neither the Company nor its Affiliates will
receive a fee for selling Shares under the DRP.     

    
     2.   Procedure for Participation.  Any Stockholder who purchased Shares
          ---------------------------                                       
pursuant to the Company's Offering may elect to become a Participant by
completing and executing the Subscription Agreement or other appropriate
authorization form as may be available from the Company, the Dealer-Manager or
Soliciting Dealer.  Participation in the DRP will begin with the next
Distribution payable after receipt of a Participant's subscription or
authorization.  Shares will be purchased under the DRP on the record date for
the Distribution used to purchase the Shares.  Distributions for Shares acquired
under the DRP are currently paid monthly and are calculated with a daily record
and Distribution declaration date.  Each Participant agrees that if, at any time
prior to listing of the Shares on a national stock exchange or inclusion of the
Shares for quotation on the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq"), he or she fails to meet the suitability
requirements for making an investment in the Company or cannot make the other
representations or warranties set forth in the Subscription Agreement, he will
promptly so notify the Company in writing.     

    
     3.   Purchase of Shares.  Participants will acquire Shares from the Company
          ------------------                                                    
at a fixed price of $______________ per Share until the termination of the
Offering.  Participants in the DRP may also purchase fractional Shares so that
100% of the Distributions will be used to acquire Shares.  However, a
Participant will not be able to acquire Shares under the DRP to the extent such
purchase would cause it to exceed the Ownership Limit.     

    
     Shares to be distributed by the Company in connection with the DRP may (but
are not required to) be supplied from:  (a) 1,500,000 Shares which were
registered for the DRP in the Offering, (b) shares of the Company's stock
purchased by the Company for the DRP in a secondary market (if available) or on
a stock exchange or Nasdaq (if listed) (collectively, the "Secondary Market"),
or (c) shares registered by the Company with the SEC for use in the DRP (a
"Secondary Registration").     

    
     Shares purchased on the Secondary Market as set forth in (b) above will be
purchased at the then-prevailing market price, which price will be utilized for
purposes of purchases of Shares in the DRP.  Shares acquired by the Company on
the Secondary Market or registered in a Secondary Registration for use in the
DRP may be at prices lower or higher than the $___________ per Share price which
will be paid for the first 1,500,000 Shares purchased under the DRP.     

    
     If the Company acquires shares in the Secondary Market for use in the DRP,
the Company shall use reasonable efforts to acquire Shares for use in the DRP at
the lowest price then reasonably available.  However, the Company does not in
any respect guarantee or warrant that the Shares so acquired and purchased by
the Participant in the DRP will be at the lowest possible price.  Further,
irrespective of the Company's ability to acquire Shares in the Secondary Market
or to complete a Secondary Registration for shares to be used in the DRP, the
Company is in no way obligated to do either, in its sole discretion.     

    
     It is understood that reinvestment of Distributions does not relieve a
Participant of any income tax liability which      

                                      C-1

<PAGE>
 
    
may be payable on the Distributions.     

    
     4.   Share Certificates.  Within 90 days after the end of the Company's
          ------------------                                                
fiscal year, the Company will issue certificates evidencing ownership of Shares
purchased through the DRP during the prior fiscal year.  The ownership of the
Shares will be in book-entry form prior to the issuance of such 
certificates.     

    
     5.   Reports.  Within 90 days after the end of the Company's fiscal year,
          -------                                                             
the Company will provide each Participant with an individualized report on his
or her investment, including the purchase date(s), purchase price and number of
Shares owned, as well as the dates of distribution and amounts of Distributions
received during the prior fiscal year.  The individualized statement to
Stockholders will include receipts and purchases relating to each Participant's
participation in the DRP including the tax consequences relative thereto.     

    
     6.   Termination by Participant.  A Participant may terminate participation
          --------------------------                                            
in the DRP at any time, without penalty, by delivering to the Company a written
notice.  Prior to listing of the Shares on a stock exchange or Nasdaq, any
transfer of Shares by a Participant to a non-Participant will terminate
participation in the DRP with respect to the transferred Shares.  If a
Participant terminates DRP participation, the Company will provide the
terminating Participant with a certificate evidencing the whole shares in his or
her account and a check for the cash value of any fractional share in such
account.  Upon termination of DRP participation, Distributions will be
distributed to the Stockholder in cash.     

    
     7.   Amendment or Termination of DRP by the Company.  The Directors of the
          ----------------------------------------------                       
Company may by majority vote (including a majority of the Independent Directors)
amend or terminate the DRP for any reason upon 30 days' written notice to the
Participants.     

    
     8.   Liability of the Company.  The Company shall not be liable for any act
          ------------------------                                              
done in good faith, or for any good faith omission to act, including, without
limitation, any claims or liability:  (a) arising out of failure to terminate a
Participant's account upon such Participant's death prior to receipt of notice
in writing of such death; and (b) with respect to the time and the prices at
which Shares are purchased or sold for a Participant's account.  To the extent
that indemnification may apply to liabilities arising under the Securities Act
of 1933, as amended or the securities act of a state, the Company has been
advised that, in the opinion of the Securities and Exchange Commission and
certain state securities commissioners, such indemnification is contrary to
public policy and, therefore, unenforceable.     

    
     9.   Governing Law.  This DRP shall be governed by the laws of the State of
          -------------                                                         
Maryland.     

                                      C-2

<PAGE>
- --------------------------------------------------------------------------------

No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Dealer Manager.  This Prospectus
does not constitute an offer of any securities other than those to which it
relates or an offer to sell, or a solicitation of an offer to buy, to any person
in any jurisdiction where such an offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that the information contained herein
is correct as of any time subsequent to the date hereof.

                           SUMMARY TABLE OF CONTENTS

    

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Summary of the Offering....................................................  
Risk Factors...............................................................  
Investor Suitability Standards.............................................  
Estimated Use of Proceeds..................................................  
Management Compensation....................................................  
Conflicts of Interest......................................................  
Summary of Reinvestment Plan...............................................  
Prior Performance Summary..................................................  
Management.................................................................  
The Advisor and the Advisory Agreement.....................................  
Investment Objectives and Criteria.........................................  
Real Property Investments..................................................  
Distribution Policy........................................................  

Management's Discussion and Analysis of....................................  
Financial Condition and Results of Operations..............................  
Description of Capital Stock...............................................  
Federal Income Tax Considerations..........................................  
ERISA Considerations.......................................................  
Partnership Agreement......................................................  
Plan of Distribution.......................................................  
Supplemental Sales Material................................................  
Legal Matters..............................................................  
Experts....................................................................  
Additional Information.....................................................  
Glossary...................................................................  
Financial Statements.......................................................  
</TABLE>

     

Until ________, 1997 (90 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as soliciting dealers.

    
                       15,000,000 Shares of Common Stock     


                               WELLS REAL ESTATE
                            INVESTMENT TRUST, INC.


                              ___________________

                                  PROSPECTUS
                              ___________________



                       WELLS INVESTMENT SECURITIES, INC.



                                     , 1997

                                            
     
- --------------------------------------------------------------------------------

<PAGE>
 
 
                                   PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS

    
                                   TABLE VI     
                                   --------

    
                    Acquisition of Properties by Programs.     
                    ------------------------------------- 

    
The information contained on the following pages relates to acquisition of
properties within the past three (3) years by five (5) prior public partnerships
with which the General Partners and their Affiliates have been affiliated and
which have substantially similar investment objectives to the Partnership.  This
table provides the potential investor with information regarding the general
nature and location of the properties and the manner in which the properties
were acquired.  None of the information in Table VI has been audited.     

                                     II-1

<PAGE>
 
                                   TABLE VI
                                   --------

                     Wells Real Estate Funds V, VI and VII
                     -------------------------------------

    

<TABLE> 
<S>                                    <C> 
Name of property                       Stockbridge Village III
Location of property                   Georgia State Route 138 and Mt. Zion Road
                                       Stockbridge, Clayton County, Georgia
Type of property                       Two retail/restaurant buildings
Size of parcel                         3.27 acres
Gross leasable space                   18,200 square feet
Date of commencement of
operations 1                           Fund VI  - May 17, 1993
                                       Fund VII - April 26, 1994
Date of purchase                       April 7, 1994
Mortgage financing at
date of purchase                       N/A
Cash down payment                      $  983,300
Contract purchase price
plus Acquisition Fee                    1,059,833
Other cash expenditures
expensed                               N/A
Other cash expenditures
capitalized 2                          $1,902,739
Total Acquisition Cost                 $2,962,572
</TABLE>

     

    
1    The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.     

    
2    Includes improvements made after acquisitions through August 31, 1997.     

                                     II-2

<PAGE>
 
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VI and VII
                      ----------------------------------

    

<TABLE>
<S>                                    <C> 
Name of property                       Marathon Building
Location of property                   2323 East Capitol Drive
                                       Appleton, Outagamie County, Wisconsin
Type of property                       Three-story office building
Size of parcel                         6.2 acres
Gross leasable space                   74,860 sq. feet
Date of commencement of                Fund V   -  April 27, 1992
operations 1                           Fund VI  -  May 17, 1993
                                       Fund VII -  April 26, 1994
Date of purchase                       September 16, 1994
Mortgage financing at
date of purchase                       N/A
Cash down payment                      $  100,000
Contract purchase price
plus Acquisition Fee                   $8,280,000
Other cash expenditures
expensed                               N/A
Other cash expenditures
capitalized 2                          $  403,074
Total Acquisition Cost                 $8,683,074
</TABLE>

     

    
1    The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.     

    
2    Includes improvements made after acquisitions through August 31, 1997.     

                                     II-3

<PAGE>
 
    
                                   TABLE VI
                                   --------

                     Wells Real Estate Funds VII and VIII
                     ------------------------------------
                                                                              
     Name of property                    Hannover Retail                      
     Location of property                7355 Hannover Parkway, North         
                                         Stockbridge, Clayton County, Georgia 
     Type of property                    Retail center                        
     Size of parcel                      1.01 acres                           
     Gross leasable space                12,000 sq. feet                      
        Date of commencement of          Fund VII   -  April 26, 1994         
     operations 1                        Fund VIII  -  February 24, 1995      
     Date of purchase                    November 30, 1994                    
        Mortgage financing at                                                 
     date of purchase                    N/A                                  
     Cash down payment                   $  500,000                           
        Contract purchase price                                               
     plus Acquisition Fee                $  512,000                           
        Other cash expenditures                                               
     expensed                                N/A                              
        Other cash expenditures                                               
     capitalized 2                       $1,003,500                           
     Total Acquisition Cost              $1,515,500                           

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                      II-4

<PAGE>
 
    
                             TABLE VI (CONTINUED)
                             --------------------

                     Wells Real Estate Funds VII and VIII
                     ------------------------------------

       Name of property                   CH2M Hill Building                  
       Location of property               3011 S.W. Wiliston Road             
                                          Gainesville, Alachua County, Florida
       Type of property                   Two-story office building           
       Size of parcel                     5 acres                             
       Gross leasable space               62,000 sq. feet                     
            Date of commencement of       Fund VII   -  April 26, 1994        
       operations 1                       Fund VIII  -  February 24, 1995     
       Date of purchase                   January 20, 1995                    
            Mortgage financing at                                             
       date of purchase                   N/A                                 
       Cash down payment                  $  222,627                          
            Contract purchase price                                           
       plus Acquisition Fee               $4,668,308                          
            Other cash expenditures                                           
       expensed                           N/A                                 
            Other cash expenditures       $  196,657                          
       capitalized 2                                                          
       Total Acquisition Cost             $5,087,592                          

1 The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2 Includes improvements made after acquisitions through August 31, 1997.     

                                      II-5

<PAGE>
 
    
                                   TABLE VI
                                   --------

                   Wells Real Estate Funds VI, VII and VIII
                   ----------------------------------------

          Name of property                 BellSouth Building                
          Location of property             10375 Centurion Pkwy North        
                                           Jacksonville, Duval County, Florida
          Type of property                 Four-story office building         
          Size of parcel                   5.55 acres                         
          Gross leasable space             92,964 square feet                 
               Date of commencement of     Fund VI   -  May 17, 1993          
          operations 1                     Fund VII  -  April 26, 1994        
                                           Fund VIII -  February 24, 1995     
          Date of purchase                 April 25, 1995                     
               Mortgage financing at                                          
          date of purchase                 N/A                                
          Cash down payment                $   15,000                         
               Contract purchase price                                        
          plus Acquisition Fee             $1,245,049                         
               Other cash expenditures                                        
          expensed                         N/A                                
               Other cash expenditures                                        
          capitalized 2                    $7,352,234                         
          Total Acquisition Cost           $8,597,283                        

1    The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2    Includes improvements made after acquisitions through August 31, 1997.     

                                      II-6

<PAGE>
 
    
                                   TABLE VI
                                   --------

                   Wells Real Estate Funds VI, VII and VIII
                   ----------------------------------------

     Name of property                  Tanglewood Commons
     Location of property              Harper Road & Highway 158
                                       Clemmons, Forsyth County, North Carolina
     Type of property                  Retail shopping center
     Size of parcel                    14.68 acres
     Gross leasable space              67,320 square feet
          Date of commencement of      Fund VI   -  May 17, 1993
     operations 1                      Fund VII  -  April 26, 1994
                                       Fund VIII -  February 24, 2995
     Date of purchase                  May 31, 1995
          Mortgage financing at
     date of purchase                  N/A
     Cash down payment                 $   50,000
          Contract purchase price
     plus Acquisition Fee              $3,020,041
          Other cash expenditures
     expensed                          N/A
          Other cash expenditures
     capitalized 2                     $3,072,244
     Total Acquisition Cost            $6,092,285

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                      II-7

<PAGE>
 
    
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VI and VII
                      ----------------------------------

       Name of property                   Stockbridge Village I Expansion     
       Location of property               3576 Highway 138                    
                                          Stockbridge, Clayton County, Georgia
       Type of property                   Multi-tenant shopping center        
       Size of parcel                     3.38 acres                          
       Gross leasable space               29,200 square feet                  
            Date of commencement of                                           
       operations 1                       Fund VI  -  May 17, 1993            
                                          Fund VII -  April 26, 1994          
       Date of purchase                   June 7, 1995                        
            Mortgage financing at                                             
       date of purchase                   N/A                                 
       Cash down payment                  $  675,200                          
            Contract purchase price                                           
       plus Acquisition Fee               $  718,489                          
            Other cash expenditures                                           
       expensed                           N/A                                 
            Other cash expenditures                                           
       capitalized 2                      $2,238,650                          
       Total Acquisition Cost             $2,957,139                         

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                      II-8

<PAGE>
 
    
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VIII and IX
                      -----------------------------------

        Name of property                   Cellular One Building            
        Location of property               5117 West Terrace Drive          
                                           Madison, Dade County, Wisconsin  
        Type of property                   Four-story office building       
        Size of parcel                     7.09 acres                       
        Gross leasable space               101727 square feet               
             Date of commencement of                                        
        operations 1                       Fund VIII  -  February 24, 1995  
                                           Fund IX  -  February 12, 1996    
        Date of purchase                   June 19, 1996                    
             Mortgage financing at                                          
        date of purchase                    N/A                             
        Cash down payment                   $    25,000                     
             Contract purchase price                                        
        plus Acquisition Fee                $   859,255                     
             Other cash expenditures                                        
        expensed                            N/A                             
             Other cash expenditures                                        
        capitalized 2                       $ 9,159,736                     
        Total Acquisition Cost              $10,018,991                     

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  ncludes improvements made after acquisitions through August 31, 1997.     

                                      II-9

<PAGE>
 
    
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VIII and XI
                      -----------------------------------

     Name of property                     TCI Building                        
     Location of property                 1565 Chenault Street                
                                          Farmer's Branch, Dallas County, Texas
     Type of property                     One-story office building           
     Size of parcel                       4.864 acres                         
     Gross leasable space                 40,000 square feet                  
          Date of commencement of                                             
     operations 1                         Fund VIII -  February 24, 1995      
                                          Fund IX    -  February 12, 1996     
     Date of purchase                     October 10, 1996                    
          Mortgage financing at                                               
    date of purchase                      N/A                                 
    Cash down payment                     $4,473,060                          
          Contract purchase price                                             
     plus Acquisition Fee                 $4,473,060                          
          Other cash expenditures                                             
     expensed                             N/A                                 
          Other cash expenditures                                             
     capitalized 2                        $  193,806                          
     Total Acquisition Cost               $4,666,866                          

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                     II-10

<PAGE>
 
    
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VIII and IX
                      -----------------------------------

     Name of property                         Matsushita Building
     Location of property                     15233 Bake Parkway
                                              Irvine, Orange County, California
     Type of property                         Two-story office building
     Size of parcel                           4.4 acres
     Gross leasable space                     65,006
          Date of commencement of
     operations 1                             Fund VIII - February 24, 1995
                                              Fund IX   -  February 12, 1996
     Date of purchase                         January 10, 1997
          Mortgage financing at
     date of purchase                         N/A
     Cash down payment                        $  100,000
          Contract purchase price
     plus Acquisition Fee                     $7,211,145
          Other cash expenditures
     expensed                                 N/A
          Other cash expenditures
     capitalized 2                            $  401,588
     Total Acquisition Cost                   $7,612,733

1  The date minimum offering proceeds were obtained and funds became available
to used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                     II-11

<PAGE>
 
    
                                   TABLE VI
                                   --------

                      Wells Real Estate Funds VIII and IX
                      -----------------------------------

          Name of property                 Cirrus Logic Building              
          Location of property             305 Interlochen Parkway            
                                           Broomfield, Boulder County, Colorado
          Type of property                 Two-story office building          
          Size of parcel                   4.26 acres                         
          Gross leasable space             49,460 square feet                 
               Date of commencement of                                        
          operations 1                     Fund VIII - February 24, 1995      
                                           Fund IX  -  February 12, 1996      
          Date of purchase                 February 20, 1997                  
               Mortgage financing at                                          
          date of purchase                 N/A                                
          Cash down payment                $   50,000                         
               Contract purchase price                                        
          plus Acquisition Fee             $7,064,550                         
               Other cash expenditures                                        
          expensed                         N/A                                
               Other cash expenditures                                        
          capitalized 2                    $  402,096                         
          Total Acquisition Cost           $7,466,646                         

1  The date minimum offering proceeds were obtained and funds became available
to be used for partnership purposes.

2  Includes improvements made after acquisitions through August 31, 1997.     

                                     II-12

<PAGE>
 
    
ITEM 31.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION     

  Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the Shares.

    

<TABLE> 
<S>                                                                     <C> 
Securities and Exchange Commission, registration fee..................  $50,000
NASD filing fee.......................................................   17,000
Printing and mailing..................................................        *
Accountant's fees and expenses........................................        *
Blue Sky fees and expenses............................................        *
Counsel fees and expenses.............................................        *
Miscellaneous.........................................................        *
                                                                          -----
Total                                                                         *
                                                                          =====
</TABLE>
 
     

    
* - To be completed by amendment     

    
ITEM 32.  SALES TO SPECIAL PARTIES     

     See Item 32.

    
ITEM 33.  RECENT SALES OF UNREGISTERED SECURITIES     

    
   Wells Capital, Inc. has agreed to purchase 20,000 units of limited
partnership interest ("Units") in Wells Operating Partnership, L.P. for a
purchase price of $10 per Unit for an aggregate purchase price of $200,000.  The
Units will be purchased for investment and for the purpose of organizing the
Company.  The Company is issuing these Units in reliance on an exemption from
registration under Section 4(2) of the Securities Act.     

    
ITEM 34.  INDEMNIFICATION OF DIRECTORS AND OFFICERS     

   The MGCL permits a Maryland corporation to include in its Articles of
Incorporation a provision limiting the liability of its directors and officers
to the trust and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Articles of
Incorporation of the Company contains such a provision which eliminates such
liability to the maximum extent permitted by the MGCL.

   The Articles of Incorporation of the Company authorities it, to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former Director or officer or (b) any individual who, while a
Director of the Company and at the request of the Company, serves or has served
another real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a trustee, director,
officer or partner of such real estate investment trust, corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The Bylaws of the Company obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
Director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a Director of the
Company and at the request of the Company, serves or has served another real
estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a trustee, director, officer or
partner of such real estate investment trust, corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The Articles
of Incorporation and Bylaws also permit the Company to indemnify and advance
expenses to any person who served a predecessor of the Company in any of the
capacities described above and to any employee or agent of the Company or a
predecessor of the Company. The Bylaws require the Company to indemnify a
Director or officer who has been successful, on the merits or otherwise, in the
defense of any proceeding to which he is made a party by reason of his service
in that capacity.

   The MGCL permits a Maryland corporation to indemnify and advance expenses to
its trustees, officers, employees and agents to the same extent as is permitted
by the MGCL for directors and officers of Maryland corporations. The MGCL
permits a corporation to indemnity its present and former directors and
officers, among others, against judgments, penalties, fines, settlements 

                                     II-13

<PAGE>
 
and reasonable expenses actually incurred by them in connection with any
proceeding to which they may be made a party by reason of their service in those
or other capacities unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
(i) was committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
accordance with the MGCL, the Bylaws of the Company require it, as a condition
to advancing expenses, to obtain (a) a written affirmation by the Director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and (b)
a written statement by or on his behalf to repay the amount paid or reimbursed
by the Company if it shall ultimately be determined that the standard of conduct
was not met.

    
ITEM 35.  TREATMENT OF PROCEEDS FROM SHARES BEING REGISTERED     

   None.

    
ITEM 36.  FINANCIAL STATEMENTS AND EXHIBITS     

    
  Balance Sheet as of July 23, 1997 (audited).     

    
ITEM 37.  UNDERTAKINGS     

    
  Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 33 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
officer, or controlling person of the Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question as to whether such indemnification by it is against public policy
as expressed in the Act, and will be governed by the final adjudication of such
issue.     

    
  The undersigned Registrant hereby undertakes to provide to the Dealer Manager
at the closing specified in the Dealer Manager Agreement certificates in such
denominations and registered in such names as required by the Dealer Manager to
permit prompt delivery to each purchaser.     

    
  The undersigned Registrant hereby undertakes that:     

    
 (1)  For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.     

    
  (2)  To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:     

    
  (i)   To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933:     

    
  (ii)  To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;     

                                     II-14

<PAGE>
 
    
  (iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

  (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering .

  (4) All post-effective amendments will comply with the applicable forms,
rules and regulations of the Commission in effect at the time such post-
effective amendments are filed.

  (5) The registrant will send to each shareholder at least on an annual basis a
detailed statement of any transactions with the Advisor or its Affiliates, and
of fees, commissions, compensation and other benefits paid, or accrued to the
Advisor or its Affiliates for the fiscal year completed, showing the amount paid
or accrued to each recipient and the services performed.

  (6) The registrant will provide to the Shareholders the financial statements
required by Form 10-K for the first full fiscal year of operations of the
Company.

  (7) The registrant will file a sticker supplement pursuant to Rule 424(c)
under the Act during the distribution period describing each property not
identified in the prospectus at such time as there arises a reasonable
probability that such property will be acquired and to consolidate all such
stickers into a post-effective amendment filed at least once every three months,
with the information contained in such amendment provided simultaneously to the
existing Shareholders.  Each sticker supplement should disclose all compensation
and fees received by the Advisor and its Affiliates in connection with any such
acquisition.  The post-effective amendment shall include audited financial
statements meeting the requirements of Rule 3-14 of Regulation S-X only for
properties acquired during the distribution period.

  (8) The registrant will file, after the end of the distribution period, a
current report on Form 8-K containing the financial statements and any
additional information required by Rule 3-14 of Regulation S-X, to reflect each
commitment (i.e., the signing of a binding purchase agreement) made after the
end of the distribution period involving the use of 10 percent or more (on a
cumulative basis) of the net proceeds of the Offering, and to provide the
information contained in such report to the Shareholders at least once each
quarter after the distribution period of the Offering has ended.     

                                     II-15

<PAGE>
 
    

                                  SIGNATURES


  Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Norcross, State of Georgia, on
September 19, 1997. 

                                            WELLS REAL ESTATE INVESTMENT TRUST,
                                                                               
                                             a Maryland corporation             
                                             (Registrant)                       

                                            By:  /s/ Leo F. Wells, III
                                            ---------------------
                                             President

                               POWER OF ATTORNEY

  Each person whose signature appears below hereby constitutes and
appoints Leo F. Wells, III and Brian M. Conlon, or either of them, his true and
lawful attorney-in-fact, for him and in his name, place and stead, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement or any additional Registration Statement filed pursuant to Rule 462
and to cause the same to be filed with the Securities and Exchange Commission,
hereby granting to said attorneys-in-fact full power and authority to do and
perform all and every act and thing whatsoever requisite or desirable to be done
in and about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things that said attorneys-in-fact may do or cause to be done by virtue
of these presents.

   Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below on September 19, 1997
by the following persons in the capacities indicated.

             SIGNATURE                                      TITLE

               /s/ Leo F. Wells, III               President and Director 
                                                   (Principal Executive Officer)

               /s/ Brian M. Conlon                 Executive Vice President
                                                   and Director(Principal 
                                                   Financial and Accounting 
                                                   Officer)     
                                                        

                                     II-16

<PAGE>
 
    

                                 EXHIBIT INDEX     


<TABLE> 
<CAPTION> 
Exhibits
- --------
<S>        <C>   
 * 1.1     Form of Dealer Manager Agreement                                
 * 3.1--   Form of Amended and Restated Articles of Incorporation of the   
           Registrant                                                      
 * 3.2--   Bylaws of the Registrant                                        
 * 4.1--   Form of Common Stock certificate                                 
***4.2--   Form of Dividend Reinvestment Plan
 * 5.1--   Opinion of Hunton & Williams
   8.1--   Form of Opinion of Hunton & Williams as to Tax Matters
 *10.1--   Form of First Amended and Restated Agreement of Limited Partnership
           of Wells Operating Partnership, L.P.
 * 10.2--  Form of Escrow Agreement
   10.3--  Form of Advisory Agreement
 * 21--    List of Subsidiaries of Registrant
 * 23.1--  Consent of Hunton & Williams (included in Exhibits 5.1 and 8.1)
   23.2--  Consent of Arthur Andersen LLP
 **24.1--  Powers of Attorney (included on signature page)
 * 27.1--  Financial Data Schedule
 * 99.1--  Consent of _______________ to being named as a Director
 * 99.2--  Consent of _______________ to being named as a Director
 * 99.3--  Consent of _______________ to being named as a Director
</TABLE>
 
    
*   --   To be filed by Amendment
**  --   Previously filed
*** --   Included in the Prospectus as Exhibit C and incorporated herein by 
 reference.     

                                     II-17





<PAGE>
 
EXHIBIT 8.1
- -----------


                               September __, 1997



Wells Real Estate Investment Trust, Inc.
3885 Holcomb Bridge Road
Norcross, Georgia  30092


                    Wells Real Estate Investment Trust, Inc.
                    ----------------------------------------
                                Qualification as
                                ----------------
                          Real Estate Investment Trust
                          ----------------------------


Ladies and Gentlemen:

          We have acted as counsel to Wells Real Estate Investment Trust, Inc.,
a Maryland corporation (the "Company"), in connection with (i) the preparation
of a Form S-11 registration statement (the "Registration Statement") filed with
the Securities and Exchange Commission ("SEC") on July 25, 1997 (No. 333-32099),
as amended through the date hereof, with respect to the offering and sale (the
"Offering") of up to 15,000,000 shares of the common stock, par value $0.01 per
share, of the Company (the "Common Stock") and (ii) the Company's contribution
of the net proceeds of the Offering to Wells Operating Partnership, L.P., a
Delaware limited partnership (the "Partnership"), in exchange for a general
partnership interest in the Partnership.  The closing of the Offering will occur
when at least 125,000 shares of Common Stock have been issued and sold.  You
have requested our opinion regarding certain U.S. federal income tax matters in
connection with the Offering.

          The Company intends to acquire commercial real estate but has
 not
identified any such properties for acquisition.  The Company will invest the net
proceeds of the Offering in short-term, interest-bearing securities until the
Company identifies real estate assets for acquisition.

<PAGE>
 
Wells Real Estate Investment Trust, Inc.
September __, 1997
Page 2


          In giving this opinion letter, we have examined the following:

1.   the Company's Articles of Incorporation, as duly filed with the Department
of Assessments and Taxation of the State of Maryland on July 3, 1997;

2.   the Articles of Correction to the Company's Articles of Incorporation, as
duly filed with the Department of Assessments and Taxation of the State of
Maryland on July 23, 1997;

3.   the Company's Articles of Amendment and Restatement, in the form filed as
an exhibit to the Registration Statement;

4.   the Company's Bylaws;

5.   the Registration Statement, including the prospectus contained as part of
the Registration Statement (the "Prospectus");

6.   the First Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement") between the Company, as general
partner, and Wells Capital, Inc., as limited partner (the "Advisor"), in the
form filed as an exhibit to the Registration Statement; and

7.   such other documents as we have deemed necessary or appropriate for
purposes of this opinion.

          In connection with the opinions rendered below, we have assumed, with
your consent, that:

1.   each of the documents referred to above has been duly authorized, executed,
and delivered; is authentic, if an original, or is accurate, if a copy; and has
not been amended;

2.   during its short taxable year ending December 31, 1997 and future taxable
years, the Company will operate in a manner that will make the representations
contained in a certificate, dated September __, 1997 and executed by a duly
appointed officer of the Company (the "Officer's Certificate"), true for such
years;

<PAGE>
 
Wells Real Estate Investment Trust, Inc.
September __, 1997
Page 3


3.   the Company will not make any amendments to its organizational documents or
the Partnership Agreement after the date of this opinion that would affect its
qualification as a real estate investment trust (a "REIT") for any taxable year;
and

4.   each partner of the Partnership (a "Partner") that is a corporation or
other entity has a valid legal existence;

5.   each Partner has full power, authority, and legal right to enter into and
to perform the terms of the Partnership Agreement and the transactions
contemplated thereby;

6.   no action will be taken by the Company, the Partnership, or the Partners
after the date hereof that would have the effect of altering the facts upon
which the opinions set forth below are based.

          In connection with the opinions rendered below, we also have relied
upon the correctness of the representations contained in the Officer's
Certificate.

          Based solely on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, the discussion in the
Prospectus under the caption "Federal Income Tax Considerations" (which is
incorporated herein by reference), and without further investigation, we are of
the opinion that:

          (a) commencing with the Company's short taxable year beginning on the
     day before the closing date of the Offering and ending on December 31 of
     the year in which the closing date of the Offering occurs, the Company will
     qualify to be taxed as a REIT pursuant to sections 856 through 860 of the
     Internal Revenue Code of 1986, as amended (the "Code"), and the Company's
     organization and proposed method of operation will enable it to continue to
     meet the requirements for qualification and taxation as a REIT under the
     Code; and

          (b)  the descriptions of the law and the legal conclusions contained
     in the Prospectus under the caption "Federal Income Tax Considerations" are
     correct in all material respects, and the discussion thereunder fairly
     summarizes the federal income tax considerations that are likely to be
     material to a holder of the Common Stock.

<PAGE>
 
Wells Real Estate Investment Trust, Inc.
September __, 1997
Page 4


Except as described herein, we have performed no due diligence and have made no
efforts to verify the accuracy and genuineness of the documents and assumptions
set forth above or the representations set forth in the Officer's Certificate.
We will not review on a continuing basis the Company's compliance with such
documents, assumptions, or representations.  Accordingly, no assurance can be
given that the actual results of the Company's operations for any given taxable
year will satisfy the requirements for qualification and taxation as a REIT.

          The foregoing opinions are based on current provisions of the Code and
the Treasury regulations thereunder (the "Regulations"), published
administrative interpretations thereof, and published court decisions.  The
Internal Revenue Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to REIT
qualification.  No assurance can be given that the law will not change in a way
that will prevent the Company from qualifying as a REIT.

          We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.  We also consent to the references to Hunton & Williams
under the caption "Federal Income Tax Considerations" in the Prospectus.  In
giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder by the SEC.

          The foregoing opinions are limited to the U.S. federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality.  We undertake no obligation to update
the opinions expressed herein after the date of this letter.  This opinion
letter is solely for the information and use of the addressee and the purchasers
of the Common Stock pursuant to the Prospectus, and it may not be distributed,
relied upon for any purpose by any other person, quoted in whole or in part or
otherwise reproduced in any document, or filed with any governmental agency
without our express written consent.

                                     Very truly yours,



<PAGE>
 
EXHIBIT 10.3
- ------------


                               ADVISORY AGREEMENT

     THIS ADVISORY AGREEMENT, dated as of _________________, 1997, is between
WELLS REAL ESTATE INVESTMENT TRUST, INC., a corporation organized under the laws
of the State of Maryland (the "Company") and WELLS CAPITAL, INC., a corporation
organized under the laws of the State of Georgia (the "Advisor").

                              W I T N E S S E T H

     WHEREAS, the Company has filed with the Securities and Exchange Commission
a Registration Statement (_______________) on Form S-11 covering its common
shares ("Shares"), par value $.01, to be offered to the public, and the Company
may subsequently issue securities other than such Shares ("Securities") or
otherwise raise additional capital;

     WHEREAS, the Company intends to qualify as a REIT (as defined below), and
to invest its funds in investments permitted by the terms of the Registration
Statement and Sections 856 through 860 of the Code (as defined below);

     WHEREAS, the Company desires to avail itself of the experience, sources of
information, advice, assistance and certain facilities available to the Advisor
and to have the Advisor undertake the duties and responsibilities hereinafter
set forth, on behalf of, and subject to the supervision, of the Board of
Directors of the Company all as provided herein; and

     WHEREAS,
 the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

     (1)  DEFINITIONS. As used in this Advisory Agreement (the "Agreement"), the
following terms have the definitions hereinafter indicated:

     Acquisition Expenses.  Any and all expenses incurred by the Company, the
Advisor, or any Affiliate of either in connection with the selection or
acquisition of any Property, whether or not acquired, including, without
limitation, legal fees and expenses, travel and communications expenses, costs
of appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses, and title insurance.

     Acquisition Fees.  Any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any person or entity to any other person or entity
(including any fees or commissions paid by or to any Affiliate of the Company or
the Advisor) in connection with making or investing in 

<PAGE>
 
mortgage loans and the selection or acquisition of any Property, including,
without limitation, real estate commissions, acquisition fees, finder's fees,
selection fees, nonrecurring management fees, consulting fees, loan fees,
points, or any other fees or commissions of a similar nature.

     Advisor.  Wells Capital, Inc., a Georgia corporation, any successor advisor
to the Company, or any person or entity to which Wells Capital, Inc. or any
successor advisor subcontracts substantially all of its functions.

     Affiliate or Affiliated.  As to any individual, corporation, partnership,
trust or other association (other than the Excess Shares Trust), (i) any Person
or entity directly or indirectly; through one or more intermediaries
controlling, controlled by, or under common control with another person or
entity; (ii) any Person or entity, directly or indirectly owning or controlling
ten percent (10%) or more of the outstanding voting securities of another Person
or entity; (iii) any officer, director, partner, or trustee of such Person or
entity; (iv) any Person ten percent (10%) or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held, with power to
vote, by such other Person; and (v) if such other Person or entity is an
officer, director, partner, or trustee of a Person or entity, the Person or
entity for which such Person or entity acts in any such capacity.

     Appraised Value.  Value according to an appraisal made by an Independent
Appraiser.

     Articles of Incorporation.  The Articles of Incorporation of the Company
under Title 2 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended from time to time.

     Asset Management Fee.  The fee payable to the Advisor for day-to-day
professional management services in connection with the Company and its
Properties pursuant to this Agreement.

     Average Invested Assets.  For a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in Properties and Loans secured by real estate before reserves for
depreciation or bad debts or other similar non-cash reserves, computed by taking
the average of such values at the end of each month during such period.

     Board of Directors or Board.  The persons holding such office, as of any
particular time, under the Articles of Incorporation of the Company, whether
they be the Directors named therein or additional or successor Directors.

     Bylaws.  The bylaws of the Company, as the same are in effect from time to
time.

     Cash from Financings.  Net cash proceeds realized by the Company from the
financing of Company Property or from the refinancing of any Company
indebtedness.

     Cash from Sales.  Net cash proceeds realized by the Company from the sale,
exchange or other disposition of any of its assets, including Secured Equipment
Leases, after deduction of all expenses incurred in connection therewith. Cash
from Sales shall not include Cash from Financings.

                                      -2-

<PAGE>
 
     Cash from Sales and Financings.  The total sum of Cash from Sales and Cash
from Financings.

     Cause.  With respect to the termination of this Agreement, fraud, criminal
conduct, willful misconduct or willful or negligent breach of fiduciary duty by
the Advisor, breach of this Agreement, a default by the Sponsor under the
guarantee by the Sponsor to the Company or the bankruptcy of the Sponsor.

     Change of Control.  A change of control of the Company of such a nature
that would be required to be reported in response to the disclosure requirements
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended, as enacted and in force on the date hereof (the "Exchange
Act"), whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a change of control
shall be deemed to have occurred if: (i) any "person" (within the meaning of
Section 13(d) of the Exchange Act) is or becomes the "beneficial owner" (as that
term is defined in Rule 13d-3, as enacted and in force on the date hereof, under
the Exchange Act) of securities of the Company representing 8.5% or more of the
combined voting power of the Company's securities then outstanding; (ii) there
occurs a merger, consolidation or other reorganization of the Company which is
not approved by the Board of Directors of the Company; (iii) there occurs a
sale, exchange, transfer or other disposition of substantially all of the assets
of the Company to another entity, which disposition is not approved by the Board
of Directors of the Company; or (iv) there occurs a contested proxy solicitation
of the Stockholders of the Company that results in the contesting party electing
candidates to a majority of the Board of Directors' positions next up for
election.

     Code.  Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.

     Company.  Wells Real Estate Investment Trust, Inc., a corporation organized
under the laws of the State of Maryland.

     Company Property.  Any and all property, real, personal or otherwise,
tangible or intangible, which is transferred or conveyed to the Company
(including all rents, income, profits and gains therefrom), and which is owned
or held by, or for the account of, the Company.

     Competitive Real Estate Commission.  A real estate or brokerage commission
for the purchase or sale of property which is reasonable, customary, and
competitive in light of the size, type, and location of the property. The total
of all real estate commissions paid by the Company to all Persons (including the
Subordinated Disposition Fee payable to the Advisor) in connection with any Sale
of one or more of the Company's Properties shall not exceed the lesser of (i) a
Competitive Real Estate Commission or (ii) six percent of the gross sales price
of the Property or Properties.

                                      -3-

<PAGE>
 
     Contract Purchase Price.  The amount actually paid or allocated (as of the
date of purchase) to the purchase, development, construction or improvement of
property, exclusive of Acquisition Fees and Acquisition Expenses.

     Contract Sales Price.  The total consideration received by the Company for
the sale of a Company Property.

     Cumulative Return.  For the period for which the calculation is being made,
the percentage resulting from dividing (A) the total Distributions paid on each
Distribution date during such period (without regard to Distributions paid out
of Cash from Sales and Financings), by (B) the product of (i) the average
Invested Capital for such period (calculated on a daily basis), and (ii) the
number of years (including fractions thereof) elapsed during such period.

     Director.  A member of the Board of Directors of the Company.

     Distributions.  Any distributions of money or other property by the Company
to owners of Shares, including distributions that may constitute a return of
capital for federal income tax purposes.

     Equity Interest.  The stock of or other interests in, or warrants or other
rights to purchase the stock of or other interests in, any entity that has
borrowed money from the Company or that is a tenant of the Company or that is a
parent or controlling Person of any such borrower or tenant.

     Equity Shares.  Transferable shares of beneficial interest of the Company
of any class or series, including common shares or preferred shares.

     Final Closing Date.  The last date on which purchasers of Shares offered
pursuant to the Prospectus are issued such Shares.

     Good Reason.  With respect to the termination of this Agreement, (i) any
failure to obtain a satisfactory agreement from any successor to the Company to
assume and agree to perform the Company's obligations under this Agreement; or
(ii) any material breach of this Agreement of any nature whatsoever by the
Company.

     Gross Proceeds.  The aggregate purchase price of all Shares sold for the
account of the Company through the Offering, without deduction for Selling
Commissions, volume discounts, the marketing support and due diligence expense
reimbursement fee or Organization and Offering Expenses. For the purpose of
computing Gross Proceeds, the purchase price of any Share for which reduced
Selling Commissions are paid to the Managing Dealer or a Soliciting Dealer
(where net proceeds to the Company are not reduced) shall be deemed to be
$10.00.

     Independent Appraiser.  A qualified appraiser of real estate as determined
by the Board. Membership in a nationally recognized appraisal society such as
the American Institute of Real Estate Appraisers ("M.A.I.") or the Society of
Real Estate Appraisers ("S.R.E.A.") shall be conclusive evidence of such
qualification.

                                      -4-

<PAGE>
 
     Independent Director.  A Director who is not and within the last two years
has not been directly or indirectly associated with the Advisor by virtue of (i)
ownership of an interest in the Advisor or its Affiliates, (ii) employment by
the Advisor or its Affiliates, (iii) service as an officer or director of the
Advisor or its Affiliates, (iv) performance of services, other than as a
Director, for the Company, (v) service as a director or trustee of more than
three real estate investment trusts advised by the Advisor, or (vi) maintenance
of a material business or professional relationship with the Advisor or any of
its Affiliates. A business or professional relationship is considered material
if the gross revenue derived by the Director from the Advisor and Affiliates
exceeds 5% of either the Director's annual gross revenue during either of the
last two years or the Director's net worth on a fair market value basis. An
indirect relationship shall include circumstances in which a Director's spouse,
parents, children, siblings, mothers- or fathers-in-law, sons- or daughters-in-
law, or brothers- or sisters-in-law is or has been associated with the Advisor,
any of its Affiliates, or the Company.

     Independent Expert.  A person or entity with no material current or prior
business or personal relationship with the Advisor or the Directors and who is
engaged to a substantial extent in the business of rendering opinions regarding
the value of assets of the type held by the Company.

     Invested Capital.  The amount calculated by multiplying the total number of
Shares purchased by stockholders by the issue price, reduced by the portion of
any Distribution that is attributable to Net Sales Proceeds and by any amounts
paid by the Company to repurchase Shares pursuant to the Company's plan for
redemption of Shares.

     Joint Ventures.  The joint venture or general partnership arrangements in
which the Company is a co-venturer or general partner which are established to
acquire Properties.

     Listing.  The listing of the Shares of the Company on a national securities
exchange or over-the-counter market.

     Managing Dealer.  Wells Investment Securities, Inc., an Affiliate of the
Advisor, or such entity selected by the Board of Directors to act as the
managing dealer for the Offering. Wells Investment Securities, Inc. is a member
of the National Association of Securities Dealers, Inc.

     Net Income.  For any period, the total revenues applicable to such period,
less the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves;
provided, however, Net Income for purposes of calculating total allowable
Operating Expenses (as defined herein) shall exclude the gain from the sale of
the Company's assets.

     Net Sales Proceeds.  In the case of a transaction described in clause (i)
(A) of the definition of Sale, the proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Company. In
the case of a transaction described in clause (i) (B) of such definition, Net
Sales Proceeds means the proceeds of any such transaction less the amount of any
legal and other selling expenses incurred in connection with such transaction.
In the case of a transaction described in clause (i) (C) of such definition, Net
Sales Proceeds means the proceeds of any such transaction actually distributed
to the Company from the Joint Venture. In the case of a transaction or series of
transactions described in clause (i) (D) of the definition of Sale, Net Sales

                                      -5-

<PAGE>
 
Proceeds means the proceeds of any such transaction less the amount of all
commissions and closing costs paid by the Company. In the case of a transaction
described in clause (ii) of the definition of Sale, Net Sales Proceeds means the
proceeds of such transaction or series of transactions less all amounts
generated thereby and reinvested in one or more Properties within 180 days
thereafter and less the amount of any real estate commissions, closing costs,
and legal and other selling expenses incurred by or allocated to the Company in
connection with such transaction or series of transactions. Net Sales Proceeds
shall also include, in the case of any Property consisting of a building only,
any amounts that the Company determines, in its discretion, to be economically
equivalent to proceeds of a Sale. Net Sales Proceeds shall not include any
reserves established by the Company in its sole discretion.

     Offering.  The initial public offering of Shares pursuant to the
Prospectus.

     Operating Expenses.  All costs and expenses incurred by the Company, as
determined under generally accepted accounting principles, which in any way are
related to the operation of the Company or to Company business, including (a)
advisory fees, (b) the Performance Fee and (c) the Subordinated Incentive Fee,
but excluding (i) the expenses of raising capital such as Organizational and
Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration, and other fees, printing and other such expenses and tax incurred
in connection with the issuance, distribution, transfer, registration and
Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash
expenditures such as depreciation, amortization and bad loan reserves, (v) the
Advisor's subordinated 10% share of Net Sales Proceeds, (vi) the Property
Management Fee and (vii) Acquisition Fees and Acquisition Expenses, real estate
commissions on the sale of property, and other expenses connected with the
acquisition, and ownership of real estate interests, mortgage loans or other
property (such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and improvement of property).

     Organizational and Offering Expenses.  Any and all costs and expenses,
other than Selling Commissions, the 2.5% marketing support and due diligence
expense reimbursement fee, and the Soliciting Dealer Servicing Fee incurred by
the Company, the Advisor or any Affiliate of either in connection with the
formation, qualification, and registration of the Company and the marketing and
distribution of Shares, including, without limitation, the following: legal,
accounting and escrow fees; printing, amending, supplementing, mailing and
distributing costs; filing, registration and qualification fees and taxes;
telegraph and telephone costs; and all advertising and marketing expenses,
including the costs related to investor and broker-dealer sales meetings. The
Organizational and Offering Expenses paid by the Company in connection with
formation of the Company will not exceed 3% of the Gross Proceeds raised in
connection with such Offering.

     Performance Fee.  The fee payable to the Advisor upon termination of this
Agreement under certain circumstances if certain performance standards have been
met and the Subordinated Incentive Fee has not been paid.

                                      -6-

<PAGE>
 
     Person.  An individual, corporation, partnership, estate, trust (including
a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of
a trust permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or other entity,
or any government or any agency or political subdivision thereof, and also
includes a group as that term is used for purposes of Section 13(d) (3) of the
Securities Exchange Act of 1934, as amended, but does not include (i) an
underwriter that participates in a public offering of Equity Shares for a period
of 60 days following the initial purchase by such underwriter of such Equity
Shares in such public offering, or (ii) Wells Capital, Inc., during the period
ending December 31, 1997, provided that the foregoing exclusions shall apply
only if the ownership of such Equity Shares by an underwriter or Wells Capital,
Inc. would not cause the Company to fail to qualify as a REIT by reason of being
"closely held" within the meaning of Section 856(a) of the Code or otherwise
cause the Company to fail to qualify as a REIT.

     Property or Properties.  (i) The real properties, including the buildings
located thereon, or (ii) the real properties only, or (iii) the buildings only,
which are acquired by the Company, either directly or through joint venture
arrangements or other partnerships.

     Prospectus.  "Prospectus" has the meaning set forth in Section 2(10) of the
Securities Act of 1933, as amended (the "Securities Act"), including a
preliminary Prospectus, an offering circular as described in Rule 256 of the
General Rules and Regulations under the Securities Act or, in the case of an
intrastate offering, any document by whatever name known, utilized for the
purpose of offering and selling securities to the public.

     Real Estate Asset Value.  The amount actually paid or allocated to the
purchase, development, construction or improvement of a Property, exclusive of
Acquisition Fees and Acquisition Expenses.

     Registration Statement.  The Registration Statement (No. ___________) on
Form S-11 of which the Prospectus is a part.

     REIT.  A "real estate investment trust" under Sections 856 through 860 of
the Code.

     Sale or Sales.  (i) Any transaction or series of transactions whereby: (A)
the Company sells, grants, transfers, conveys, or relinquishes its ownership of
any Property or portion thereof, including the lease of any Property consisting
of the building only, and including any event with respect to any Property which
gives rise to a significant amount of insurance proceeds or condemnation awards;
(B) the Company sells, grants, transfers, conveys, or relinquishes its ownership
of all or substantially all of the interest of the Company in any Joint Venture
in which it is a co-venturer or partner; or (C) any Joint Venture in which the
Company as a co-venturer or partner sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof, including any
event with respect to any Property which gives rise to insurance claims or
condemnation awards, but (ii) not including any transaction or series of
transactions specified in clause (i) (A), (i) (B), or (i) (C) above in which the
proceeds of such transaction or series of transactions are reinvested in one or
more Properties within 180 days thereafter.

                                      -7-

<PAGE>
 
     Securities.  Any Equity Shares, Excess Shares, as such term is defined in
the Company's Articles of Incorporation, any other stock, shares or other
evidences of equity or beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.

     Shares.  The up to 16,500,000 shares of the common stock of the Company to
be sold in the Offering.

     Soliciting Dealers.  Broker-dealers who are members of the National
Association of Securities Dealers, Inc., or that are exempt from broker-dealer
registration, and who, in either case, have executed participating broker or
other agreements with the Managing Dealer to sell Shares.

     Sponsor.  Any Person directly or indirectly instrumental in organizing,
wholly or in part, the Company or any Person who will control, manage or
participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is that of
an independent property manager of Company assets, and whose only compensation
is as such. Sponsor does not include wholly independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services.

     Stockholders.  The registered holders of the Company's Shares.

     Stockholders' 6% Return.  As of each date, an aggregate amount equal to an
6% cumulative, noncompounded, annual return on Invested Capital.

     Subordinated Disposition Fee.  The Subordinated Disposition Fee as defined
in Paragraph 9(c).

     Subordinated Incentive Fee.  The fee payable to the Advisor under certain
circumstances if the Shares are listed on a national securities exchange or
over-the-counter market.

     Termination Date.  The date of termination of the Agreement.

     Total Property Cost.  With regard to any Company Property, an amount equal
to the sum of the Real Estate Asset Value of such Property plus the Acquisition
Fees paid in connection with such Property.

     2%/25% Guidelines.  The requirement pursuant to the guidelines of the North
American Securities Administrators Association, Inc. that, in any 12 month
period, total Operating Expenses not exceed the greater of 2% of the Company's
Average Invested Assets during such 12 month period or 25% of the Company's Net
Income over the same 12 month period.

     Valuation.  An estimate of value of the assets of the Company as determined
by an Independent Expert.

                                      -8-

<PAGE>
 
     (2)  APPOINTMENT.  The Company hereby appoints the Advisor to serve as its
advisor on the terms and conditions set forth in this Agreement, and the Advisor
hereby accepts such appointment.

     (3)  DUTIES OF THE ADVISOR.  The Advisor undertakes to use its best efforts
to present to the Company potential investment opportunities and to provide a
continuing and suitable investment program consistent with the investment
objectives and policies of the Company as determined and adopted from time to
time by the Directors. In performance of this undertaking, subject to the
supervision of the Directors and consistent with the provisions of the
Registration Statement, Articles of Incorporation and Bylaws of the Company, the
Advisor shall, either directly or by engaging an Affiliate:

     (a)  serve as the Company's investment and financial advisor and provide
          research and economic and statistical data in connection with the
          Company's assets and investment policies;

     (b)  provide the daily management of the Company and perform and supervise
          the various administrative functions reasonably necessary for the
          management of the Company;

     (c)  investigate, select, and, on behalf of the Company, engage and conduct
          business with such Persons as the Advisor deems necessary to the
          proper performance of its obligations hereunder, including but not
          limited to consultants, accountants, correspondents, lenders,
          technical advisors, attorneys, brokers, underwriters, corporate
          fiduciaries, escrow agents, depositaries, custodians, agents for
          collection, insurers, insurance agents, banks, builders, developers,
          property owners, mortgagors, and any and all agents for any of the
          foregoing, including Affiliates of the Advisor, and Persons acting in
          any other capacity deemed by the Advisor necessary or desirable for
          the performance of any of the foregoing services, including but not'
          limited to entering into contracts in the name of the Company with any
          of the foregoing;

     (d)  consult with the officers and Directors of the Company and assist the
          Directors in the formulation and implementation of the Company's
          financial policies, and, as necessary, furnish the Directors with
          advice and recommendations with respect to the making of investments
          consistent with the investment objectives and policies of the Company
          and in connection with any borrowings proposed to be undertaken by the
          Company;

     (e)  subject to the provisions of Paragraphs 3(g) and 4 hereof, (i) locate,
          analyze and select potential investments in Properties, (ii) structure
          and negotiate the terms and conditions of transactions pursuant to
          which investment in Properties will be made; (iii) make investments in
          Properties on behalf of the Company in compliance with the investment
          objectives and policies of the Company; (iv) arrange for financing and
          refinancing and make other changes in the asset or capital structure
          of, and dispose of, reinvest the proceeds from the sale of, or
          otherwise deal with the 

                                      -9-

<PAGE>
 
          investments in, Property; and (v) enter into leases and service
          contracts for Company Property and, to the extent necessary, perform
          all other operational functions for the maintenance and administration
          of such Company Property;

     (f)  provide the Directors with periodic reports regarding prospective
          investments in Properties;

     (g)  obtain the prior approval of the Directors (including a majority of
          all Independent Directors) for any and all investments in Properties;

     (h)  negotiate on behalf of the Company with banks or lenders for loans to
          be made to the Company, and negotiate on behalf of the Company with
          investment banking firms and broker-dealers or negotiate private sales
          of Shares and Securities or obtain loans for the Company, but in no
          event in such a way so that the Advisor shall be acting as broker-
          dealer or underwriter; and provided, further, that any fees and costs
          payable to third parties incurred by the Advisor in connection with
          the foregoing shall be the responsibility of the Company;

     (i)  obtain reports (which may be prepared by the Advisor or its
          Affiliates), where appropriate, concerning the value of investments or
          contemplated investments of the Company in Properties;

     (j)  from time to time, or at any time reasonably requested by the
          Directors, make reports to the Directors of its performance of
          services to the Company under this Agreement;

     (k)  provide the Company with all necessary cash management services;

     (l)  do all things necessary to assure its ability to render the services
          described in this Agreement;

     (m)  deliver to or maintain on behalf of the Company copies of all
          appraisals obtained in connection with the investments in Properties;
          and

     (n)  notify the Board of all proposed material transactions before they are
          completed.

     (4)  AUTHORITY OF ADVISOR.

     (a)  Pursuant to the terms of this Agreement (including the restrictions
included in this Paragraph 4 and in Paragraph 7), and subject to the continuing
and exclusive authority of the Directors over the management of the Company, the
Directors hereby delegate to the Advisor the authority to (1) locate, analyze
and select investment opportunities, (2) structure the terms and conditions of
transactions pursuant to which investments will be made or acquired for the
Company, (3) acquire Properties in compliance with the investment objectives and
policies of the Company, (4) arrange for financing or refinancing Property, (5)
enter into leases and service contracts for the Company's Property, [and perform
other property management services], (6) oversee non-affiliated property
managers and other non-affiliated Persons who perform services 

                                      -10-

<PAGE>
 
for the Company; and (7) undertake accounting and other record-keeping functions
at the Property level.

     (b)  Notwithstanding the foregoing, any investment in Properties, including
any acquisition of Property by the Company (as well as any financing acquired by
the Company in connection with such acquisition), will require the prior
approval of the Directors [(including a majority of the Independent Directors)].

     (c)  If a transaction requires approval by the Independent Directors, the
Advisor will deliver to the Independent Directors all documents required by them
to properly evaluate the proposed investment in the Property.

     The prior approval of a majority of the Independent Directors and a
majority of the Directors not otherwise interested in the transaction will be
required for each transaction with the Advisor or its Affiliates.

     The Directors may, at any time upon the giving of notice to the Advisor,
modify or revoke the authority set forth in this Paragraph 4. If and to the
extent the Directors so modify or revoke the authority contained herein, the
Advisor shall henceforth submit to the Directors for prior approval such
proposed transactions involving investments in Property as thereafter require
prior approval, provided however, that such modification or revocation shall be
effective upon receipt by the Advisor and shall not be applicable to investment
transactions to which the Advisor has committed the Company prior to the date of
receipt by the Advisor of such notification.

     (5)  BANK ACCOUNTS. The Advisor may establish and maintain one or more bank
accounts in its own name for the account of the Company or in the name of the
Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
under such terms and conditions as the Directors may approve, provided that no
funds shall be commingled with the funds of the Advisor; and the Advisor shall
from time to time render appropriate accountings of such collections and
payments to the Directors and to the auditors of the Company.

     (6)  RECORDS; ACCESS. The Advisor shall maintain appropriate records of all
its activities hereunder and make such records available for inspection by the
Directors and by counsel, auditors and authorized agents of the Company, at any
time or from time to time during normal business hours. The Advisor shall at all
reasonable times have access to the books and records of the Company.

     (7)  LIMITATIONS ON ACTIVITIES.  Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, as amended, or (c) violate any law, rule,
regulation or statement of policy of any governmental body or agency having
jurisdiction over the Company, its Shares or its Securities, or otherwise not be
permitted by the Articles of Incorporation or Bylaws of the Company, except if
such action shall be ordered by the Directors, in which case the Advisor shall
notify promptly the Directors of the Advisor's 

                                      -11-

<PAGE>
 
judgment of the potential impact of such action and shall refrain from taking
such action until it receives further clarification or instructions from the
Directors. In such event the Advisor shall have no liability for acting in
accordance with the specific instructions of the Directors so given.
Notwithstanding the foregoing, the Advisor, its directors, officers, employees
and stockholders, and stockholders, directors and officers of the Advisor's
Affiliates shall not be liable to the Company or to the Directors or
stockholders for any act or omission by the Advisor, its directors, officers or
employees, or stockholders, directors or officers of the Advisor's Affiliates
except as provided in Paragraphs 20 and 21 of this Agreement.

     (8)  RELATIONSHIP WITH DIRECTORS.  Directors, officers and employees of the
Advisor or an Affiliate of the Advisor or any corporate parents of an Affiliate,
or directors, officers or stockholders of any director, officer or corporate
parent of an Affiliate may serve as a Director and as officers of the Company,
except that no director, officer or employee of the Advisor or its Affiliates
who also is a Director or officer of the Company shall receive any compensation
from the Company for serving as a Director or officer other than reasonable
reimbursement for travel and related expenses incurred in attending meetings of
the Directors.

     (9)  FEES.

     (a)  Acquisition Fees. The Advisor may receive as compensation for services
rendered in connection with the investigation, selection and acquisition (by
purchase, investment or exchange) of Property an Acquisition Fee payable by the
Company. The Acquisition Fees shall be reduced to the extent that, and, if
necessary to limit, the total compensation paid to all persons involved in the
acquisition of any Property to the amount customarily charged in arm's-length
transactions by other persons or entities rendering similar services as an
ongoing public activity in the same geographical location and for comparable
types of Properties and to the extent that other acquisition fees, finder's
fees, real estate commissions, or other similar fees or commissions are paid by
any person in connection with the transaction.

     (b)  Subordinated Disposition Fee.  If the Advisor or an Affiliate provides
a substantial amount of the services (as determined by a majority of the
Independent Directors) in connection with the Sale of one or more Properties,
the Advisor or an Affiliate shall receive a Subordinated Disposition Fee equal
to the lesser of (i) one-half of a Competitive Real Estate Commission or (ii) 3%
of the sales price of such Property or Properties. The Subordinated Disposition
Fee will be paid only if Stockholders have received total Distributions in an
amount equal to the sum of their aggregate Invested Capital and their aggregate
Stockholders' 6% Return.  To the extent that Subordinated Disposition Fees are
not paid by the Company on a current basis due to the foregoing limitation, the
unpaid fees will be accrued and paid at such time as the subordination
conditions have been satisfied. The Subordinated Disposition Fee may be paid in
addition to real estate commissions paid to non-Affiliates, provided that the
total real estate commissions paid to all Persons by the Company shall not
exceed an amount equal to the lesser of (i) 6% of the Contract Sales Price of a
Property or (ii) the Competitive Real Estate Commission. In the event this
Agreement is terminated prior to such time as the Stockholders have received
total Distributions in an amount equal to 100% of Invested Capital plus an
amount sufficient to pay the Stockholders' 6% Return through the Termination
Date, an appraisal of the Properties then owned by the Company shall be made and
the Subordinated Disposition Fee on Properties 

                                      -12-

<PAGE>
 
previously sold will be deemed earned if the Appraised Value of the Properties
then owned by the Company plus total Distributions received prior to the
Termination Date equals 100% of Invested Capital plus an amount sufficient to
pay the Stockholders' 6% Return through the Termination Date. Upon Listing, if
the Advisor has accrued but not been paid such Subordinated Disposition Fee,
then for purposes of determining whether the subordination conditions have been
satisfied, Stockholders will be deemed to have received a Distribution in the
amount equal to the product of the total number of Shares outstanding and the
average closing price of the Shares over a period, beginning 180 days after
Listing, of 30 days during which the Shares are traded.

     (c)  Subordinated Share of Net Sales Proceeds.  The Subordinated Share of
Net Sales Proceeds shall be payable to the Advisor in an amount equal to 10% of
Net Sales Proceeds remaining after the Stockholders have received Distributions
equal to the sum of the Stockholders' 6% Return and 100% of Invested Capital.
Following Listing, no Subordinated Share of Net Sales Proceeds will be paid to
the Advisor.

     (d)  Subordinated Incentive Fee.  Upon Listing, the Advisor shall be paid
the Subordinated Incentive fee in an amount equal to 10% of the amount by which
(i) the market value of the Company, measured by taking the average closing
price or average of bid and asked price, as the case may be, over a period of 30
days during which the Shares are traded, with such period beginning 180 days
after Listing (the "Market Value"), plus the total Distributions paid to
Stockholders from the Company's inception until the date of Listing, exceeds
(ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions
required to be paid to the Stockholders in order to pay the Stockholders' 6%
Return from inception through the date the Market Value is determined. The
Company shall have the option to pay such fee in the form of cash, Shares, a
promissory note or any combination of the foregoing. The Subordinated Incentive
Fee will be reduced by the amount of any prior payment to the Advisor of a
deferred, subordinated share of Net Sales Proceeds from a Sale or Sales of a
Property.

     (e)  Loans from Affiliates.  If any loans are made to the Company by an
Affiliate of the Advisor, the maximum amount of interest that may be charged by
such Affiliate shall be the lesser of (i) 1% above the prime rate of interest
charged from time to time by [The Bank of New York] and (ii) the rate that would
be charged to the Company by unrelated lending institutions on comparable loans
for the same purpose. The terms of any such loans shall be no less favorable
than the terms available between non-Affiliated Persons for similar commercial
loans.

     (f)  Changes to Fee Structure. In the event of Listing, the Company and the
Advisor shall negotiate in good faith to establish a fee structure appropriate
for a perpetual-life entity. A majority of the Independent Directors must
approve the new fee structure negotiated with the Advisor. In negotiating a new
fee structure, the Independent Directors shall consider all of the factors they
deem relevant, including, but not limited to: (i) the amount of the advisory fee
in relation to the asset value, composition and profitability of the Company's
portfolio; (ii) the success of the Advisor in generating opportunities that meet
the investment objectives of the Company; (iii) the rates charged to other REITs
and to investors other than REITs by Advisors performing the same or similar
services; (iv) additional revenues realized by the Advisor and its Affiliates
through their relationship with the Company, including loan administration,
underwriting or broker commissions, servicing, engineering, inspection and other
fees, whether paid by the 

                                      -13-

<PAGE>
 
REIT or by others with whom the REIT does business; (v) the quality and extent
of service and advice furnished by the Advisor; (vi) the performance of the
investment portfolio of the REIT, including income, conversion or appreciation
of capital, and number and frequency of problem investments; and (vii) the
quality of the Property portfolio of the Company in relationship to the
investments generated by the Advisor for its own account. The new fee structure
can be no more favorable to the Advisor than the current fee structure.

     (10) EXPENSES.

     (a)  In addition to the compensation paid to the Advisor pursuant to
Paragraph 9 hereof, the Company shall pay directly or reimburse the Advisor for
all of the expenses paid or incurred by the Advisor in connection with the
services it provides to the Company pursuant to this Agreement, including, but
not limited to:

          (i)    the Company's Organizational and Offering Expenses; provided,
however, that within 60 days after the end of the month in which the Offering
terminates, the Advisor shall reimburse the Company for any Organizational and
Offering Expenses reimbursement received by the Advisor pursuant to this
Paragraph 10, to the extent that such reimbursement exceeds 3% of the Gross
Proceeds. The Advisor shall be responsible for the payment of all the Company's
Organizational and Offering Expenses in excess of 3% of the Gross Proceeds;

          (ii)   Acquisition Expenses incurred in connection with the selection
and acquisition of Properties at the lesser of the actual cost or 90% of the
competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location;

          (iii)  the actual cost of goods and services used by the Company and
obtained from entities not affiliated with the Advisor, other than Acquisition
Expenses, including brokerage fees paid in connection with the purchase and sale
of securities;

          (iv)   interest and other costs for borrowed money, including
discounts, points and other similar fees;

          (v)    taxes and assessments on income or Property and taxes as an
expense of doing business;

          (vi)   costs associated with insurance required in connection with the
business of the Company or by the Directors;

          (vii)  expenses of managing and operating Properties owned by the
Company, whether payable to an Affiliate of the Company or a non-affiliated
Person.

          (viii) all expenses in connection with payments to the Directors and
meetings of the Directors and Stockholders;

                                      -14-

<PAGE>
 
          (ix)   expenses associated with Listing or with the issuance and
distribution of Shares and Securities, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, Listing and registration
fees, and other Organization and Offering Expenses;

          (x)    expenses connected with payments of Distributions in cash or
otherwise made or caused to be made by the Company to the Stockholders;

          (xi)   expenses of organizing, revising, amending, converting,
modifying, or terminating the Company or the Articles of Incorporation;

          (xii)  expenses of maintaining communications with Stockholders,
including the cost of preparation, printing, and mailing annual reports and
other Stockholder reports, proxy statements and other reports required by
governmental entities;

          (xiii) administrative service expenses (including personnel costs;
provided, however, that no reimbursement shall be made for costs of personnel to
the extent that such personnel perform services in transactions for which the
Advisor receives a separate fee); and

          (xiv)  audit, accounting and legal fees.

     (b)  Expenses incurred by the Advisor on behalf of the Company and payable
pursuant to this Paragraph 10 shall be reimbursed no less than monthly to the
Advisor. The Advisor shall prepare a statement documenting the expenses of the
Company during each quarter, and shall deliver such statement to the Company
within 45 days after the end of each quarter.

     (11) OTHER SERVICES.  Should the Directors request that the Advisor or any
director, officer or employee thereof render services for the Company other than
set forth in Paragraph 3, such services shall be separately compensated at such
rates and in such amounts as are agreed by the Advisor and the Independent
Directors of the Company, subject to the limitations contained in the Articles
of Incorporation, and shall not be deemed to be services pursuant to the terms
of this Agreement.

     (12) FIDELITY BOND.  The Advisor shall maintain a fidelity bond for the
benefit of the Company which bond shall insure the Company from losses of up to
$10 million per occurrence and shall be of the type customarily purchased by
entities performing services similar to those provided to the Company by the
Advisor.

     (13) REIMBURSEMENT TO THE ADVISOR.  The Company shall not reimburse the
Advisor at the end of any fiscal quarter Operating Expenses that, in the four
consecutive fiscal quarters then ended (the "Expense Year") exceed (the "Excess
Amount") the greater of 2% of Average Invested Assets or 25% of Net Income (the
"2%/25% Guidelines") for such year. Any Excess Amount paid to the Advisor during
a fiscal quarter shall be repaid to the Company. If there is an Excess Amount in
any Expense Year and the Independent Directors determine that such excess was
justified, based on unusual and nonrecurring factors which they deem sufficient,
the Excess Amount may be carried over and included in Operating Expenses in
subsequent Expense Years, and reimbursed to the Advisor in one or more of such
years, provided that Operating Expenses in any Expense Year, including any
Excess Amount to be paid to the 

                                      -15-

<PAGE>
 
Advisor, shall not exceed the 2%/25% Guidelines. Within 60 days after the end of
any fiscal quarter of the Company for which total Operating Expenses for the
Expense Year exceed the 2%/25% Guidelines, there shall be sent to the
stockholders a written disclosure of such fact, together with an explanation of
the factors the Independent Directors considered in determining that such excess
expenses were justified. Such determination shall be reflected in the minutes of
the meetings of the Board of Directors. The Company will not reimburse the
Advisor or its Affiliates for services for which the Advisor or its Affiliates
are entitled to compensation in the form of a separate fee. All figures used in
the foregoing computation shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis.

     (14) OTHER ACTIVITIES OF THE ADVISOR.  Nothing herein contained shall
prevent the Advisor from engaging in other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs) and
the management of other programs advised, sponsored or organized by the Advisor
or its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Advisor
may, with respect to any investment in which the Company is a participant, also
render advice and service to each and every other participant therein. The
Advisor shall report to the Directors the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor's obligations to the
Company and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Directors knowledge of such condition
or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof have
sponsored other investment programs with similar investment objectives which
have investment funds available at the same time as the Company, it shall be the
duty of the Directors (including the Independent Directors) to adopt the method
set forth in the Registration Statement or another reasonable method by which
properties are to be allocated to the competing investment entities and to use
their best efforts to apply such method fairly to the Company.

     The Advisor shall be required to use its best efforts to present a
continuing and suitable investment program to the Company which is consistent
with the investment policies and objectives of the Company, but neither the
Advisor nor any Affiliate of the Advisor shall be obligated generally to present
any particular investment opportunity to the Company even if the opportunity is
of character which, if presented to the Company, could be taken by the Company.
The Advisor or its Affiliates may make such an investment in a property only
after (i) such investment has been offered to the Company and all public
partnerships and other investment entities affiliated with the Company with
funds available for such investment and (ii) such investment is found to be
unsuitable for investment by the Company, such partnerships and investment
entities.

     In the event that the Advisor or its Affiliates is presented with a
potential investment which might be made by the Company and by another
investment entity which the Advisor or its Affiliates advises or manages, the
Advisor shall consider the investment portfolio of each entity, cash flow of
each entity, the effect of the acquisition on the diversification of each
entity's portfolio, rental payments during any renewal period, the estimated
income tax effects of the 

                                      -16-

<PAGE>
 
purchase on each entity, the policies of each entity relating to leverage, the
funds of each entity available for investment and the length of time such funds
have been available for investment. In the event that an investment opportunity
becomes available which is suitable for both the Company and a public or private
entity which the Advisor or its Affiliates are Affiliated, then the entity which
has had the longest period of time elapse since it was offered an investment
opportunity will first be offered the investment opportunity. The Advisor may
consider the property for private placement only if such property is deemed
inappropriate for any investment entity which is advised or managed by the
Advisor, including the Company.

     (15) RELATIONSHIP OF ADVISOR AND COMPANY.  The Company and the Advisor are
not partners or joint venturers with each other, and nothing in this Agreement
shall be construed to make them such partners or joint venturers or impose any
liability as such on either of them.

     (16) TERM; TERMINATION OF AGREEMENT.  This Agreement shall continue in
force until __________________, 1999, subject to an unlimited number of
successive one-year renewals upon mutual consent of the parties. It is the duty
of the Directors to evaluate the performance of the Advisor or annually before
renewing the Agreement, and each such renewal shall be for a term of no more
than one year.

     (17) TERMINATION BY EITHER PARTY.  This Agreement may be terminated upon 60
days written notice without Cause or penalty, by either party (by a majority of
the Independent Directors of the Company or a majority of the Board of Directors
of the Advisor, as the case may be).

     (18) ASSIGNMENT TO AN AFFILIATE.  This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement without obtaining
the approval of the Directors.  This Agreement shall not be assigned by the
Company without the consent of the Advisor, except in the case of an assignment
by the Company to a corporation or other organization which is a successor to
all of the assets, rights and obligations of the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound by this Agreement.

     (19) PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.  Payments to the
Advisor pursuant to this Section (19) shall be subject to the 2%/25% Guidelines
to the extent applicable.

     (a)  After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Company within 30 days after the effective date of such
termination all unpaid reimbursements of expenses and all earned but unpaid fees
payable to the Advisor prior to termination of this Agreement.

     (b)  Upon termination, the Advisor shall be entitled to payment of the
Performance Fee if performance standards satisfactory to a majority of the Board
of Directors, including a majority 

                                      -17-

<PAGE>
 
of the Independent Directors, when compared to (a) the performance of the
Advisor in comparison with its performance for other entities, and (b) the
performance of other advisors for similar entities, have been met. If Listing
has not occurred, the Performance Fee, if any, shall equal 10% of the amount, if
any, by which (i) the appraised value of the Properties on the Termination Date,
less the amount of all indebtedness secured by Properties and Secured Equipment
Leases, plus the total Distributions paid to stockholders from the Company's
inception through the Termination Date, exceeds (ii) Invested Capital plus an
amount equal to the Stockholders' 6% Return from inception through the
Termination Date. The Advisor shall be entitled to receive all accrued but
unpaid compensation and expense reimbursements in cash within 30 days of the
Termination Date. All other amounts payable to the Advisor in the event of a
termination shall be evidenced by a promissory note and shall be payable from
time to time.

     (c)  The Performance Fee shall be paid in 12 equal quarterly installments
without interest on the unpaid balance, provided, however, that no payment will
be made in any quarter in which such payment would jeopardize the Company's REIT
status, in which case any such payment or payments will be delayed until the
next quarter in which payment would not jeopardize REIT status. Notwithstanding
the preceding sentence, any amounts which may be deemed payable at the date the
obligation to pay the Performance Fee is incurred which relate to the
appreciation of the Company's Properties shall be an amount which provides
compensation to the Advisor only for that portion of the holding period for the
respective Properties during which the Advisor provided services to the Company.

     (d)  If Listing occurs, the Performance Fee, if any, payable thereafter
will be as negotiated between the Company and the Advisor. The Advisor shall not
be entitled to payment of the Performance Fee in the event this Agreement is
terminated because of failure of the Company and the Advisor to establish,
pursuant to Paragraph 9(h) hereof, a fee structure appropriate for a perpetual-
life entity at such time, if any, as Listing occurs.

     (e)  The Advisor shall promptly upon termination:

          (i)    pay over to the Company all money collected and held for the
account of the Company pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;

          (ii)   deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Directors;

          (iii)  deliver to the Directors all assets, including Properties, and
documents of the Company then in the custody of the Advisor; and

          (iv)   cooperate with the Company to provide an orderly management
transition.

     (20) INDEMNIFICATION BY THE COMPANY.  The Company shall indemnify and hold
harmless the Advisor and its Affiliates, including their respective officers,
directors, partners 

                                      -18-

<PAGE>
 
and employees, from all liability, claims, damages or losses arising in the
performance of their duties hereunder, and related expenses, including
reasonable attorneys' fees, to the extent such liability, claims, damages or
losses and related expenses are not fully reimbursed by insurance, subject to
any limitations imposed by the laws of the State of Maryland or the Articles of
Incorporation of the Company. Notwithstanding the foregoing, the Advisor shall
not be entitled to indemnification or be held harmless pursuant to this
paragraph 20 for any activity which the Advisor shall be required to indemnify
or hold harmless the Company pursuant to paragraph 21. Any indemnification of
the Advisor may be made only out of the net assets of the Company and not from
Stockholders.

     (21) INDEMNIFICATION BY ADVISOR.  The Advisor shall indemnify and hold
harmless the Company from contract or other liability, claims, damages, taxes or
losses and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, willful misfeasance, misconduct, negligence or reckless disregard of its
duties, but the Advisor shall not be held responsible for any action of the
Board of Directors in following or declining to follow any advice or
recommendation given by the Advisor.

     (22) NOTICES.  Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand or by overnight mail or other
overnight delivery service to the addresses set forth herein:

To the Directors and to the Company:  Wells Real Estate Investment
                                      Trust, Inc.
                                      3885 Holcomb Bridge Road
                                      Norcross, Georgia  30092

To the Advisor:                       Wells Capital, Inc.
                                      3885 Holcomb Bridge Road
                                      Norcross, Georgia  30092

     Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Paragraph 22.

     (23) MODIFICATION.  This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.

     (24) SEVERABILITY.  The provisions of this Agreement are independent of and
severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

                                      -19-

<PAGE>
 
     (25) CONSTRUCTION.  The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida.

     (26) ENTIRE AGREEMENT.  This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.

     (27) INDULGENCES, NOT WAIVERS.  Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

     (28) GENDER.  Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

     (29) TITLES NOT TO AFFECT INTERPRETATION.  The titles of paragraphs and
subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.

     (30) EXECUTION IN COUNTERPARTS.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.

     [(31)  NAME.  Wells Capital, Inc. has a proprietary interest in the name
"Wells" Accordingly, and in recognition of this right, if at any time the
Company ceases to retain Wells Capital, Inc. or an Affiliate thereof to perform
the services of Advisor, the Directors of the Company will, promptly after
receipt of written request from Wells Capital, Inc., cease to conduct business
under or use the name "Wells" or any diminutive thereof and the Company shall
use its best efforts to change the name of the Company to a name that does not
contain the name "Wells" or any other word or words that might, in the sole
discretion of the Advisor, be susceptible of indication of some form of
relationship between the Company and the Advisor or any Affiliate thereof.
Consistent with the foregoing, it is specifically recognized that the Advisor or
one or more of its Affiliates has in the past and may in the future organize,
sponsor or otherwise permit to exist other investment vehicles (including
vehicles for investment in real estate) and financial 

                                      -20-

<PAGE>
 
and service organizations having "Wells" as a part of their name, all without
the need for any consent (and without the right to object thereto) by the
Company or its Directors.]

     (32) INITIAL INVESTMENT.  The Advisor has contributed to the Company
$200,000 in exchange for 20,000 units of limited partnership interest in Wells
Operating Partnership, L.P. ("Units") (the "Initial Investment"). The Advisor or
its Affiliates may not sell any of the Units purchased with the Initial
Investment for a period of one year following completion of the Offering and may
only sell Units or the Shares issuable upon the redemption of the Units
representing the Initial Investment through the market on which the Shares are
normally traded. The restrictions included above shall not continue to apply to
any Shares, other than the Shares acquired through the Initial Investment,
acquired by the Advisor or its Affiliates. The Advisor shall not vote any Shares
it now owns, or hereafter acquires, in any vote for the election of Directors or
any vote regarding the approval or termination of any contract with the Advisor
or any of its Affiliates.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

                              WELLS REAL ESTATE INVESTMENT TRUST, INC.



                              By:_______________________________________
                              Name:____________________________________
                              Its:_______________________________________


                              WELLS CAPITAL, INC.


                              By:_______________________________________
                              Name:____________________________________
                              Its:_______________________________________

                                      -21-



<PAGE>

                     [LETTERHEAD OF ARTHUR ANDERSEN LLP]
 
                                                                EXHIBIT 23.2


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTS


As independent public accountants, we hereby consent to the use of our report on
the July 23, 1997 financial statements of Wells Real Estate Investment Trust,
Inc. and to all references to our firm included in or made a part of this
registration statement.


ARTHUR ANDERSEN LLP



Atlanta, Georgia
September 23, 1997