<PAGE>
 
    
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION NOVEMBER 6, 1997       

                                                     Registration No. 333-32099
===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                ---------------
    
                               AMENDMENT NO. 2 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 Maximum
 Title of Securities    Amount Being      Offering Price       Aggregate
 Being Registered       Registered(1)       Per Share        Offering Price    Amount of Registration Fee
- --------------------------------------------------------------------------------------------------------- 
<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 Reinvestment
    Plan, (as defined herein), and 600,000 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 WITH 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.       
===============================================================================
 
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.

<PAGE>
 
                                   Subject to Completion, dated __________, 1997

                    WELLS REAL ESTATE INVESTMENT TRUST, INC.
    
                             SHARES OF COMMON STOCK
                              $1,250,000  MINIMUM        

    
     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 (individually, a "property," collectively, "properties").  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 16,500,000 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).

AN INVESTMENT IN SHARES INVOLVES SIGNIFICANT RISKS (SEE RISK FACTORS AT PAGE 8),
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.

    
 . The Company may purchase properties from its Affiliates (without profit
  to such selling Affiliates), and enter into joint venture agreements with its
  Affiliates and with the Prior Wells Public Programs 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
  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 Company may be able to acquire only an estimated three or fewer
  properties, and thus the Company would have very limited asset diversification
  and possibly no geographic diversification.

 . Distributions to investors in certain real estate investment programs
  previously sponsored by the Advisor have fluctuated with real estate business
  cycles and other external market conditions, as well as varying occupancy
  levels, amounts of capital improvements and other necessary expenses for each
  property owned by such other programs.

 . 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.

    
 . The Company may incur indebtedness of up to 50% of the properties' aggregate
  value, which may be exceeded with approval of a majority of the Company's
  Independent Directors, though such debt limitation does not apply to
  individual properties. Accordingly, the Company and its properties may be
  moderately leveraged, which could have adverse consequences to the Company.

 . Of the proceeds from the sale of the Shares, approximately 84% will be used to
  acquire properties, and the balance will be paid as commissions and fees to
  certain Affiliates (as defined herein) of the Company for their services and
  as reimbursement for certain organizational and offering expenses, though some
  of such amounts will be reallowed or paid directly to participating broker-
  dealers.

  The Company has registered an offering of 16,500,000 Shares, with 1,500,000 of
such Shares available only to stockholders purchasing Shares in this initial
public offering who receive a copy of this Prospectus and who elect to
participate in the Company's Dividend Reinvestment Plan (as defined herein).
Any participation in such plan by a person who becomes a stockholder otherwise
than by participating in this Offering must be made pursuant to a separate
prospectus.  See "Summary of Reinvestment Plan."

  The Company's Affiliates include Wells Capital, Inc.--the Advisor, Wells
Investment Securities, Inc.--the Dealer Manager (the "Dealer Manager"), Wells
Management Company, Inc.--the property manager (the "Management Company"), Wells
Operating Partnership, L.P.--the partnership that will own the properties (the
"Operating Partnership"), and Wells Development Corporation--a property
development company (the "Development Company") .  The Shares are being placed
for the Company by Dealer Manager on a "best efforts" basis.  See "Plan of
Distribution"

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 marketing support and due diligence purposes, up to a
     maximum of 2.5% of the Gross Offering Proceeds (the "Marketing and Due
     Diligence Fee").  The Company also will issue, for every 25 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 -- $4,500,000 if the maximum amount under the Offering is sold and
     $37,500 if the minimum amount 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 600,000 Soliciting Dealer Warrants are issued to
     the Dealer Manager, $480 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 $7,200,000 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 600,000 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
of Georgia, N.A., Atlanta, Georgia (the "Escrow Agent"), 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 and without deducting for
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.

                                 (i)

<PAGE>
 
                               TABLE OF CONTENTS

    
                                                                           Page
                                                                           ----
SUMMARY OF THE OFFERING...................................................   1

RISK FACTORS..............................................................   9

   Investment Risks.......................................................   9
      Lack of Liquidity of Shares
      Total Reliance on the Advisor
      Conflicts of Interest Related to the Company's Affiliates
      Possible Lack of Diversification Resulting from
        Subscriptions for Less than the Maximum Number of Shares
      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..............................................  20
   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
   Federal Income Tax Considerations......................................  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 Business................  48
   Meeting of Stockholders................................................  49
   Operations.............................................................  49
     

<PAGE>
 
    
                                                                           Page
                                                                           ----
   Anti-Takeover Effect of Certain Provisions of Maryland Law
     and of the Articles of Incorporation and Bylaws
   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
     

<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."


<TABLE>
<S>                             <C>
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
                                600,000 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.

                                . This Offering involves payment of substantial
                                fees to the Advisor and
</TABLE>


                                       1

<PAGE>
 

<TABLE>
<S>                             <C>
                                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 fluctuated with
                                real estate business cycles and other external
                                market conditions, as well as varying occupancy
                                levels, amounts of capital improvements and
                                other necessary expenses for each property owned
                                by such other programs. Accordingly, 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 may incur indebtedness of up to
                                50% of the properties' aggregate value, which
                                may be exceeded with approval of a majority of
                                the Company's Independent Directors, though such
                                debt limitation does not apply to individual
                                properties. However, the Company expects that
                                its aggregate indebtedness generally will not
                                exceed such 50% limit. Accordingly, the Company
                                and its properties may be moderately leveraged,
                                which could have adverse consequences to the
                                Company.     

                                . The Company intends to elect to be taxed as a
                                REIT for federal income
</TABLE>


                                       2

<PAGE>
 

<TABLE>
<S>                             <C>
                                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.
                                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
                                and not 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 upon the approval of a majority of
                                Independent Directors. However, the Company
                                expects that its aggregate indebtedness
                                generally will not exceed such 50% limit. Such
                                limitation, however, does not apply to
                                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 OF    It is anticipated that approximately 84% of the
 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 includes
                                proceeds from shares sold pursuant to the
                                Reinvestment Plan, but excludes proceeds from
                                shares sold pursuant to the Soliciting Dealer
                                Warrants. See also "Management Compensation"
                                regarding the compensation and fees to be paid
                                to the Advisor and other Affiliates.     
</TABLE>


                                       3

<PAGE>
 

<TABLE>
<S>                             <C>
    
INVESTMENT OBJECTIVES:          The Company's objectives are: (i) to preserve,
                                protect and return the Invested Capital (as
                                defined herein) 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. Distributions to investors in certain
                                real estate investment programs previously
                                sponsored by the Advisor, as shown in the Prior
                                Performance Tables included as Exhibit A hereto,
                                have fluctuated with real estate business cycles
                                and other external market conditions, as well as
                                varying occupancy levels, amounts of capital
                                improvements and other necessary expenses for
                                each property owned by such other programs. 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 the Advisor and other
                                Affiliates (with no profit to the Advisor or
                                such selling Affiliate), 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 
</TABLE>


                                       4

<PAGE>
 

<TABLE>
<S>                             <C>
    
                                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.     
    
                                . 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's Affiliates include Wells
                                Capital, Inc.--the Advisor, Wells Investment
                                Securities, Inc.--the Dealer Manager, Wells
                                Management Company, Inc.--the Management
                                Company, Wells Operating Partnership, L.P.--the
                                Operating Partnership, and Wells Development
                                Corporation--the Development Company. 
                                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. Distributions to investors in
                                certain real estate investment programs
                                previously sponsored by the Advisor have
                                fluctuated with real estate business cycles and
                                other external market conditions, as well as
                                varying occupancy levels, amounts of capital
                                improvements and other necessary expenses for
                                each property owned by such other programs. 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 AND     The Advisor and other Affiliates will receive
 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 and $87,500
                                at the Minimum Offering) payable to the Dealer
                                Manager; one Soliciting Dealer Warrant for every
                                25 Shares sold, issuable to the Dealer Manager,
                                all or a part of which may be reallowed to
                                unaffiliated participating broker-dealers; a
                                Marketing and Due Diligence Fee for marketing
                                support and due diligence reimbursements of up
                                to 2.5%, comprised of .5% for due diligence
                                reimbursements and 2% for marketing support
                                ($3,750,000 at the Maximum Offering and $31,250
                                at the Minimum Offering); and up to 3%
                                ($4,500,000 at the Maximum Offering and $37,500
                                at the Minimum 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.     
</TABLE>


                                       5

<PAGE>
 

<TABLE>
<S>                             <C>
    
                                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 to the Advisor
                                (an Affiliate of the Company) 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, approximately
                                2% to 3% of which is expected to be generated
                                from direct tenant chargebacks, resulting in a
                                net amount payable by each property of
                                approximately 1.5% to 2.5%; 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% 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. A real
                                estate brokerage commission of up to 3% of the
                                sale price of properties sold by the Company
                                will be payable to the Advisor.

                                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.
</TABLE>


                                       6

<PAGE>
 

<TABLE>
<S>                             <C>
    
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 the taxable
                                year ending December 31 of the year in which the
                                Offering is closed. 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 taxable year
                                ending December 31 of the year in which the
                                Offering is closed, and the Company's
                                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 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 by exchanging units of
                                limited partnership interest in the Operating
                                Partnership ("OP Units") for interests in
                                properties, which generally will allow sellers
                                of properties to defer gain recognition with
                                respect to such properties. Holders may redeem
                                OP Units for cash equal to the value of one
                                Share or, at the option of the Company, holders
                                may receive one Share for each tendered OP
                                Unit.    

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.
</TABLE>


                                       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 the Advisor and other
Affiliates (without profit to such selling 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 with the advisability of such a sale.
The Company's Affiliates include Wells Capital, Inc.-- the Advisor, Wells
Investment Securities, Inc.--the Dealer Manager, Wells Management Company, 
Inc.--the Management Company, Wells Operating     

                                       8

<PAGE>
 
    
Partnership, L.P.--the Operating Partnership, and Wells Development Corporation
- --the Development Company. Collectively, these several relationships among the
Company and the Affiliates reduce substantially the presence of independent,
arm's length managerial and advisory influence on the operations of the Company.
Consequently, such affiliated relationships and conflicts of interest have the
potential to reduce the Company's financial performance and return to investors.
     
    
     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 Marketing and Due 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, though approximately 2% to 3% of such 4.5% fee is expected to be
generated from direct chargebacks to tenants of such properties, resulting in a
net fee payable by the properties of 1.5% to 2.5%.  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, Marketing and Due 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 

                                       9

<PAGE>
 
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 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.
Distributions to investors in certain real estate investment programs previously
sponsored by the Advisor have fluctuated with real estate business cycles and
other external market conditions, as well as varying occupancy levels, amounts
of capital improvements and other necessary expenses for each property owned by
such other 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.

                                       10

<PAGE>
 
    
     "BLIND POOL" OFFERING; LACK OF PROPERTIES REQUIRES TOTAL RELIANCE ON
ABILITIES OF ADVISOR.  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 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.     
    
     INDEBTEDNESS ON PROPERTIES BRINGS RISKS.  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 may incur indebtedness of up to 50% of the properties' aggregate value,
which may be exceeded with approval of a majority of the Company's Independent
Directors, though such debt limitation does not apply to individual properties.
However, the Company expects that its aggregate indebtedness generally will not
exceed such 50% limit.  Accordingly, the Company and its properties may be
moderately leveraged, which could have adverse consequences to the Company,
including the potential for loss of one or more properties if any such secured
debt is defaulted upon and imposition of operating restrictions on the Company
by such lenders.     

     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 

                                       11

<PAGE>
 
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.
    
     FAILURE TO LIST AND RESULTING LIQUIDATION MAY ADVERSELY AFFECT RETURNS TO
STOCKHOLDERS.  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 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 

                                       12

<PAGE>
 
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 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 

                                       13

<PAGE>
 
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."

                                       14

<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 $100.  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 10 Shares
($100).  After an investor has purchased the minimum investment, any additional
investments must be made in increments of at least 10 Shares ($100), 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.

                                       15

<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.
    
     NEW YORK -- The investor has either (i) a net worth (exclusive of home,
furnishings, and personal automobiles) of at least $35,000 and an annual gross
income of at least $35,000, or (ii) a net worth (exclusive of home, furnishings,
and personal automobiles) of at least $100,000.     

     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 AND OREGON -- 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%  $151,200,000       100%
Less Public Offering Expenses:
  Selling Commissions (3)                              87,500         7%    10,080,000       6.7%
  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%  $132,870,000      87.8%
                                                   ==========      ====   ============      ====
  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%  $127,620,000      84.4%
                                                   ==========      ====   ============      ====
</TABLE>

     

                                       16

<PAGE>
 
    
_________________________
(1) Excludes 1,500,000 Shares that may be sold pursuant to the Reinvestment
    Plan, but includes 600,000 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 25
    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 Marketing and Due Diligence Fee equal to 2.5% of Gross Offering
    Proceeds which may be paid as a reimbursement of expenses incurred for
    marketing support (2%) and due diligence (.5%) 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 Marketing and Due 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 Marketing and Due Diligence Fee may be reallowed to
    the non-affiliated Dealers which will assist the Dealer Manager in the
    distribution of Shares (the "Soliciting Dealers") for bona fide due
    diligence expenses.  Up to .5% of the Marketing and Due Diligence Fee may be
    paid as a reimbursement of due diligence expenses and up to 2% of the
    Marketing and Due Diligence Fee may be paid as a reimbursement of marketing
    support expenses in connection with the Offering.     

(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

                                       17

<PAGE>
 
    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.
    
(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.     

                                       18

<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
Dealer Manager, the Soliciting Dealers, the Advisor and the Management Company
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 Proceeds before reallowance of                      $10,500,000 at the
 Dealer Manager                 commissions earned by participating broker-dealers.  The                       Maximum Offering and
                                Dealer Manager intends to reallow 100% of commissions                          $87,500 at the 
                                earned by participating broker-dealers.                                        Minimum Offering

Reimbursement of Organization   Up to 3% of Gross Offering Proceeds.  All Organization                         $4,500,000 at the 
and Offering Expenses - The     and Offering Expenses (excluding Selling Commissions)                          Maximum Offering
Advisor and its Affiliates      will be advanced by the Advisor and its Affiliates and reimbursed              and $37,500 at
                                by the Company.                                                                the Minimum Offering.


Marketing support and due       Up to 2.5% of Gross Offering Proceeds for reimbursement of bona                $3,750,000 at the 
diligence expense - Dealer      fide marketing and due diligence expenses.                                      Maximum Offering
Manager and Soliciting                                                                                          and $31,250 at the
Dealers                                                                                                         Minimum Offering.
 
                                                 ACQUISITION AND DEVELOPMENT STAGE
                                                 ---------------------------------
Acquisition and Advisory Fees   For the review and evaluation of potential real property acquisitions,         $4,500,000 at the 
- - The Advisor or its            a fee of up to 3% of Gross Offering Proceeds, plus reimbursement of            Maximum Offering
Affiliates                      costs and expenses for the acquisition of properties.                          and $43,750 at the 
                                                                                                               Minimum Offering.

Reimbursement of Acquisition    Up to .5% of the Gross Offering Proceeds for reimbursement of expenses         $750,000 at the 
Expenses - The Advisor          related to real property acquisitions, such as legal fees, travel and          Maximum Offering and
                                communication expenses, title insurance premiums expenses.                     $6,250 at the 
                                                                                                               Minimum Offering.


                                                         OPERATIONAL STAGE
                                                         -----------------
    
Property Management and         For supervising the management of the Company's properties, a fee equal        Actual amounts are
Leasing Fees - The              to 4.5% of the gross rental incomes (approximately 2% - 3% of which is         dependent upon 
Management Company              expected to come from direct tenant chargebacks resulting in a net fee         results of
                                payable by each property of 1.5%  to 2.5%), and in the case of leases to       operations and 
                                new tenants, an initial leasing fee equal to the lesser of (i) the first       therefore cannot be
                                month's rent under the applicable lease or (ii) the amounts charged by         determined at the 
                                unaffiliated persons rendering comparable services in the same geographic      present time.
                                area.
     
    
Real Estate Commissions - The   In connection with the sale of any Company property, an amount not             Actual amounts are
Advisor or Its Affiliates       exceeding the lesser of:  (A) 50% of the reasonable, customary                 dependent upon
                                and Competitive Real Estate Brokerage Commissions customarily paid for         results of
                                the sale of a comparable property in light of the size, type and               operations and 
                                location of the property, or (B) 3% of the gross sales price of each           therefore cannot be
                                property, subordinated to distributions to shareholders from Sale              determined at the 
                                Proceeds of an amount which, together with prior distributions to the          present time.
                                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 10% of the amount by which (i) the market         Actual amounts are
upon Listing - The Advisor      value of the Company plus the total distributions made to shareholders from    dependent upon 
                                the Company's inception until the date of Listing exceeds (ii) the sum of (A)  results of operations

                                100% of Invested Capital and (B) the total distributions required to pay       and therefore cannot
                                the Common Return to the shareholders from inception through the date on       be determined at
                                which the market value is determined.                                          the present time.
</TABLE>
 

                                       19

<PAGE>
 

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

                                       20

<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.
===========================================================================================================
<S>                         <C>                                       <C> 
            |100%                            |100%                                    |100%
========================    ======================================    =====================================
  WELLS CAPITAL, INC.            WELLS INVESTMENT  SECURITIES,            WELLS MANAGEMENT COMPANY, INC.
                                    INC. (DEALER MANAGER)                     (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 Advisor serve as
Directors of the Company, and, in this capacity, have a fiduciary obligation to
act in the best 

                                       21

<PAGE>
 
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 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.

                                       22

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

                                       23

<PAGE>
 
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 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

                                       24

<PAGE>
 
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.  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.

                                       25

<PAGE>
 
    
     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 Marketing and Due 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 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.

                                       26

<PAGE>
 
     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 Marketing and Due Diligence Fee and
Acquisition and Advisory Fee).  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; 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 

                                       27

<PAGE>
 
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.

                                       28

<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.

                                       29

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

                                       30

<PAGE>
 
     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 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.

                                       31

<PAGE>
 
     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 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.

                                       32

<PAGE>
 
     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."

     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 

                                       33

<PAGE>
 
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 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.

                                       34

<PAGE>
 
     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.

                                       35

<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:


<TABLE>
<CAPTION>
<S>                              <C>
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
</TABLE>


     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.

                                       36

<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.

                                       37

<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 Net Sales Proceeds will 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.  The Advisor shall be entitled
to receive all accrued but unpaid compensation and expense reimbursements in
cash within 30 days of the effective date of termination of the Advisory
Agreement.  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.     

                                       38

<PAGE>
 
     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 the Management Company. The officers of the Management Company are as
follows:


<TABLE>
<CAPTION>
<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>


     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.

                                       39

<PAGE>
 
     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.

     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.     

                                       40

<PAGE>
 
     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 Real 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.

     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 

                                       41

<PAGE>
 
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 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 Real 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 

                                       42

<PAGE>
 
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.
    
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.

                                       43

<PAGE>
 
     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 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 other Affiliates, or to any director, officer or principal of
the Company or any of 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      

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<PAGE>
 
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 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 

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<PAGE>
 
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.

    
                    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 a
total of 30,000,000 shares of capital stock, of which 25,000,000 shares are
designated as common stock, $.01 par value per share (the "Common Stock"), and
5,000,000 shares of which are designated 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 

                                       46

<PAGE>
 
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
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 600,000 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
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 25 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 effective date of this Offering (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 effective date of the Offering.  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.  For a period of one year from the effective date
of the Offering, 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.     

                                       47

<PAGE>
 
     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 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 

                                       48

<PAGE>
 
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.

     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.

                                       49

<PAGE>
 
     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.

  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 

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<PAGE>
 
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 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.

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<PAGE>
 
     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 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.

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<PAGE>
 
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 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      

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<PAGE>
 
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:

     (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, described below, regarding the nature of its income and assets.
The Code provides that conditions (i) to (iv), 

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<PAGE>
 
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 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 

                                       57

<PAGE>
 
    
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 minimus 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 & 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

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<PAGE>
 
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 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 

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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.

     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 

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<PAGE>
 
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.

  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 

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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, 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 

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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.

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.

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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 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.

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     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 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 

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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, 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      

                                       66

<PAGE>
 
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 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.

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<PAGE>
 
     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 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.     

                                       68

<PAGE>
 
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 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 

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<PAGE>
 
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 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.

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<PAGE>
 
     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 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.

                                       71

<PAGE>
 
                             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.

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.

                                       72

<PAGE>
 
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 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 

                                       73

<PAGE>
 
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 marketing support and due
diligence purposes in the maximum amount of 2.5% of the Gross Offering Proceeds.
The Company will not pay 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 25 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 effective date of this
Offering.  Subject to certain limitations, the Soliciting Dealer Warrants may
not be transferred, assigned, pledged or hypothecated for a period of one year
following the effective date of this Offering.  In addition, no Soliciting
Dealer Warrants will be exercisable until one year from the effective date of
the Offering.  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      

                                       74

<PAGE>
 
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 7% of Gross Offering Proceeds,
except for the additional Marketing and Due Diligence Fee (2.5% of Gross
Offering Proceeds), which may be paid by the Company in connection with
marketing support and due diligence activities, which is comprise of .5% for due
diligence activities and 2% for marketing support 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
the Escrow Agent by noon of the business day after the proceeds are received by
the Company until such subscriptions aggregating at least $1,250,000 (exclusive
of any subscriptions for 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."

                                       75

<PAGE>
 
    
     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
without deducting escrow expenses.  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 93% of the
Share's public offering price in consideration of the services rendered by such
broker-dealers and registered representatives in the distribution.  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%         $0.5936             $9.8936             $9.30
$650,000-$999,999                       3.0%         $0.2876             $9.5876             $9.30
$1,000,000-$1,999,999                   1.0%         $0.0939             $9.3939             $9.30
Over $2,000,000                         0.5%         $0.0467             $9.3467             $9.30
</TABLE>

     
                                       76

<PAGE>
 
    
     For example, if an investor purchases 100,000 Shares in the Company, he
could pay as little as $939,390 rather than $1,000,000 for the Shares, in which
event the commission on the sale of such Shares would be $9,390 ($0.0939 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.
    
     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 $8.40 per Share (or approximately
92%) 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 

                                       77

<PAGE>
 
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.
    
     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 six
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 7% of Gross Offering Proceeds, except for the additional .5% of Gross
Offering Proceeds which may be paid by the Company in connection with due
diligence activities and 2% of Gross Offering Proceeds which may be paid by the
Company in connection with marketing support 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 

                                       78

<PAGE>
 
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 certified 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
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,

                                       79

<PAGE>
 
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.
    
     "AVERAGE INVESTED ASSETS" means, for any period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests and in loans secured by real estate, before
reserves for depreciation or bad debtsor other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.     

     "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.
    
     "COMPETITIVE REAL ESTATE BROKERAGE COMMISSION" means the real estate or
brokerage commission paid for the purchase or sale of a property which is
reasonable, customary and competitive in light of the size, type and location of
such property.     
    
     "CONSTRUCTION FEE" means a fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects or to provide major repairs or rehabilitation on properties.
     
     "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.
    
     "DEVELOPMENT FEE" means a fee for the packaging of a property of the
Company, including negotiating and approving plans, and undertaking to assist in
obtaining zoning and necessary variances and necessary financing for the
specific property, either initially or at a later date.     

     "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.
    
     "INDEPENDENT EXPERT" means a person with no material current or prior
business or personal relationship with the Advisor or Board of Directors of the
Company 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.     
    
     "INDEPENDENT DIRECTOR" shall mean a member of the Board of Directors of the
Company who is not associated and has not been associated within the last two
years, directly or indirectly, with the Advisor.     
    
     "INVESTED CAPITAL" means the original issue price of the Shares reduced by
prior distributions from the sale or financing of Company fixed assets.     

     "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 

                                       81

<PAGE>
 
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.

     "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.
    
     "UNIMPROVED REAL PROPERTY" means the properties of the Company which: (a)
represent an equity interest in real property which was not acquired for the
purpose of producing rental or other operating      

                                       82

<PAGE>
 
    
income, (b) has no development or construction in process on such land, and (c)
no development or construction on such land is planned in good faith to commence
on such land within one year.     

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

                                       83

<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



                                    ASSETS
 
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
                                                                ======



       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%              84.0%              85.0%              85.0%
                                          
Acquisition and Development Costs         
  Prepaid Items and Fees related to       
   Purchase of Property                                0.3%               0.0%               0.0%               0.0%
  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 Available  
  for Investment                                    15 mo.             12 mo.                     (7)                (8)
 (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         
  Investment                                           --           --             --             --            100
 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  Special Items             $   (3,897)  $ (227,842)   $(2,426,206)   $(2,914,517)   $ 5,824,145
                                               ==========   ==========    ===========    ===========    ===========
                                              
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)                                    0            0              0              0              0
                                               ----------   ----------    -----------    -----------    -----------
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 Operations                     18,027         216,092             --             --
                                                                    ----------    ------------    -----------    -----------
Cash Generated (Deficiency) after Cash Distributions                $ (143,341)   $   (216,092)   $   234,119    $    (2,478)
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 Investment                            --              --             --            100
 Property Acquisitions and Deferred Project Costs                      234,924      10,721,376      5,912,454      3,856,239
                                                                    ----------    ------------    -----------    -----------
Cash Generated (Deficiency) after Cash Distributions and            $ (378,265)   $(10,937,468)   $(4,708,217)   $(7,195,998)
 Special Items                                                      ==========    ============    ===========    ===========
 
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 Invested in Program                 100%
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            $(6,725,699)   $(19,441,318)
 Special Items                                                      ===========    ============
 
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 Invested in Program                  100%
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            $23,557,385
 Special Items                                                      ===========
 
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 Invested in Program                  100%
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.
(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-13

<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 of Georgia, 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


<TABLE>
<S>                            <C>
- --------------------------------------------------------------------------------------------------------------------------- 
INVESTMENT INSTRUCTIONS        Please follow these instructions carefully.  Failure to 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 "WELLS REAL ESTATE INVESTMENT TRUST,
                               INC."  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 type of entity or type of individuals
  OWNERSHIP                    subscribing.
- --------------------------------------------------------------------------------------------------------------------------- 
3.  REGISTRATION               Please enter the exact name in which the Shares are to be held.  For joint tenants with right
  NAME AND                     of survivorship or tenants in common, include the names of both investors.  In the case of
  ADDRESS                      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 address is different from the
  AND ADDRESS                  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 the investor where indicated.  Except
  SIGNATURE                    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 in the Company.  All
  INVESTMENTS                  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 
</TABLE>
 

                                      B-5

<PAGE>
 

<TABLE> 
<S>                            <C> 
- ---------------------------------------------------------------------------------------------------------------------------------
                               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.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>



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 may be payable on the
Distributions.

                                      C-1

<PAGE>
 
     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>
 

<TABLE> 
<S>                                                                      <C>    
=====================================================================   =========================================================== 

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                        15,000,000 Shares of Common Stock
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.                                                     
                                                                                              WELLS REAL ESTATE          
                           SUMMARY TABLE OF CONTENTS                                        INVESTMENT TRUST, INC.       
                                                                                                                     
                                                   Page                                                              
                                                   ----                                                              
Summary of the Offering............................                                          ___________________         
Risk Factors.......................................                                                                  
Investor Suitability Standards.....................                                                                  
Estimated Use of Proceeds..........................                                               PROSPECTUS             
Management Compensation............................                                                                  
Conflicts of Interest..............................                                          ___________________         
Summary of Reinvestment Plan.......................                                                                  
Prior Performance Summary..........................                                                                  
Management.........................................                                                                  
The Advisor and the Advisory Agreement.............                                   WELLS INVESTMENT SECURITIES, INC.  
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...............................                                                    , 1997  
    
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 Sealers.      

=================================================================       =========================================================== 

</TABLE>
 

<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
                     -------------------------------------



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


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

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


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  Includes 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 be 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.

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................................................................      *
                                                                        =======

* - 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 and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason 

                                     II-13

<PAGE>
 
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;

     (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;

                                     II-14

<PAGE>
 
    
     (3)  That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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

     (4)  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.

     (5)  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.

     (6)  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.

     (7)  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.

     (8)  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.

     (9)  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.

     (10)  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. 2 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
November 6, 1997.      

                                    WELLS REAL ESTATE INVESTMENT TRUST, INC.
                                     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. 2 to the Registration Statement has been signed below on November 6, 1997 by
the following persons in the capacities indicated.      

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


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

                                     II-16

<PAGE>
 

                                 EXHIBIT INDEX

Exhibits
- ----------
    
    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
  *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
     
- --------------------------
  *--   To be filed by Amendment
 **--   Previously filed
***--   Included in the Prospectus as Exhibit C and incorporated herein by 
        reference.

                                     II-17





<PAGE>
 
                                  EXHIBIT 1.1
                                  -----------
                                        

                        Form of Dealer Manager Agreement
                        --------------------------------
                                        
                    WELLS REAL ESTATE INVESTMENT TRUST, INC.
                                     Up To
                                   15,900,000
                             Shares of Common Stock
                                 ($159,000,000)

                     Dealer Manager Distribution Agreement
                             ________________, 1997

Wells Investment Securities, Inc.
3885 Holcomb Bridge Road
Norcross, Georgia 30092

Ladies and Gentlemen:

     Wells Real Estate Investment Trust, Inc., a Maryland corporation (the
"Company"), is registering for public sale a maximum of 16,500,000 shares of its
common stock, $.01 par value per share, of which amount 600,000 shares are to be
sold pursuant to a dealer warrant plan, with the balance of 15,900,000 shares
(the "Shares" or the "Stock") to be issued and sold for an aggregate purchase
price of $159,000,000.  Such Stock is to be sold for a per share cash purchase
price of $10.00; and the minimum purchase by any one person shall be 100 Shares
(except as otherwise indicated in the Prospectus or in any letter or memorandum
from the Company to Wells Investment Securities, Inc. (the "Dealer Manager")).
Terms not defined herein shall have the same meaning as in the Prospectus.  The
Stock is being registered with the SEC (as defined herein) as part of a
registration of 16,500,000 shares, of which amount 600,000 will be issued upon
the exercise of certain warrants to be
 issued in connection with the Offering.
In connection therewith, the Company hereby agrees with you, the Dealer Manager,
as follows:

     1.  Representations and Warranties of the Company
         ---------------------------------------------

     The Company represents and warrants to the Dealer Manager and each dealer
with whom the Dealer Manager has entered into or will enter into a Selected
Dealer Agreement in the form attached to this Agreement as Exhibit "A" (said
dealers being hereinafter called the "Dealers") that:

          1.1  A registration statement with respect to the Company has been
prepared by the Company in accordance with applicable requirements of the
Securities Act of 1933, as amended (the Securities Act"), and the applicable
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC") promulgated thereunder, covering the Shares.
Said registration statement, which includes a preliminary prospectus, was

                                       1

<PAGE>
 
initially filed with the SEC on or about July 25, 1997.  Copies of such
registration statement and each amendment thereto have been or will be delivered
to the Dealer Manager.  (The registration statement and prospectus contained
therein, as finally amended and revised at the effective date of the
registration statement, are respectively hereinafter referred to as the
Registration Statement. and the "Prospectus," except that if the Prospectus
first filed by the Company pursuant to Rule 424(b) under the Securities Act
shall differ from the Prospectus, the term "Prospectus" shall also include the
Prospectus filed pursuant to Rule 424(b).)

          1.2  The Company has been duly and validly organized and formed as a
corporation under the laws of the state of Maryland, with the power and
authority to conduct its business as described in the Prospectus.

          1.3  The Registration Statement and Prospectus comply with the
Securities Act and the Rules and Regulations and do not contain any untrue
statements of material facts or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading provided, however, that the foregoing provisions of this Section 1.3
will not extend to such statements contained in or omitted from the Registration
Statement or Prospectus as are primarily within the knowledge of the Dealer
Manager or any of the Dealers and are based upon information furnished by the
Dealer Manager in writing to the Company specifically for inclusion therein.

          1.4  The Company intends to use the funds received from the sale of
the Shares as set forth in the Prospectus.

          1.5  No consent, approval, authorization or other order of any
governmental authority is required in connection with the execution or delivery
by the Company of this Agreement or the issuance and sale by the Company of the
Shares, except such as may be required under the Securities Act or applicable
state securities laws.

          1.6  There are no actions, suits or proceedings pending or to the
knowledge of the Company, threatened against the Company at law or in equity or
before or by any federal or state commission, regulatory body or administrative
agency or other governmental body, domestic or foreign, which will have a
material adverse effect on the business or property of the Company.

          1.7  The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated and compliance with the terms of this
Agreement by the Company will not conflict with or constitute a default under
any charter, by-law, indenture, mortgage, deed of trust, lease, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company, except to the extent that the enforceability of the indemnity and/or
contribution provisions contained in Section 4 of this Agreement may be limited
under applicable securities laws.

          1.8  The Company has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated hereby, except
to the extent that the

                                       2

<PAGE>
 
enforceability of the indemnity and/or contribution provisions contained in
Section 4 of this Agreement may be limited under applicable securities laws.

          1.9  At the time of the issuance of the Shares, the Shares will have
been duly authorized and validly issued, and upon payment therefor, will be
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus.

     2.  Covenants of the Company
         ------------------------

     The Company covenants and agrees with the Dealer Manager that:

          2.1  It will, at no expense to the Dealer Manager, furnish the Dealer
Manager with such number of printed copies of the Registration Statement,
including all amendments and exhibits thereto, as the Dealer Manager may
reasonably request. It will similarly furnish to the Dealer Manager and others
designated by the Dealer Manager as many copies as the Dealer Manager may
reasonably request in connection with the offering of the Shares of: (a) the
Prospectus in preliminary and final form and every form of supplemental or
amended prospectus; (b) this Agreement; and (c) any other printed sales
literature or other materials (provided that the use of said sales literature
and other materials has been first approved for use by the Company and all
appropriate regulatory agencies).

          2.2  It will furnish such proper information and execute and file such
documents as may be necessary for the Company to qualify the Shares for offer
and sale under the securities laws of such jurisdictions as the Dealer Manager
may reasonably designate and will file and make in each year such statements and
reports as may be required. The Company will furnish to the Dealer Manager a
copy of such papers filed by the Company in connection with any such
qualification.

          2.3  It will: (a) use its best efforts to cause the Registration
Statement to become effective; (b) furnish copies of any proposed amendment or
supplement of the Registration Statement or Prospectus to the Dealer Manager;
(c) file every amendment or supplement to the Registration Statement or the
Prospectus that may be required by the SEC; and (d) if at any time the SEC shall
issue any stop order suspending the effectiveness of the Registration Statement,
it will use its best efforts to obtain the lifting of such order at the earliest
possible time.

          2.4  If at any time when a Prospectus is required to be delivered
under the Securities Act any event occurs as a result of which, in the opinion
of either the Company or the Dealer Manager, the Prospectus or any other
prospectus then in effect would include an untrue statement of a material fact
or, in view of the circumstances under which they were made, omit to state any
material fact necessary to make the statements therein not misleading, the
Company will promptly notify the Dealer Manager thereof (unless the information
shall have been received from the Dealer Manager) and will effect the
preparation of an amended or supplemental prospectus which will correct such
statement or omission. The Company will then promptly prepare such amended or
supplemental prospectus or prospectuses as may be necessary to comply with the
requirements of Section 10 of the Securities Act.

                                       3

<PAGE>
 
     3.  Obligations and Compensation of Dealer Manager
         ----------------------------------------------

          3.1  The Company hereby appoints the Dealer Manager as its agent and
principal distributor for the purpose of selling for cash up to a maximum of
16,125,000 Shares through Dealers, all of whom shall be members of the National
Association of Securities Dealers, Inc. (NASD). The Dealer Manager may also sell
Shares for cash directly to its own clients and customers at the public offering
price and subject to the terms and conditions stated in the Prospectus. The
Dealer Manager hereby accepts such agency and distributorship and agrees to use
its best efforts to sell the Shares on said terms and conditions. The Dealer
Manager represents to the Company that it is a member of the NASD and that it
and its employees and representatives have all required licenses and
registrations to act under this Agreement.

          The Dealer Manager agrees to be bound by the terms of the Escrow
Agreement executed as of ________________, 1997, by NationsBank of Georgia,
N.A., as escrow agent, the Dealer Manager and the Company, a copy of which is
enclosed.

          3.2  Promptly after the effective date of the Registration Statement,
the Dealer Manager and the Dealers shall commence the offering of the Shares for
cash to the public in jurisdictions in which the Shares are registered or
qualified for sale or in which such offering is otherwise permitted. The Dealer
Manager and the Dealers will suspend or terminate offering of the Shares upon
request of the Company at any time and will resume offering the Shares upon
subsequent request of the Company.

          3.3  Except as provided in the "Plan of Distribution" Section of the
Prospectus, as compensation for the services rendered by the Dealer Manager, the
Company agrees that it will pay to the Dealer Manager selling commissions in the
amount of 7% of the gross proceeds of the Shares sold plus reimbursement of
organization and offering expenses in the amount of 3% of the gross proceeds of
the Shares sold. Notwithstanding the foregoing, no commissions, payments or
amount whatsoever will be paid to the Dealer Manager under this Section 3.3
unless or until 125,000 Shares have been sold by the Dealer Manager and its
Dealers (the "Minimum Offering"), or in connection with commissions payable with
respect to sales made to residents of the States of New York and Pennsylvania,
until 250,000 Shares (from all sources), have been sold. Until the Minimum
Offering is obtained, investments will be held in escrow and, if the Minimum
Offering is not obtained, will be returned to the investors in accordance with
the Prospectus. The Company will not be liable or responsible to any Dealer for
direct payment of commissions to such Dealer, it being the sole and exclusive
responsibility of the Dealer Manager for payment of commissions to Dealers.
Notwithstanding the above, at its discretion, the Company may act as agent of
the Dealer Manager by making direct payment of commissions to such Dealers
without incurring any liability therefor.

          3.4  The Dealer Manager represents and warrants to the Company and
each person and firm that signs the Registration Statement that the information
under the caption "Plan of Distribution" in the Prospectus and all other
information furnished to the Company by the Dealer Manager in writing expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus, or any amendment or supplement thereto does not contain any untrue

                                       4

<PAGE>
 
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

          3.5  The Dealer Manager represents and warrants to the Company that it
will not represent or imply that the escrow holder, as identified in the
Prospectus, has investigated the desirability or advisability of investment in
the Company, or has approved, endorsed or passed upon the merits of the Shares
or the Company, nor will they use the name of said escrow holder in any manner
whatsoever in connection with the offer or sale of the Shares other than by
acknowledgment thus it has agreed to serve as escrow holder.

     4.  Indemnification
         ---------------

          4.1  The Company will indemnify and hold harmless the Dealers and the
Dealer Manager, their officers and directors and each person, if any, who
controls such Dealer or Dealer Manager within the meaning of Section 15 of the
Securities Act from and against any losses, claims, damages or liabilities,
joint or several, to which such Dealers or Dealer Manager, their officers and
directors, or such controlling person may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Registration Statement (including the Prospectus as a part thereof) or any post-
effective amendment thereto or in the Prospectus or any amendment or supplement
to the Prospectus or (ii) in any blue sky application or other document executed
by the Company or on its behalf specifically for the purpose of qualifying any
or all of the Shares for sale under the securities laws of any jurisdiction or
based upon written information furnished by the Company under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Applications), or (b) the omission or alleged omission to
state in the Registration Statement (including the Prospectus as a part thereof)
or any post-effective amendment thereof or in any Blue Sky Application a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (c) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus, if used prior to the
effective date of the Registration Statement, or in the Prospectus or any
amendment or supplement to the Prospectus or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and will reimburse each Dealer or Dealer
Manager, its officers and each such controlling person for any legal or other
expenses reasonably incurred by such Dealer or Dealer Manager, its officers and
directors, or such controlling person in connection with investigating or
defending such loss, claim, damage, liability or action; provided that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of, or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company or
Dealer Manager by or on behalf of any Dealer or Dealer Manager specifically for
use with reference to such Dealer or Dealer Manager in the preparation of the
Registration Statement or any such post-effective amendment thereof, any such
Blue Sky Application or any such preliminary prospectus or the Prospectus or any
such amendment thereof or supplement thereto; and further provided that the

                                       5

<PAGE>
 
Company will not be liable in any such case if it is determined that such Dealer
or Dealer Manager was at fault in connection with the loss, claim, damage,
liability or action.

          4.2  The Dealer Manager will indemnify and hold harmless the Company
and each person or firm which has signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, from and against any losses, claims, damages or liabilities to
which any of the aforesaid parties may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (a) any untrue statement of a
material fact contained (i) in the Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment thereof or (ii)
any Blue Sky Application, or (b) the omission to state in the Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or in any Blue Sky Application a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(c) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, if used prior to the effective date of
the Registration Statement, or in the Prospectus, or in any amendment or
supplement to the Prospectus or the omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading in each case to the extent, but only to the extent, that such untrue
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Dealer Manager
specifically for use with reference to the Dealer Manager in the preparation of
the Registration Statement or any such post-effective amendments thereof or any
such Blue Sky Application or any such preliminary prospectus or the Prospectus
or any such amendment thereof or supplement thereto, or (d) any unauthorized use
of sales materials or use of unauthorized verbal representations concerning the
Shares by the Dealer Manager and will reimburse the aforesaid parties, in
connection with investigation or defending such loss, claim, damage, liability
or action. This indemnity agreement will be in addition to any liability which
the Dealer Manager may otherwise have.

          4.3  Each Dealer severally will indemnify and hold harmless the
Company, Dealer Manager and each of their directors (including any persons named
in any of the Registration Statements with his consent, as about to become a
director), each of their officers who has signed any of the Registration
Statements and each person, if any, who controls the Company and the Dealer
Manager within the meaning of Section 15 of the Securities Act from and against
any losses, claims, damages or liabilities to which the Company, the Dealer
Manager, any such director or officer, or controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement (including the Prospectus as a part
thereof) or any post-effective amendment thereof or (ii) in any Blue Sky
Application, or (b) the omission or alleged omission to state in the
Registration Statement (including the Prospectus as a part thereof or any post-
effective amendment thereof or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (c) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, if used prior to the
effective date of the Registration Statement, or in the Prospectus, or in any

                                       6

<PAGE>
 
amendment or supplement to the Prospectus or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or the Dealer Manager by or on behalf of
such Dealer specifically for use with reference to such Dealer in the
preparation of the Registration Statement or any such post-effective amendments
thereof or any such Blue Sky Application or any such preliminary prospectus or
the Prospectus or any such amendment thereof or supplement thereto, or (d) any
unauthorized use of sales materials or use of unauthorized verbal
representations concerning the Shares by such Dealer and will reimburse the
Company and the Dealer Manager and any such directors or officers, or
controlling person, in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which such Dealer may otherwise have.

          4.4  Promptly after receipt by an indemnified party under this Section
4 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 4, notify in writing the indemnifying party of the commencement thereof
and the omission so to notify the indemnifying party will relieve it from any
liability under this Section 4 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 4.5) incurred by such
indemnified party in defending itself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.

          4.5  The indemnifying party shall pay all legal fees and expenses of
the indemnified party in the defense of such claims or actions; provided,
however, that the indemnifying party shall not be obliged to pay legal expenses
and fees to more than one law firm in connection with the defense of similar
claims arising out of the same alleged acts or omissions giving rise to such
claims notwithstanding that such actions or claims are alleged or brought by one
or more parties against more than one indemnified party. If such claims or
actions are alleged or brought against more than one indemnified party, then the
indemnifying party shall only be obliged to reimburse the expenses and fees of
the one law firm that has been selected by a majority of the indemnified parties
against which such action is finally brought; and in the event a majority of
such indemnified parties is unable to agree on which law firm for which expenses
or fees will be reimbursable by the indemnifying party, then payment shall be
made to the first law firm of record representing an indemnified party against
the action or claim. Such law firm shall be paid only to the extent of services
performed by such law firm and no reimbursement shall be payable to such law
firm on account of legal services performed by another law firm.

                                       7

<PAGE>
 
          4.6  The indemnity agreements contained in this Section 4 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of any Dealer, or any person controlling any Dealer or by or on
behalf of the Company, the Dealer Manager or any officer or director thereof, or
by or on behalf of the Company or the Dealer Manager, (b) delivery of any Shares
and payment therefor, and (c) any termination of this Agreement. A successor of
any Dealer or of any of the parties to this Agreement, as the case may be, shall
be entitled to the benefits of the indemnity agreements contained in this
Section 4.

     5.  Survival of Provisions
         ----------------------

     The respective agreements, representations and warranties of the Company
and the Dealer Manager set forth in this Agreement shall remain operative and in
full force and effect regardless of (a) any termination of this Agreement, (b)
any investigation made by or on behalf of the Dealer Manager or any Dealer or
any person controlling the Dealer Manager or any Dealer or by or on behalf of
the Company or any person controlling the Company, and (c) the acceptance of any
payment for the Shares.

     6.  Applicable Law
         --------------

     This Agreement was executed and delivered in, and its validity,
interpretation and construction shall be governed by the laws of, the State of
Georgia.

     7.  Counterparts
         ------------

     This Agreement may be executed in any number of counterparts. Each
counterpart, when executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same Agreement.

     8.  Successors and Amendment
         ------------------------

          8.1  This Agreement shall inure to the benefit of and be binding upon
the Dealer Manager and the Company and their respective successors. Nothing in
this Agreement is intended or shall be construed to give to any other person any
right, remedy or claim, except as otherwise specifically provided herein. This
Agreement shall inure to the benefit of the Dealers to the extent set forth in
Sections I and 4 hereof.

          8.2  This Agreement may be amended by the written agreement of the
Dealer Manager and the Company.

     9.  Term
         ----

     Any party to this Agreement shall have the right to terminate this
Agreement on 60 days' written notice.

                                       8

<PAGE>
 
     10.  Confirmation
          ------------

     The Company hereby agrees and assumes the duty to confirm on its behalf and
on behalf of dealers or brokers who sell the Shares all orders for purchase of
Shares accepted by the Company.  Such confirmations will comply with the rules
of the SEC and the NASD, and will comply with applicable laws of such other
jurisdictions to the extent the Company is advised of such laws in writing by
the Dealer Manager.

     11.  Suitability Investors
          ---------------------

     The Dealer Manager will offer Shares, and in its agreements with Dealers
will require that the Dealers offer Shares, only to persons who meet the
financial qualifications set forth in the Prospectus or in any suitability
letter or memorandum sent to it by the Company and will only make offers to
persons in the states in which it is advised in writing that the Shares are
qualified for sale or that such qualification is not required. In offering
Shares, the Dealer Manager will, and in its agreements with Dealers the Dealer
Manager will require that the Dealer comply with the provisions of Appendix IFS
of the Rules of Fair Practice set forth in the NASD Manual, attached hereto as
Attachment No. 1, as well as all other applicable rules and regulations relating
to suitability of investors, including without limitation, the provisions of
Article III.C. of the Statement of Policy Regarding Real Estate Programs of the
North American Securities Administrators Association, Inc.

     12.  Submission of Orders
          --------------------

          12.1 Those persons who purchase Shares will be instructed by the
Dealer Manager or the Dealer to make their checks payable to an escrow agent for
the Company, whenever appropriate, or to the Company after the Minimum Offering
has been achieved. The Dealer Manager and any Dealer receiving a check not
conforming to the foregoing instructions shall return such check directly to
such subscriber not later than the end of the next business day following its
receipt. Checks received by the Dealer Manager or Dealer which conform to the
foregoing instructions shall be transmitted for deposit pursuant to one of the
methods described in this Section 12. Transmittal of received investor funds
will be made in accordance with the following procedures.

          12.2 Where, pursuant to a Dealer's internal supervisory procedures,
internal supervisory review is conducted at the same location at which
subscription documents and checks are received from subscribers, checks will be
transmitted in care of the Dealer Manager by the end of the next business day
following receipt by the Dealer for deposit to an escrow agent, where
appropriate, or to the Company after the Minimum Offering has been achieved.

          12.3 Where, pursuant to a Dealer's internal supervisory procedures,
final internal supervisory review is conducted at a different location, checks
will be transmitted by the end of the next business day following receipt by the
Dealer to the office of the Dealer conducting such final internal supervisory
review (the "Final Review Offices).. The Final Review Office will in turn by the
end of the next business day following receipt by the Final Review

                                       9

<PAGE>
 
Office, transmit such checks in care of the Dealer Manager for deposit to an
escrow agent, where appropriate, or to the Company after the Minimum Offering
has been achieved.

          12.4 Where the Dealer Manager is involved in the distribution process,
checks will be transmitted by the Dealer Manager for deposit to the escrow
agent, where applicable, or to the Company after the Minimum Offering has been
achieved, as soon as practicable, but in any event by the end of the second
business day following receipt by the Dealer Manager. Checks of rejected
subscribers will be promptly returned to such subscribers.

     If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us
as of the date first above written.

                         Very truly yours,

                         WELLS REAL ESTATE INVESTMENT TRUST, INC.
 

                         By:
                             --------------------------------------------------


Accepted and agreed as of the
date first above written.

WELLS INVESTMENT SECURITIES, INC.


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

                                       10

<PAGE>
 
                               ATTACHMENT NO. 1

                                 APPENDIX "F"
                                 ------------

Sec. 3

Suitability

     (a) A member or person associated with a member shall not underwrite or
participate in a public offering of a direct participation program unless
standards of suitability have been established by the program for participants
therein and such standards are fully disclosed in the prospectus and are
consistent with the provisions of subsection (b) of this section.

     (b) In recommending to a participant the purchase, sale or exchange of an
interest in a direct participation program, a member or person associated with a
member shall:

          (1) have reasonable grounds to believe, on the basis of information
obtained from the participant concerning his investment objectives, other
investments, financial situation and needs, and any other information known by
the member or associated person, that:

              (i)   the participant is or will be in a financial position
appropriate to enable him to realize to a significant extent the benefits
described in the prospectus, including the tax benefits where they are a
significant aspect of the program;

              (ii)  the participant has a fair market net worth sufficient to
sustain the risks inherent in the program, including loss of investment and lack
of liquidity; and

              (iii) the program is otherwise suitable for the participant; and

          (2) maintain in the files of the member documents disclosing the basis
upon which the determination of suitability was reached as to each participant.

     (c) Subsections 3(a) and 3(b) shall not apply to:

          (1) a secondary public offering of or a secondary market transaction
in a Share, depositary receipt, or other interest in a direct participation
program for which quotations are displayed on the NASDAQ System or which is
listed on a registered national securities exchange, or

          (2) an initial public offering of a Share, depositary receipt or other
interest in a direct participation program for which an application for
inclusion on the NASDAQ System or listing on a registered national securities
exchange has been approved by NASDAQ or such exchange and the applicant makes a
good faith representation that it believes such inclusion on NASDAQ or listing
on an exchange will occur within a reasonable period of time following the
formation of the program.

                                       11

<PAGE>
 
     (d) Notwithstanding the provisions of subsections (a) and (b) hereof, no
member shall execute any transaction in a direct participation program in a
discretionary account without prior written approval of the transaction by the
customer.

Sec. 4

Disclosure

     (a) Prior to participating in a public offering of a direct participation
program, a member or person associated with a member shall have reasonable
grounds to believe, based on information made available to him by the sponsor
through a prospectus or other materials, that all material facts are adequately
and accurately disclosed and provide a basis for evaluating the program.

     (b) In determining the adequacy of disclosed facts pursuant to subsection
(a) hereof, a member or person associated with a member shall obtain information
on material facts relating at a minimum to the following, if relevant in view of
the nature of the program:

          (1)  items of compensation;

          (2)  physical properties;

          (3)  tax aspects;

          (4) financial stability and experience of the sponsor;

          (5) the program's conflicts and risk factors; and

          (6) appraisals and other pertinent reports.

     (c) For purposes of subsections (a) or (b) hereof, a member or person
associated with a member may rely upon the results of an inquiry conducted by
another member or members, provided that:

          (1) the member or person associated with a member has reasonable
grounds to believe was conducted with due care;

          (2) the results of the inquiry were provided to the member or person
associated with a member with the consent of the member or members conducting or
directing the inquiry; and

          (3) no member that participated in the inquiry is a sponsor of the
program or an affiliate

     (d) Prior to executing a purchase transaction in a direct participation
program, a member or person associated with a member shall inform the
prospective participant of all pertinent facts relating to the liquidity and
marketability of the program during the term of the investment; provided,
however, that this subsection shall not apply to an initial or secondary

                                       12

<PAGE>
 
public offering of or a secondary market transaction in a Share, depositary
receipt or other interest in a direct participation program which complies with
subsection 3(c).

                                       13

<PAGE>
 
     We have read the foregoing Agreement and we hereby accept and agree to the
terms and conditions therein set forth. We hereby represent that the list below
of jurisdictions in which we are registered or licensed as a broker or dealer
and are fully authorized to sell securities is true and correct, and we agree to
advise you of any change in such list during the term of this Agreement.

1.   Identity of Dealer:

Name:
      -------------------------------------------------------------------------
Type of entity:
                ---------------------------------------------------------------
                (to be completed by Dealer)
                (corporation, Company or proprietorship)

Organized in the State of
                          -----------------------------------------------------
                          (to be completed by Dealer)       (State)

Licensed as broker-dealer in the following states:
                                                   ----------------------------
                                                   (to be completed by Dealer)

Tax I.D. #
          ---------------------------------------------------------------------

2.   Person to receive notice pursuant to Section XI.

Name:
      -------------------------------------------------------------------------
Company:
         ----------------------------------------------------------------------
Address:
         ----------------------------------------------------------------------
City, State and Zip Code:
                          -----------------------------------------------------
Telephone No. :(    )
                ---- ----------------------------------------------------------

AGREED TO AND ACCEPTED BY THE DEALER:

 
- ------------------------------------
         (Dealer's Firm Name)

By:
    --------------------------------
              Signature

Title:
       -----------------------------

                                       14



<PAGE>
 
                                  EXHIBIT 10.2
                                  ------------

                                        

                            Form of Escrow Agreement
                            ------------------------


NationsBank of Georgia, N.A.
100 Ashford Center North
Suite 520
Atlanta, Georgia 30338

Attn: Peggy T. McWhorter

            Re: Wells Real Estate Trust, Inc.
                -----------------------------

Ladies and Gentlemen:

     Wells Real Estate Investment Trust, Inc., a Maryland corporation (the
"Company"), will be the issuer for a public offering of its common stock (the
"Stock").  Wells Investment Securities, Inc., a Georgia corporation (the "Dealer
Manager"), will act as Dealer Manager for the offering of the Stock.  The
Company will sell a minimum of 125,000 shares of Stock at a price of $10.00 per
share, for a total minimum capital raised of $1,250,000 (the "Required
Capital").  The Company hereby appoints you as Escrow Agent for purposes of
holding the proceeds from the sale of the Stock, and the Company shall deposit
with you such proceeds to be held by you as Escrow Agent on the terms and
conditions hereinafter set forth:

     1. Persons subscribing to purchase the Stock will be instructed by the
Dealer Manager or any soliciting dealers to remit the purchase price in the form
of checks, drafts or money orders (hereinafter called "instruments of payment")
payable to the order of, or funds wired in favor of, the Company (the "Escrow
Account"). The Dealer Manager will
 deposit such instruments of payment with you
into the deposit account entitled NationsBank, as Escrow Holder for Wells Real
Estate Investment Trust, Inc. (the "Escrow Holding Account") promptly after
receipt of those instruments of payment by the Dealer Manager. Within one
business day after receipt by you of written notification from the Dealer
Manager setting forth, as to each subscriber, the name, address, number of
shares purchased and purchase price remitted (the "Batch Sheet"), you will
transfer the total amount of subscription proceeds shown on such Batch Sheet
from the Escrow Holding Account to the Escrow Account.

     2.  The aforesaid instruments of payment are to be promptly processed for
collection by you following deposit by the Dealer Manager into the Escrow
Holding Account. The proceeds thereof are to be transferred into the Escrow
Account as provided in paragraph I hereof and held in the Escrow Account until
such funds are either returned to the subscribers in accordance with paragraph 3
hereof or otherwise disbursed in accordance with paragraph 6 hereof. In the
event any of the instruments of payment are returned to you for nonpayment prior
to receipt by you of the Required Capital, you shall promptly notify the Dealer
Manager in writing of such nonpayment, and you are authorized to debit the
Escrow Account in the amount of such return payment as well as any interest
earned on the investment represented by such payment.

     3.  In the event that at the close of business on ________ __, 1997 (the
"Expiration Date") you are not in receipt of Batch Sheets evidencing
subscriptions accepted on or before such date, and instruments of payment dated
not later than that date (or actual wired funds), for the purchase of Stock
providing for total purchase proceeds that equal the Required Capital (exclusive
of any funds received from subscriptions for Stock from entities which we have
notified you are affiliated with the Company or its affiliates), you shall
promptly notify the Company that such instruments of payment and Batch Sheets
have not been received by you.  Thereafter, you agree to use your best efforts
to obtain an executed IRS Form W-9 from each subscriber within thirty (30) days
after you provide such notice.  Upon receipt of said Form W-9 from each
subscriber, you shall promptly return by your check the funds

<PAGE>
 
deposited in the Escrow Account, or shall return the instruments of payment
delivered to you if such instruments have not been processed for collection
prior to such time, directly to the Company, which will in turn promptly forward
such checks to each subscriber at the address indicated on the Batch Sheet.  In
the event an executed Form W-9 is not received by you from each subscriber
within such period, you shall thereupon remit an amount to the subscribers in
accordance with the provisions hereof, withholding thirty one percent (31%) of
the earnings attributable to those subscribers not furnishing executed forms in
accordance with IRS Regulations.  Included in the remittance shall be a
proportionate share of the income earned in the account allocable to each
subscriber's investment in accordance with the terms and conditions specified in
paragraph 7 hereof (less the thirty one percent (31%) withholding, where
applicable). However, you shall not be required to remit any payments until
funds represented by such payments have been collected by you.

          In the event that the Company rejects any subscription for which you
have already collected funds, you shall promptly issue a refund check to the
rejected subscriber.  If the Company rejects any subscription for which you have
not yet collected funds but have submitted the subscriber's check for
collection, you shall promptly issue a check in the amount of the subscriber's
check to the rejected subscriber after you have cleared such funds.  If you have
not yet submitted a rejected subscriber's check for collection, you shall
promptly remit the subscriber's check directly to the subscriber.

     4. Following receipt by you of cash and instruments of payment (or wired
funds) of the Required Capital prior to the time provided in paragraph 3
hereinabove, you shall notify the Company in writing within one business day
when such funds have been collected through normal banking channels and
deposited in the Escrow Account.

     5. Prior to the disbursement of funds deposited in the Escrow Account in
accordance with the provisions of paragraph 3 or 6 hereof, you shall invest all
of the funds deposited in the Escrow Account in "Short-term Investments" (as
defined below) and you are further authorized and you agree to reinvest all
earnings and interest derived therefrom in any of the Short-term Investments
specified below. In the event that instruments of payment are returned to you
for nonpayment, you are authorized to debit the Escrow Account in accordance
with paragraph 2 hereof.

          "Short-term Investments" include 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 a depository or custodian for any such funds, including,
without limitation, such certificates or instruments of The Bank of New York),
which mature on or before the Expiration Date, unless such instrument cannot be
readily sold or otherwise disposed of for cash by the Expiration Date without
any dissipation of the offering proceeds invested.

          The following securities are not permissible investments:

          (a)  money market mutual funds;
          (b)  corporate equity or debt securities;
          (c)  repurchase agreements;
          (d)  bankers' acceptances;
          (e)  commercial paper; and
          (f)  municipal securities.

     6. All disbursements from the Escrow Account, except for disbursements
under the provisions of paragraph 3 hereof, shall be made by you only pursuant
to the provisions of this paragraph 6. Except for disbursements authorized upon
court order, you shall hold all funds in the Escrow Account until (i) the date
checks for Required Capital have cleared normal banking channels after receipt
by you of the Required Capital, and (ii) receipt of letter instructions from the
Company directing disbursements of such funds to the Company. In disbursing such
funds, you are authorized to rely solely upon such letter instructions which you
receive from the Company whether or not such instructions are correct, true or
authentic; provided that, if in your opinion such letter instructions from the
Company are unclear, you are authorized to rely upon the legal counsel to the
Company in

                                       2

<PAGE>
 
distributing such funds to the effect that distribution of the funds is
authorized by the letter instructions of the Company and that distribution of
the funds in that manner is authorized by and in compliance with such letter.
However, you shall not be required to disburse any funds attributable to
instruments of payment which have not been collected by you, provided that you
shall use your best efforts to promptly collect such funds after your receipt of
disbursement instructions from the Company in accordance with this paragraph,
and shall disburse such funds in compliance with the disbursement instructions
from the Company.

     7.  In the event the offering of Stock terminates prior to receipt of the
Required Capital, income earned on subscription proceeds deposited in the Escrow
Account ("Gross Escrow Income") minus the total escrow expenses ("Net Escrow
Income") shall be remitted to subscribers in compliance with paragraph 3.  Each
subscriber's pro rata portion of Net Escrow Income shall be determined as
follows: The total amount of Net Escrow Income shall be multiplied by a
fraction, the numerator of which is determined by multiplying the number of
Stock purchased by said subscriber times the number of days said subscriber's
proceeds are invested prior to termination of the offering, and the denominator
of which is the total of the numerators for all such subscribers.
Notwithstanding the foregoing, (i) escrow expenses may be deducted from the
Escrow Account only to the extent of Gross Escrow Income, and the Company shall
reimburse the Escrow Agent for any escrow expenses in excess of such amount, and
(ii) Maine, Missouri, Ohio and Pennsylvania residents will be paid their pro
rata portion of income earned on subscription proceeds deposited in the Escrow
Account without any deductions for escrow expenses.  You shall promptly notify
the Company of the amount of Net Escrow Income which subscribers who are Maine,
Missouri, Ohio or Pennsylvania residents would have received if escrow expenses
were not deducted from Gross Escrow Income, and the Company shall reimburse you
for such pro rata escrow expenses attributable to subscribers who are Maine,
Missouri, Ohio or Pennsylvania residents.  You shall promptly remit all such Net
Escrow Income in accordance with paragraph 3.

     8. As compensation for serving as Escrow Agent hereunder, you shall receive
a fee, as set forth in Schedule A attached hereto.

     9.  In performing any of your duties hereunder, you shall not incur any
liability to anyone for any damages, losses or expenses, except for willful
default, breach of trust, or gross negligence, and accordingly you shall not
incur any such liability with respect to any action taken or omitted (1) in good
faith upon advice of your counsel given with respect to any questions relating
to your duties and responsibilities under this Agreement, or (2) in reliance
upon any instrument, including any written instrument or instruction provided
for in this Agreement, not only as to its due execution and validity and
effectiveness of its provisions but also as to the truth and accuracy of
information contained therein, which you shall in good faith believe to be
genuine, to have been signed or presented by a proper person or persons and to
conform to the provisions of this Agreement.

     10. The Company hereby agrees to indemnify and hold you harmless against
any and all losses, claims, damages, liabilities and expenses, including the
reasonable cost of attorneys' fees and disbursements, that may be imposed on you
or incurred by you in connection with your acceptance of appointment as the
Escrow Agent hereunder, or the performance of your duties hereunder, including
any litigation arising from this Agreement or involving the subject matter
hereof, except where such losses, claims, damages, liabilities and expenses
result from willful default, breach of trust or gross negligence.

     11. In the event of a dispute between the parties hereto sufficient in your
discretion to justify doing so, you shall be entitled to tender into the
registry or custody of any court of competent jurisdiction all money or property
in your hands under this Agreement, together with such legal pleadings as you
deem appropriate, and thereupon be discharged from all further duties and
liabilities under this Agreement. In the event of any uncertainty as to your
duties hereunder, you may refuse to act under the provisions of this Agreement
pending order of a court of competent jurisdiction and you shall have no
liability to the Company or to any other person as a result of such action. Any
such legal action may be brought in such court as you shall determine to have
jurisdiction thereof. The filing of any such legal proceedings shall not deprive
you of your compensation earned prior to such filing.

     12. All written notices and letters required hereunder to you shall only be
effective if delivered personally or by certified mail, return receipt requested
to NationsBank of Georgia, N..A., 100 Ashford Center

                                       3

<PAGE>
 
North, Suite 520, Atlanta, Georgia 30338, Attn: Peggy T. McWhorter.  All written
notices and letters required hereunder to the Company or the Dealer Manager
shall only be effective if delivered personally or by certified mail, return
receipt requested to Leo F. Wells, III, 3885 Holcomb Bridge Road, Norcross,
Georgia 30092.

     13. This Agreement shall be governed by the laws of the State of Georgia as
to both interpretation and performance.

     14.  The provisions of this Agreement shall be binding upon the legal
representatives, heirs, successors and assigns of the parties hereto.

     15. The Company hereby acknowledges that you are serving as Escrow Agent
only for the limited purposes herein set forth, and hereby agrees that it will
not represent or imply that you, by serving as Escrow Agent hereunder or
otherwise, have investigated the desirabilities or advisability of investment in
the Company, or have approved, endorsed or passed upon the merits of the Stock
or the Company. The Company further agrees to instruct the Dealer Manager, and
each of its representatives, and any other representative who may offer Stock to
persons from time to time, that they shall not represent or imply that you have
investigated the desirability or advisability of investment in the Company, or
have approved, endorsed or passed upon the merits of the Stock or the Company,
nor shall they use your name in any manner whatsoever in connection with the
offer or sale of the Stock other than by acknowledgment that you have agreed to
serve as Escrow Agent for the limited purposes herein set forth.

     16.  This Agreement and any amendment hereto may be executed by the parties
hereto in one or more counterpane, each of which shall be deemed to be an
original.

     17. In the event that you receive instruments of payment (or wired funds)
after the Required Capital has been received and the proceeds of the Escrow
Account have been distributed to the Company, you are hereby authorized to
deposit such instruments of payment to any deposit account as directed by the
Company. The application of said funds into a deposit account directed by the
Company shall be a full acquittance to you and you shall not be responsible for
the application of said funds.

     18. The Escrow Agent shall be bound only by the terms of this Escrow
Agreement and shall not be bound or incur any liability with respect to any
other agreements or understanding between any other parties, whether or not the
Escrow Agent has knowledge of any such agreements or understandings.

     19. Indemnification provisions set forth herein shall survive the
termination of this Agreement.

     20.  Upon acceptance and distribution of the Required Capital, this Escrow
Agreement shall terminate and the Escrow Agent shall have no further
responsibility or liability with regard to the terms of this Agreement.

     21.  The Escrow Agent has no responsibility for accepting, rejecting or
approving subscriptions.

     22.  This Agreement shall not be modified, revoked, released or terminated
unless reduced to writing and signed by all parties hereto, subject to the
following paragraph.

     Should, at any time, any attempt be made to modify this Agreement in a
manner that would increase the duties and responsibilities of the Escrow Agent
or to modify this Agreement in any manner which the Escrow Agent shall deem
undesirable, or at any other time, the Escrow Agent may resign by notifying the
Company in writing, by certified mail, and until (i) the acceptance by a
successor escrow agent as shall be appointed by the Company; or (ii) thirty (30)
days following the date upon which notice was mailed, whichever occurs sooner,
the Escrow Agent's only remaining obligation shall be to perform its duties
hereunder in accordance with the terms of the Agreement.

     23. The Escrow Agent may resign at any time from its obligations under this
Escrow Agreement by providing written notice to the Company. Such resignation
shall be effective on the date specified in such notice which shall be not less
than thirty (30) days after such written notice has been given. The Escrow Agent
shall have no responsibility for the appointment of a successor escrow agent.
Unless otherwise provided in this Agreement,

                                       4

<PAGE>
 
final termination of this Escrow Agreement shall occur on the date that all
funds held in the Escrow Account are distributed either (a) to the Company
pursuant to paragraph 6 hereof, or (b) to subscribers pursuant to paragraphs 3
and 7 hereof.

     24. The Escrow Agent may be removed for cause by the Company by written
notice to the Escrow Agent effective on the date specified in such notice. The
removal of the Escrow Agent shall not deprive the Escrow Agent of its
compensation earned prior to such removal.

     [Signatures on following page]

                                       5

<PAGE>
 
     Agreed to as of the ____ day of ____________, 1997.


                                        WELLS REAL ESTATE TRUST, INC.,
                                        a Maryland corporation

                                        By:
                                           -----------------------------------
                                        Name:
                                              --------------------------------
                                        Title:
                                               -------------------------------


                                        WELLS INVESTMENT SECURITIES, INC.,
                                        a Georgia corporation

                                        By:
                                           -----------------------------------
                                        Name:
                                              --------------------------------
                                        Title:
                                               -------------------------------


The terms and conditions contained above are hereby accepted and agreed to by:

NATIONSBANK OF GEORGIA, N.A.

By: 
    ------------------------------------
Name: 
      ----------------------------------
Title: 
       ---------------------------------

                                       6

<PAGE>
 
                                 SCHEDULE A TO

                              ESCROW AGREEMENT FOR

                    WELLS REAL ESTATE INVESTMENT TRUST, INC.


                        Schedule of Fees - Escrow Agency
                             NationsBank of Georgia

Administration Fee - Payable Annually................$
                                                      -------------
For return of funds due to
rejected subscription................................$
                                                      -------------
                                                      per rejected
                                                      subscription
For costs incurred in connection
with returned checks.................................$
                                                      -------------
                                                 per returned check

Charges for refunding subscription proceeds if Required Capital is not met will
be negotiated between the parties.

Charges for filing reports or information as may be required by Internal Revenue
Service regulations or for the performance of any services not contemplated at
the time of opening account, or not of a routine administrative nature, or not
specifically covered in this schedule, will be determined by appraisal.

Actual Out-of-Pocket expenses such as counsel fees, cost of special checks,
postage, insurance, telephone, telegraph, etc. will be billed at cost.

                                       7