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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

OR

Commission file number 0-17876

WELLS REAL ESTATE FUND II-OW
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (770) 449-7800

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

         Yes x No o

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FORM 10-Q

WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

INDEX

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WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

BALANCE SHEETS

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

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WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

STATEMENTS OF (LOSS) INCOME

The accompanying notes are an integral part of these statements.

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WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2001 AND

NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)

The accompanying notes are an integral part of these statements.

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WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these statements.

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WELLS REAL ESTATE FUND II-OW

(A Georgia Public Limited Partnership)

CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2002 (UNAUDITED)

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Organization and Business

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         (b)      Basis of Presentation

         (c)      Distributions of Net Cash From Operations

         (d)      Reclassifications

         (e)      Impairment of Real Estate Assets

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2.      INVESTMENTS IN JOINT VENTURES

         (a)      Basis of Presentation

         (b)      Summary of operations

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          (c)         Summary of Operations

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          (d)         Summary of Operations

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

(a)      Forward Looking Statements

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

(b)      Results of Operations

Revenues
Gross revenues decreased to a deficit of $53,957 for the nine months ended September 30, 2002, from $5,908 for the nine months ended September 30, 2001, primarily due to the decrease in earnings generated from Fund II-IIOW Associates resulting from (i) the vacancy of the Louis Rose Building beginning in May 2001, (ii) a reduction in occupancy of Boeing at the Atrium beginning in December 2001, (iii) a reduction in income generated from Fund I-II-IIOW-VI-VII Associates relating to the sale of the Cherokee Commons property in the third quarter of 2001, (iv) a decrease in rental rates and an increase in legal fees related to lease negotiations for Brookwood Grill, (v) several uncollectible tenant receivables for Heritage Place that were written off in 2002, and (vi) a decrease in occupancy at Heritage Place and the Holcomb Bridge Property during the nine months ended September 30, 2002.

In March 2002, Boeing/Shuttle Division (“Boeing”) entered into a lease for the top three floors of the four-story Boeing at the Atrium, which commenced on September 1, 2002, extends for a term of 73 months and provides annual base rent payable of $1,483,697, or $15.75 per square foot. In October 2002, Boeing exercised an option to lease an additional 11,515 square feet comprising approximately half of the first floor for the same rental rate and lease term as that for the top three floors. The lease for the additional space on the first floor is estimated to commence in mid-November 2002.

Distributions
The Partnership has reserved distributions to the Class A limited partners for the first, second and third quarters of 2002 due to the reasons described in the preceding section. Distributions were made to the limited partners holding Class A units of $8.28 per unit with respect to the nine months ended September 30, 2001. Such distributions have been made from net cash from operations and distributions received from investments in joint ventures. No cash distributions have been made to the limited partners holding Class B units or to the General Partners.

The General Partners’ guidance with regard to future operating cash distributions to the limited partners holding Class A units is that such distributions are likely to be reinstated following the re-leasing the Louis Rose Building and funding related leasing costs and tenant improvements.

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(c)    Liquidity and Capital Resources

Net cash flows from operating activities decreased to a deficit of $450 used for the nine months ended September 30, 2002, from $45 provided for nine months ended September 30, 2001, primarily due to a change in the timing of paying accounts payable in 2002. Cash flows from investing activities decreased to $28,114 for the nine months ended September 30, 2002, from $69,578 for the same period in 2001 as a result of contributing capital to Fund II-III Associates – Atrium for the purpose of funding tenant improvements for Boeing at the Atrium, partially offset by proceeds from the sale of Cherokee Commons, which the Partnership received in the second quarter of 2002. Net cash used in financing activities was $0 for the nine months ended September 30, 2002, compared to $66,124 for the nine months ended September 30, 2001 as a result of the General Partners’ decision to reserve cash otherwise available for distributions to limited partners holding Class A units as further described below.

The Partnership expects to continue to meets its short-term liquidity requirements, generally through the use of net cash from operations and distributions received from investments in joint ventures. The General Partners believe that such sources will continue to provide adequate cash flows for the purposes of meeting the Partnership’ operating requirements.

Rather than being distributed to the limited partners, the Partnership’s share of the net proceeds generated from the sale of Cherokee Commons is currently being held as reserves in order to fund leasing costs as well as actual and anticipated tenant improvements for Boeing at the Atrium and the Louis Rose Building, respectively. As set forth in the preceding section, the General Partners anticipate restating distributions to limited partners holding Class A units following the re-leasing of the Louis Rose Building and funding all tenant improvements and other related lease-up costs.

(d)      Inflation

The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate. Most tenant leases include provisions designed to protect the Partnership from the impact of inflation and increases in costs and other operating expenses, including common area maintenance, real estate tax and insurance reimbursement billings to tenants either on a per square foot basis or above a certain allowance per square foot annually. In addition, a number of the tenant leases in which the Partnership holds an interest are for remaining terms of less than five years, which may allow the joint ventures discussed in Note 1 to enter into new leases at higher base rental rates in the event that market rental rates rise above the existing lease rates. There is no assurance, however, that the joint ventures would be able to replace existing leases with new leases at higher base rental rates.

(e)      Critical Accounting Policies

The Partnership’s accounting policies have been established and conformed to in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to use judgments in the application of accounting policies, including making estimates and assumptions. These judgments may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements presented and the reported amounts of revenues and expenses during the respective reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied; thus, resulting in a different presentation of our financial statements.

The accounting policies that we consider to be critical, in that they may require complex judgment in

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their application or require estimates about matters that are inherently uncertain, are discussed below. For further information related to the Partnership’s accounting policies, including the critical accounting policies described below, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2001.

Straight-Lined Rental Revenues
The Partnership recognizes rental income generated from all leases on real estate assets in which the Partnership has an ownership interest through its investments in joint ventures on a straight-line basis over the terms of the respective leases. Should tenants encounter financial difficulties in future periods, the amounts recorded as receivables may not be fully realized.

Operating Cost Reimbursements
The Partnership generally bills tenants for operating cost reimbursements through its investments in joint ventures on a monthly basis at amounts estimated largely based on actual prior period activity and the respective tenant lease terms. Such billings are generally adjusted on an annual basis to reflect reimbursements owed to the landlord based on the actual costs incurred during the period and the respective tenant lease terms. Should tenants encounter financial difficulties in future periods, the amounts recorded as receivables may not be fully realized.

Real Estate
Management continually monitors events and changes in circumstances indicating that the carrying amounts of the real estate assets in which the Partnership has ownership interests through its investments in joint ventures may not be recoverable. When such events or changes in circumstances are present, management assesses the potential impairment by comparing the fair market value of the underlying assets, estimated at amounts equal to the future undiscounted operating cash flows expected to be generated from tenants over the life of the assets and from their eventual disposition, to the carrying value of the assets. In the event that the carrying amount exceeds the estimated fair market value, the Partnership would recognize an impairment loss in the amount required to adjust the carrying amount of the asset to its estimated fair market value. Neither the Partnership nor its joint ventures have recognized impairment losses to date.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, Inc., the corporate General Partner of the Partnership, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures pursuant to Rule 13a – 14 under the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnership’s disclosure controls and procedures were effective.

There were no significant changes in the Partnership’s internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation.

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PART II. OTHER INFORMATION

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

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

CERTIFICATIONS

         I, Leo F. Wells, III, certify that:

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CERTIFICATIONS

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EXHIBIT INDEX
TO
THIRD QUARTER FORM 10-Q
OF
WELLS REAL ESTATE FUND II-OW