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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

For the transition period from                                          to                                              

Commission file number 0-25606

WELLS REAL ESTATE FUND VII, L.P.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

CLASS A UNITS

(Title of class)

CLASS B UNITS

(Title of class)

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

Yes x No ¨

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

PART I

General

Wells Real Estate Fund VII, L.P. (the “Partnership”) is a Georgia public limited partnership, with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as the General Partners. The Partnership was formed on December 1, 1992 for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elect to have their units treated as Class A units or Class B units. Limited partners have the right to change their prior elections to have some or all of their units treated as Class A units or Class B units one time during each annual accounting period. Limited partners may vote to, among other things, (a) amend the partnership agreement, subject to certain limitations, (b) change the business purpose or investment objectives of the Partnership, and (c) remove a general partner. A majority vote on any of the above described matters will bind the Partnership, without the concurrence of the general partners. Each limited partnership unit has equal voting rights, regardless of class.

On April 6, 1994, the Partnership commenced an offering of up to $25,000,000 of Class A or Class B limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on January 5, 1995 upon receiving gross proceeds of $24,180,174 representing subscriptions for approximately 1,678,810 Class A units and 739,207 Class B units held by 1,591 and 319 limited partners, respectively.

Employees

The Partnership has no direct employees. The employees of Wells Capital, Inc., the general partner of Wells Partners, L.P., and Wells Management Company, Inc., an affiliate of the general partners, perform a full range of real estate services including leasing and property management, accounting, asset management and investor relations for the Partnership. See item 11—“Compensation of General Partners and Affiliates” for a summary of the compensation and fees paid to the General Partners and their affiliates during the year ended December 31, 2002.

Insurance

Wells Management Company, Inc. carries comprehensive liability and extended coverage with respect to all of the properties owned by the Partnership through its interests in joint ventures. In the opinion of management, all such properties are adequately insured.

Competition

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

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The Partnership owns interests in properties through the following joint ventures between the Partnership and affiliated limited partnerships. As of December 31, 2002, the Partnership owned interests in the following eight properties through the affiliated joint ventures listed below:

On October 1, 2001, Fund I-II-IIOW-VI-VII Associates sold Cherokee Commons for net sale proceeds of $8,434,089 and recognized a gain of $1,725,015 on the sale, of which approximately $886,000 and $189,000 are attributable to the Partnership.

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Each of the aforementioned properties was acquired on an all cash basis. The Partnership does not have control over the operations of the joint ventures; however, it does exercise significant influence. Accordingly, investments in joint ventures are recorded using the equity method.

As of December 31, 2002, the lease expirations scheduled during each of the following ten years for all properties in which the Partnership owned an interest through the joint ventures, assuming no exercise of renewal options or termination rights, are summarized below:

The joint ventures and properties in which the Partnership owned an interest as of December 31, 2002 are further described below:

Fund V-VI-VII Associates

On September 8, 1994, the Partnership, Wells Real Estate Fund V, L.P. (“Wells Fund V”) and Wells Real Estate Fund VI, L.P. (“Wells Fund VI”), both of which are Georgia public limited partnerships affiliated with the Partnership through common general partners, formed Fund V-VI-VII Associates. The investment objectives of Wells Fund V and Wells Fund VI are substantially identical to those of the Partnership. As of December 31, 2002, the Partnership owns an approximate 42% interest in the following property through its investment in Fund V-VI-VII Associates:

The Marathon Building

On September 16, 1994, Fund V-VI-VII Associates purchased the Marathon Building, a three-story office building containing approximately 76,000 rentable square feet on approximately 6.2 acres of land in Appleton, Wisconsin, for a $8,746,598, including closing and acquisition costs of approximately $497,000. The funds used by Fund V-VI-VII Associates to acquire the Marathon Building were derived from capital contributions made by the Partnership, Wells Fund V and Wells Fund VI totaling $3,470,958, $1,337,505, and $3,470,958, respectively.

The entire Marathon Building is leased to Jaakko Poyry Fluor Daniel for a period of twelve years, three and one-half months, with options to renew the lease for two additional five-year periods. The annual base rent is $980,000. The current lease expires on December 31, 2006.

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The average effective annual rental rate per square foot at the Marathon Building was $12.79 for 2002 and $12.78 for 2001, 2000, 1999 and 1998.

Fund VI-VII Associates

On December 9, 1994, the Partnership and Wells Fund VI entered into a joint venture agreement known as Fund VI-VII Associates. As of December 31, 2002, the Partnership had contributed $3,358,633 and Wells Fund VI had contributed $2,710,639, including its cost to acquire land, to Fund VI-VII Associates for the acquisition and development of Stockbridge Village III and Stockbridge Village I Expansion. As of December 31, 2002, the Partnership’s and Wells Fund VI’s equity interest in Fund VI-VII Associates were approximately 55% and 45%, respectively.

Stockbridge Village III

In April 1994, Wells Fund VI purchased 3.27 acres of real property located in Clayton County, Georgia for a cost of $1,015,673. This tract of land is located directly across Route 138 from the Stockbridge Village Shopping Center which was developed and is owned by an affiliate of the Partnership. On December 9, 1994, Wells Fund VI contributed this real property as a capital contribution to Fund VI-VII Associates.

As of December 31, 2002, the Partnership has contributed $1,917,483 and Wells Fund VI has contributed $1,033,285 to Fund VI-VII Associates for the acquisition and development of the Stockbridge Village III Property. The first building is a 3,200 square foot restaurant, which was completed in March 1995 at a cost of approximately $400,000 excluding land and is currently leased to RMS/Fazoli’s for a period of 13 years, which commenced on December 10, 1998.

The second out-parcel building containing approximately 15,000 square feet was completed in October 1995, at a cost of approximately $1,500,000, excluding land. In October 2001, Stockbridge Ribs, Inc. took occupancy of 6,732 square feet with a lease for ten years. Four other tenants occupy the remaining 6,543 square feet of this building.

The average effective annual rental rate per square foot at Stockbridge Village III was $18.35 for 2002, $14.99 for 2001, $17.05 for 2000, $17.08 for 1999, and $13.08 for 1998.

Stockbridge Village I Expansion

On June 7, 1995, Fund VI-VII Associates purchased 3.38 acres of real property located in Clayton County, Georgia for $718,000. The Stockbridge Village I Expansion consists of a multi-tenant shopping center containing approximately 29,200 square feet. Construction was substantially complete in April 1996, with Cici’s Pizza taking occupancy of 4,000 square foot restaurant. The term of the Cici’s Pizza lease is 9 years and 11 months commencing upon occupancy.

As of December 31, 2002, the Partnership had contributed a total of $1,441,150, and Wells Fund VI had contributed a total of $1,677,354, for a total contribution of approximately $3,118,504 toward the development and construction of the Stockbridge Village I Expansion.

The average effective annual rental rate per square foot at the Stockbridge Village I Expansion was $13.65 for 2002, $13.87 for 2001, $11.97 for 2000, $10.74 for 1999, and $10.08 for 1998.

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Fund II-III-VI-VII Associates

On January 10, 1995, the Partnership, Fund II-III Associates—Brookwood, and Wells Fund VI entered into Fund II-III-VI-VII Associates.

Holcomb Bridge Property

In January 1995, Fund II-III Associates—Brookwood contributed to Fund II-III-VI-VII Associates approximately 4.3 acres of land at the intersection of Warsaw Road and Holcomb Bridge Road in Roswell, Fulton County, Georgia (“the Brookwood Property”) including land improvements for the development and construction of two buildings with a total of 49,534 square feet. Once constructed, this property became known as the Holcomb Bridge Property.

As of December 31, 2002, nine tenants occupied approximately 60% of the Holcomb Bridge Property, with only one tenant, Bertucci’s Restaurant, occupying more than 10% of the space at 5,935 square feet. The Bertucci’s Restaurant lease currently requires annual base rental payments of $127,850 and expires on February 28, 2006. Occupancy declined by approximately 29% during 2002, which resulted in a corresponding decrease in revenues of approximately $203,000. Certain leases have been executed that provide for commencement in 2003, and will result in additional revenues of approximately $45,000 for 2003. Management is actively seeking replacement tenants for the vacant space at this property.

The average effective annual rental rate per square foot was $12.97 for 2002, $17.07 for 2001, $17.55 for 2000, $19.36 for 1999, and $17.63 for 1998.

As of December 31, 2002, the joint venture partners had contributed the following amounts and held the following equity interests in Fund II-III-VI-VII Associates: (i) Fund II-III Associates-Brookwood—$1,729,116, in land and improvements, for an interest of approximately 24%, (ii) Wells Fund VI -$1,929,541 for an interest of approximately 26%, (iii) Wells Real Estate Fund VII, L.P.—$3,525,041 for an interest of approximately 50%.

Fund VII-VIII Associates

On February 10, 1995, the Partnership and Wells Fund VIII formed Fund VII-VIII Associates. The Partnership holds an approximate 37% equity interest and Wells Fund VIII holds an approximate 63% equity interest in Fund VII-VIII Associates, through which a retail/office building and an office building are owned and operated, as described below. The investment objectives of Wells Fund VIII are substantially identical to those of the Partnership. As of December 31, 2002, the Partnership had contributed $2,474,725 and Wells Fund VIII had contributed $4,267,621 for a total cost of $6,742,346 to Fund VII-VIII Associates for the acquisition and development of the following properties.

The Hannover Property

On April 1996, the Partnership contributed 1.01 acres of land located in Clayton County, Georgia and improvements thereon valued at $512,000 to Fund VII-VIII Associates for the development of a 12,080 square foot, single story combination retail/office building. As of December 31, 2002, the Partnership and Wells Fund VIII has funded approximately $1,437,801 $190,311 to Fund VII-VIII Associates for the development of the Hannover Property, in addition to the cost of the land.

In December 2000, Fund VII-VIII Associates entered into a five-year lease with Mattress King, a mattress sale store, to occupy 6,020 square feet. The annual base rent for the first three years is $88,795, and for the last two years is $91,805. The lease will expire in December 2005. Two additional tenants, Norwest Financial and Prudential Realty, occupy the remaining space at this property (approximately 50%) under leases that expire in October 2003. Management will

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actively pursue prospective replacement tenants during 2003 for this space.

The average effective annual rental per square foot at Hannover Center was $16.35 for 2002, $13.68 for 2001, $9.15 for 2000, $15.97 for 1999, and $10.05 for 1998.

CH2M Hill at Gainesville Property

The Partnership made an initial contribution to Fund VII-VIII Associates of $677,534, which constituted the total purchase price and all other acquisition and development costs related to the purchase of a 5-acre parcel of land in Gainesville, Alachua County, Florida. Construction of a 62,975 square foot office building, containing 61,468 rentable square feet, was completed in December 1995 and is known as the CH2M Hill at Gainesville Property.

In December 1995, Fund VII-VIII Associates entered into a 9 years and 11 month lease with CH2M Hill to occupy 57,457 square feet, including one option to extend the term for an additional five-year period. The annual base rent during the initial term is $530,313. The annual rent for the extended term will be at the currently prevailing market rate.

As of December 31, 2002, the Partnership had contributed $1,036,923 and Wells Fund VIII had contributed $4,077,310 to Fund VII-VIII Associates toward the completion of this project.

The average effective annual rental per square foot at the CH2M Hill at Gainesville Property was $9.23 for 2002, $9.37 for 2001, 2000 and 1999, and $9.19 for 1998.

Fund VI-VII-VIII Associates

On April 17, 1995, the Partnership, Wells Real Estate Fund VI, L.P. (“Wells Fund VI”) and Wells Real Estate Fund VIII, L.P. (“Wells Fund VIII”), Georgia public limited partnerships affiliated with the Partnership through common general partners, formed Fund VI-VII-VIII Associates. As of December 31, 2002, the Partnership, Wells Fund VI and Wells Fund VIII had contributed approximately $5,932,312, $6,067,688, and $5,700,000 to Fund VI-VII-VIII Associates for equity interests of approximately 34%, 34%, and 32% respectively.

BellSouth Building

On April 25, 1995, Fund VI-VII-VIII Associates purchased a 5.55 acre parcel of land in Jacksonville, Florida for a total of $1,245,059, including closing costs. In May 1996, the office building of approximately 92,031 square feet was completed with BellSouth Advertising and Publishing Corporation, a subsidiary of BellSouth Company, taking occupancy of 66,333 square feet and American Express Travel Related Services Company, Inc. taking occupancy of 22,607 square feet. BellSouth took occupancy of an additional 3,091 square feet in December 1996. The land purchase and construction costs totaling approximately $9 million were funded by capital contributions of $3,500,000 from the Partnership, $3,500,000 from Wells Fund VI and $2,000,000 from Wells Fund VIII.

The BellSouth lease is for a term of nine years and eleven months with an option to extend for an additional five-year period at the currently prevailing market rate. The annual base rent during the initial term is $1,094,426 during the first five years and $1,202,034 for the balance of the initial lease term. The original American Express lease was for a term of five years with an annual base rent of $369,851 and expired in June 2001. American Express has renewed their lease for five years at an annual base rent of $405,117 for the first year with a cumulative 3% escalation each year thereafter. BellSouth and American Express are required to pay additional rent equal to their share of operating expenses during their respective lease terms.

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The average effective annual rental per square foot at the BellSouth Building was $16.99 for 2002, $16.65 for 2001, and $16.36 for 2000, 1999, and 1998.

Tanglewood Commons

On May 31, 1995, Fund VI-VII-VIII Associates purchased a 14.683 acres tract of real property located in Clemmons, Forsyth County, North Carolina. Fund VI-VII-VIII Associates constructed one large strip shopping center building containing approximately 67,320 gross square feet on a 12.48 acres tract. The remaining 2.2 acre portion of the property consists of four out-parcels which have been graded and are held for future development or resale. As of December 31, 2002, Wells Fund VI had contributed $2,567,688, the Partnership had contributed $2,432,312, and Wells Fund VIII had contributed $3,700,000 for the development of this project. Total costs and expenses incurred by Fund VI-VII-VIII Associates for the acquisition, development, construction and completion of the shopping center were approximately $8,700,000.

In February 1997, Harris Teeter, Inc., a regional supermarket chain, executed a lease for a minimum of 45,000 square feet with an initial term of 20 years with extension options of four successive five-year periods with the same terms as the initial lease. The annual base rent during the initial term is $488,250. In addition, Harris Teeter has agreed to pay percentage rents equal to one percent of the amount by which Harris Teeter’s gross sales exceed $35,000,000 for any lease year.

The average effective annual rental per square foot at Tanglewood Commons was $12.85 for 2002, $13.02 for 2001, $12.53 for 2000, $11.48 for 1999, and $10.96 for 1998.

On October 7, 2002, Fund VI-VII-VIII Associates sold an outparcel of land at Tanglewood Commons to Truliant Federal Credit Union, an unrelated third-party, for a gross sales price of $558,570. As a result of this sale, a gain of approximately $13,000 and net proceeds of $175,149 are attributable to the Partnership. The recognized gain may be adjusted as additional information becomes available in subsequent periods.

There were no material pending legal proceedings or proceedings known to be contemplated by governmental authorities involving the Partnership during the fourth quarter of 2002.

No matters were submitted to a vote of the Limited Partners during the fourth quarter of 2002.

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PART II

As of February 28, 2003, the Partnership had 2,092,547 outstanding Class A Units held by a total of 1,686 Limited Partners and 325,470 of Class B held by a total of 220 Limited Partners. There is no established public trading for the Partnership’s limited partnership units, and it is not anticipated that a public trading market for the units will develop. Under the Partnership Agreement, the General Partners have the right to prohibit transfers of units.

Because fiduciaries of retirement plans subject to ERISA are required to determine the value of the assets of such retirement plans on an annual basis, the General Partners are required under the Partnership Agreement to report estimated Unit values to the Limited Partners each year in the Partnership’s annual Form 10-K. The methodology to be utilized for determining such estimated Unit values under the Partnership Agreement requires the General Partners to estimate the amount a Unit holder would receive if the Partnership’s properties were sold at their estimated fair market values as of the end of the Partnership’s fiscal year and the proceeds therefrom (without reduction for selling expenses) were distributed to the Limited Partners in liquidation of the Partnership. Utilizing this methodology, the General Partners have estimated Unit valuations, based upon their estimates of property values as of December 31, 2002, to be approximately $8.18 per Class A Unit and $14.05 per Class B Unit, based upon market conditions existing in early December 2002. In connection with these estimated valuations, the General Partners obtained an opinion from David L. Beal Company, an independent MAI appraiser, to the effect that such estimates of value were reasonable; however, due to the inordinate expense involved in obtaining appraisals for all of the Partnership’s properties, no actual appraisals were obtained. Accordingly, these estimates should not be viewed as an accurate reflection of the values of the Limited Partners’ Units, what a Limited Partner might be able to sell his Units for, or the fair market value of the Partnership’s properties, nor do they represent the amount of net proceeds Limited Partners would receive if the Partnership’s properties were sold and the proceeds distributed in a liquidation of the Partnership. The valuations performed by the General Partners are estimates only, and are based a number of assumptions which may not be accurate or complete. In addition, property values are subject to change and could decline in the future. Further, as set forth above, no appraisals have or will be obtained. For these reasons, the estimated Unit valuations set forth above should not be used by or relied upon by investors, other than fiduciaries of retirement plans for limited ERISA reporting purposes, as any indication of the fair market value of their Units.

Class A Limited Partners are entitled to a distribution from Net Cash From Operations, as defined in the Partnership Agreement to mean cash flow, less adequate cash reserves for other obligations of the Partnership for which there is no provision, on a per unit basis until they have received distributions in each fiscal year of the Partnership equal to 10% of their adjusted capital contributions. After this preference is satisfied, the General Partners will receive an amount of Net Cash From Operations equal to 10% of the total amount of Net Cash From Operations distributed. Thereafter, the Limited Partners holding Class A Units will receive 90% of Net Cash From Operations and the General Partners will receive 10%. No Net Cash From Operations will be distributed to Limited Partners holding Class B Units. Holders of Class A Units will, except in limited circumstances, be allocated none of the Partnership’s net loss, depreciation, amortization and cost recovery deductions. These deductions will be allocated to the Class B Units, until their capital account balances have been reduced to zero. No distributions have been made to the General Partner or holders of Class B Units as of December 31, 2002.

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Cash available for distribution to the Limited Partners is distributed on a annual basis unless Limited Partners elect to have their cash distributed monthly. Cash distributions made to Class A Limited Partners during 2002 and 2001 were as follows:

The fourth quarter distributions were accrued for accounting purposes in 2002 and paid to Limited Partners holding Class A Units in February 2003. The General Partners anticipate that cash distributions to Limited Partners holding Class A Units will continue in 2003 at a level at least comparable with 2002 cash distributions on an annual basis.

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

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The following sets forth a summary of the selected financial data as of and for the fiscal years ended December 31, 2002, 2001, 2000, 1999, and 1998.

This report contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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 may cause actual results to differ materially from any forward-looking statements made in this report including lease-up risks, inability to obtain new tenants upon expiration of existing leases, and the potential need to fund tenant improvements, leasing commissions or other capital expenditures or lease-up costs out of operating cash flow.

Gross Revenues

Gross revenues of the Partnership were $921,264, $1,203,501, and $961,858, for the years ended December 31, 2002, 2001, and 2000, respectively. Both the 2002 decrease from 2001 and the 2001 increase over 2000 resulted from the corresponding changes in equity in income from joint ventures described below.

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Equity in Income of Joint Ventures – Operations

Gross Revenues of Joint Ventures

Gross revenues of the joint ventures in which the Partnership holds an interest decreased in 2002, as compared to 2001, primarily due to the sale of Cherokee Commons in the fourth quarter of 2001, decreased occupancy at the Holcomb Bridge Property and lower interest income due to declining interest rates, partially offset by the sale of an outparcel of land at Tanglewood Commons. Such gross revenues increased in 2001, as compared to 2000, primarily due to increased rental rates at the BellSouth Building, Tanglewood Commons, Hannover Center, Cherokee Commons, and Stockbridge Village I Expansion.

Expenses of Joint Ventures

The expenses of the joint ventures in which the Partnership holds an interest decreased in 2002, as compared to 2001, primarily due to the sale of Cherokee Commons in late 2001, the recovery of previously uncollectible receivables from tenants at the Holcomb Bridge Property in 2002, which were written off on 2001, and a decrease in the write-off of uncollectible receivables due from tenants at Stockbridge Village III and Tanglewood Commons in 2002. Expenses decreased in 2001, as compared to 2000, primarily due to a decrease in depreciation related to the sale of Cherokee Commons in late 2001 and a decrease in the write-off of uncollectible receivables due from tenants at the Holcomb Bridge Property from 2000 to 2001.

Equity In Income of Joint Ventures – Dispositions

On October 1, 2001, Fund I-II-IIOW-VI-VII Associates sold Cherokee Commons for net sales proceeds of $8,434,089 and recognized a gain of $1,725,015 on the sale.

On October 7, 2002, Fund VI-VII-VIII Associates sold an outparcel of land at Tanglewood Commons to Truliant Federal Credit Union, an unrelated third-party, for a gross sales price of $558,570. As a result of this sale, Fund VI-VII-VIII received net sales proceeds of $524,377 and recognized a gain of approximately $52,000.

Expenses

Expenses of the Partnership were $117,553 for the year ended December 31, 2002, as compared to $89,817 for 2001 and $78,876 for 2000. The increase in expenses for 2002 from 2001 resulted from increased administrative salary expense, increased legal and accounting fees, and other general and administrative costs. The increase in expenses from 2000 to 2001 resulted primarily from increases in administrative salaries.

As a result, net income of the Partnership was $803,711 for 2002, $1,113,684 for 2001, and $882,982 for 2000.

Cash Flows Used In Operating Activities

Net cash flows used in operating activities was $107,678 for 2002, $83,497 for 2001, and $60,735 for 2000. The 2002 increase from 2001 resulted primarily from increases in partnership administration expenses, including administrative salaries and printing expenses. The 2001 increase from 2000 resulted primarily from an increase in partnership administration expenses.

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Cash Flows From Investing Activities

Net cash provided by investing activities was $2,805,650 for 2002, $1,904,057 for 2001, and $1,921,437 for 2000. The 2002 increase from 2001 resulted primarily from the receipt of proceeds from Fund I-II-IIOW-VI-VII Associates in 2002 for the 2001 sale of Cherokee Commons. Cash flows provided by investing activities remained relatively stable in 2001 compared to 2000, as the operating cash flows generated by joint ventures were relatively stable during these periods as well.

Cash Flows Used In Financing Activities

Net cash used in financing activities was $1,750,142 for 2002, $1,829,826 for 2001, and $1,887,183 for 2000. The decrease in net cash used in financing activities in 2002, as compared to 2001, and in 2001, as compared to 2000, were commensurate with the corresponding decreases in operating cash flows generated by properties owned through joint ventures, which thereby resulted in a declining distribution rate for the Partnership from 2000 through 2002.

Distributions

The Partnership made distributions to the limited partners holding Class A units of $0.81 per unit, $0.89 per unit and $0.92 per unit for the years ended December 31, 2002, 2001 and 2000, respectively. Such distributions have been made from net cash from operations and distributions received from investments in joint ventures. No distributions have been made to the limited partners holding Class B units or to the General Partners.

The General Partners anticipate that distributions per unit to limited partners holding Class A Units will continue in 2003. Distributions accrued for the fourth quarter of 2002 to the limited partners holding Class A Units were paid in February 2003. No cash distributions were made to limited partners holding Class B Units.

Sales Proceeds

Rather than distributing net sales proceeds to the limited partners, the Partnership’s share of the net proceeds generated from the sales of the Cherokee Commons property and the outparcel of land at Tanglewood Commons will be held in reserve as the General Partners evaluate the capital needs of the existing properties, in which the Partnership holds an interest through investments in joint ventures, as well as the potential impact to the limited partners of investing in an expansion of Tanglewood Commons. Upon completing such evaluations in consideration of the best interests of the limited partners, the General Partners anticipate distributing the reserves not otherwise utilized to the limited partners in accordance with the terms of the Partnership Agreement during 2003.

Capital Resources

The Partnership is an investment vehicle formed for the purpose of acquiring, owning and operating income-producing real properties and has invested all of its funds available for investment. Accordingly, it is unlikely that the Partnership will acquire interests in any additional properties. The Partnership is unaware of any material commitments for capital expenditures with respect to any of its properties which would have a material effect on its capital resources.

Management and Leasing Fees

Wells Management Company, Inc., an affiliate of the General Partners, receives compensation for supervising the management of the Partnership’s properties owned through joint ventures equal to (a) 3% of the gross revenues for management and 3% of the gross revenues for leasing (aggregate maximum of 6%) plus a separate fee for the one-time lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering

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similar services in the same geographic area for similar properties or (b) in the case of commercial properties which are leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term.

The Partnership incurred management and leasing fees, at the joint venture level, of $144,841, $187,927 and $195,633 for the years ended December 31, 2002, 2001 and 2000, respectively.

Administration Reimbursements

Wells Capital, Inc. and its affiliates perform certain administrative services for the Partnership, such as accounting and other partnership administration, and incurs the related expenses. Such expenses are allocated among the various Wells Real Estate Funds based on time spent on each fund by individual administrative personnel. During 2002, 2001 and 2000, the Partnership reimbursed $45,796, $38,028 and $28,077, respectively, to Wells Capital, Inc. and its affiliates for these services. See Note 6 to the financial statements included with this report for a summary of the Partnership’s administrative costs.

Conflicts of Interests

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

The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate. However, there are provisions in the majority of tenant leases, which would protect the Partnership from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square foot basis, or in some cases, annual reimbursement of operating expenses above a certain per square foot allowance. However, due to the long-term nature of the leases, the leases may not re-set frequently enough to cover inflation.

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

Below is a discussion of the accounting policies that management considers to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. Additional discussion of accounting policies that management considers to be significant, including further discussion of the critical accounting policies described below, is presented in Note 1 to the Partnership’s financial statements included in this report.

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Investment in Real Estate Assets

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

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

Valuation of Real Estate Assets

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. Management has determined that there has been no impairment in the carrying value of real estate assets held by the Partnership at December 31, 2002 and 2001.

Projections of expected future cash flows requires management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property, and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flows and fair value, and could result in the overstatement of the carrying value of real estate assets held by the joint ventures and net income of the Partnership.

On March 18, 2003, four Wells affiliated joint ventures (collectively, the “Seller”, defined below) entered into an agreement (the “Agreement”) to sell five real properties (the “Sale Properties”, defined below) located in Stockbridge, Georgia to an unrelated third-party (the “Purchaser”) for a gross sales price of $23,750,000. Contemporaneously with the Purchaser’s execution and delivery of the Agreement to the Seller, the Purchaser paid a fully refundable earnest money deposit of $250,000 to the designated escrow agent. This transaction is currently subject to a due diligence period of 60 days, during which the Purchaser has the right to terminate the Agreement. Accordingly, there are no assurances that this sale will close.

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Since the Partnership does not borrow any money or make any foreign investments, it is not subject to risks relating to interest rate or foreign currency exchange rate fluctuations.

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PART II – OTHER INFORMATION

The Financial Statements of the Registrant and supplementary data are detailed under Item 15(a) and filed as part of the report on the pages indicated.

There were no disagreements with the Partnership’s independent public accountants during the two years ended December 31, 2002.

On May 16, 2002, the general partners dismissed Arthur Andersen LLP (Andersen) as the Partnership’s independent public accountants effective immediately.

Andersen’s reports on the financial statements of the Partnership for the year ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2001 and 2000 and through the date of Andersen’s dismissal, there were no disagreements with Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen’s satisfaction, would have caused Andersen to make reference to the subject matter in connection with its report on the financial statements of the Partnership for such year and there were no reportable events as set forth in Item 304(a)(1)(v) of Regulation S-K.

On July 3, 2002, the Partnership engaged Ernst & Young, LLP (Ernst & Young) to audit the financial statements of the Partnership, effective immediately. During the fiscal year ended December 31, 2001, and through the date of appointment of Ernst & Young as the Partnership’s independent public accountants, the Partnership did not consult Ernst & Young with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of the Partnership, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

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PART III

Wells Partners, L.P.

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

Leo F. Wells, III

Mr. Wells is a resident of Atlanta, Georgia, is 59 years of age and holds a Bachelor of Business Administration Degree in Economics from the University of Georgia. Mr. Wells is the President, sole Director and sole shareholder of Wells Real Estate Funds, Inc., which is the parent company of Wells Capital, Wells & Associates, Inc., Wells Management Company, Inc. and Wells Investment Securities, Inc. Mr. Wells is the President and sole Director of Wells Capital, Inc. He is also the President, sole Director and sole shareholder of Wells Real Estate Investment Funds, Inc., the parent corporation of Wells Capital, Inc. Mr. Wells is also the President of Wells & Associates, Inc., a real estate brokerage and investment company formed in 1976 and incorporated in 1978, for which he serves as the principal broker. Mr. Wells is also the sole Director and President of Wells Management Company, Inc., a property management company he founded in 1983. In addition, Mr. Wells is the President and Chairman of the Board of Wells Investment Securities, Inc., Wells & Associates, Inc., and Wells Management Company, Inc., all of which are all affiliates of the General Partners. From 1980 to February 1985, Mr. Wells served as Vice-President of Hill-Johnson, Inc., a Georgia corporation engaged in the construction business. From 1973 to 1976, he was associated with Sax Gaskin Real Estate Company, and from 1970 to 1973, he was a real estate salesman and property manager for Roy D. Warren & Company, an Atlanta real estate company.

The following table summarizes the compensation and fees paid to the General Partners and their affiliates during the year ended December 31, 2002:

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

Set forth below is the security ownership of management as of December 31, 2002.

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

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

Interest in Partnership Cash Flow and Net Sale Proceeds

The General Partners will receive a subordinated participation in net cash flow from operations equal to 10% of net cash flow from operations after the Limited Partners holding Class A Units have received preferential distributions equal to 10% of their adjusted capital contribution. The General Partners will also receive a subordinated participation in net sale proceeds and net financing proceeds equal to 20% of residual proceeds available for distribution after the Limited Partners holding Class A Units have received a return of their adjusted capital contributions plus a 10% cumulative return on their adjusted capital contributions and the Limited Partners holding Class B Units have received a return of their adjusted capital contribution plus a 15% cumulative return on their adjusted capital contribution; however, that in no event shall the General Partners receive in the aggregate in excess of 15% of net sale proceeds and net financing proceeds remaining after payments to Limited Partners from such proceeds of amounts equal to the sum of their adjusted capital contributions plus a 6% cumulative return on their adjusted capital contributions. The General Partners did not receive any distributions from net cash flow from operations or net sale proceeds for the year ended December 31, 2002.

Property Management and Leasing Fees

Wells Management Company, Inc., an affiliate of the General Partners, receives compensation for supervising the management of the Partnership’s properties owned through joint ventures equal to the lesser of: (A)(i) 3% of the gross revenues for management and 3% of the gross revenues for leasing (aggregate maximum of 6%) plus a separate one-time fee for initial lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties; and (ii) n the cash of industrial and commercial properties which are leased on a long-term basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term; or (B) the amounts charged by unaffiliated persons rendering comparable services in the same geographic area. Wells Management Company, Inc. received $144,841 in property management and leasing fee compensation for services rendered during the year ended December 31, 2002.

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Real Estate Commissions

In connection with the sale of Partnership properties, the General Partners or their affiliates may receive commissions not exceeding the lesser of (A) 50% of the commissions customarily charged by other brokers in arm’s-length transactions involving comparable properties in the same geographic area or (B) 3% of the gross sales price of the property, and provided that payments of such commissions will be made only after Limited Partners have received prior distributions totaling 100% of their capital contributions plus a 6% cumulative return on their adjusted capital contributions. During 2002, no real estate commissions were paid to the General Partners or their affiliates.

Expense Reimbursements

See Note 6 to the Partnership’s financial statements included with this report for a description of the administrative costs and reimbursements made to the General Partners and their affiliates during the year ended December 31, 2002.

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 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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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.

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CERTIFICATIONS

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

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CERTIFICATIONS

I, Douglas P. Williams, certify that:

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

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

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EXHIBIT INDEX

TO

2002 FORM 10-K

OF

WELLS REAL ESTATE FUND VII, L.P.

The following documents are filed as exhibits to this report. Those exhibits previously filed and incorporated herein by reference are identified below by an asterisk. For each such asterisked exhibit, there is shown below the description of the previous filing. Exhibits which are not required for this report are omitted.

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INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT AUDITORS

The Partners

Wells Real Estate Fund VII, L.P.

We have audited the accompanying balance sheet of Wells Real Estate Fund VII, L.P. (a Georgia public limited partnership) as of December 31, 2002 and the related statements of income, partners’ capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Wells Real Estate Fund VII, L.P. as of December 31, 2001, and for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations and whose report dated January 25, 2002 expressed an unqualified opinion on those financial statements before the restatement adjustments and disclosures described in Note 1.

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

In our opinion, the 2002 financial statements referred to above present fairly, in all material respects, the financial position of Wells Real Estate Fund VII, L.P. at December 31, 2002 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

As discussed above, the financial statements of Wells Real Estate Fund VII, L.P. as of December 31, 2001 and for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations. As described in Note 1, these financial statements have been restated. We audited the adjustments described in Note 1 that were applied to restate the 2001 and 2000 financial statements. Our procedures included (a) agreeing the restatement adjustment amounts to the corresponding accounts maintained in the underlying records of the Partnership, and (b) testing the application of the adjustments to the previously reported amounts. In our opinion, such adjustments are appropriate and have been properly applied. Additionally, as described in Note 1, these financial statements have been revised to include disclosure of the number of Class A weighted average limited partner units outstanding for the years ended December 31, 2001 and 2000 and the number of Class B weighted average limited partner units outstanding for the year ended December 31, 2000 on the statements of income. Our procedures with respect to this disclosure included (a) recalculating the number of Class A weighted average limited partner units outstanding for the years ended December 31, 2001 and 2000 by dividing the net income amount allocated to Class A limited partners, previously reported on the statements of income in 2001 and 2000, by the amount of net income per weighted average Class A limited partner unit, previously reported on the statements of income in 2001 and 2000 and (b) dividing the net loss amount allocated to Class B limited partners, previously reported on the statement of income in 2000 by the amount of net loss per weighted average Class B limited partner unit, previously reported on the statement of income in 2000. In our opinion, the disclosure of the number of Class A weighted average limited partner units outstanding on the statements of income for the years ended December 31, 2001 and 2000 and the number of Class B weighted average limited partner units outstanding on the statement of income for the year ended December 31, 2000 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of Wells Real Estate Fund VII, L.P. other than with respect to such restatement adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole.

/s/Ernst & Young LLP

Atlanta, Georgia

January 24, 2003

F-2

(The following is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the financial statements of Wells Real Estate Fund VII, L.P. for the fiscal year ended December 31, 2001 included in the previous year’s Form 10-K filing. This audit report has not been reissued by Arthur Andersen in connection with the filing of this form 10-K for the fiscal year ended December 31, 2002.)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying balance sheets of Wells Real Estate Fund VII, L.P. (a Georgia public limited partnership) as of December 31, 2001 and 200 and the related statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

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

ARTHUR ANDERSEN LLP

Atlanta, Georgia

January 25, 2002

F-3

WELLS REAL ESTATE FUND VII, L.P.

(A Georgia Public Limited Partnership)

BALANCE SHEETS

December 31, 2002 and 2001

ASSETS

LIABILITIES AND PARTNERS’ CAPITAL

See accompanying notes.

F-4

WELLS REAL ESTATE FUND VII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF INCOME(LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes.

F-5

WELLS REAL ESTATE FUND VII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes.

F-6

WELLS REAL ESTATE FUND VII, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000