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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

[Fee Required]

For the fiscal year ended December 31, 2002 or

¨    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

[No Fee Required]

For the transition period from __________________________ To ____________________________

Commission file number: 0-25731

WELLS REAL ESTATE FUND XI, L.P.

(Exact name of registrant as specified in its charter)

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

ITEM 1.      BUSINESS

General

Wells Real Estate Fund XI, L.P. (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as the General Partners. The Partnership was formed on June 20, 1996 for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income producing commercial properties for investment purposes. Upon subscription, limited partners elect to have their units treat their units as Class A units or Class B units. The 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) add or remove a general partner. A majority vote on any of the above described matters will bind the Partnership without the concurrence of the general partners. Each limited partnership unit has equal voting rights, regardless of class.

On December 31, 1997, the Partnership commenced a public offering of up to $35,000,000 of limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on March 3, 1998 upon receiving and accepting subscriptions for 125,000 units. The offer terminated on December 30, 1998 at which time approximately 1,302,942 and 350,338 units had been sold to 1,250 and 95 Class A and Class B Limited Partners, respectively, for total limited partner capital contributions of $16,532,802. As of December 31, 2002, the Partnership had paid a total of $578,648 in acquisition and advisory fees and acquisition expenses and $2,066,600 in selling commissions and organization and offering expenses and invested $3,357,436 in Fund IX-X-XI-REIT Associates, $2,398,767 in Fund X-XI Associates, and $8,131,351in Fund XI-XII-

REIT Associates.

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 the properties owned by the Partnership through its interest 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 be required to provide free rent, reduced charges for tenant improvements, and other inducements, all of which may have an adverse impact on results of operations. At the time the Partnership elects to dispose 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 all of its real estate assets through joint ventures with other Wells Real Estate Funds. As of December 31, 2002, the Partnership owned interests in the following 11 properties through the affiliated joint ventures listed below:

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

As of December 31, 2002, the lease expirations schedule during each of the following ten years for all properties owned by the joint ventures described above, assuming no exercise of renewal options or termination rights, are summarized below:

(1)  Cort Furniture lease ( 52,000 square feet).

(2)  Fairchild lease (58,424 square feet).

(3)  Ohmeda lease (106,750 square feet).

(4)  Alstom Power-Knoxville lease (84,404 square feet), Sprint lease (68,900 square feet), and the Johnson Matthey                lease (130,000 square feet).

(5)  Avaya lease (57,186 square feet), and Gartner lease (62,400 square feet).

(6)  Iomega lease (108,250 square feet).

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

Fund IX-X-XI-REIT Associates

On June 11, 1998, Wells Real Estate Fund IX L.P. (“Wells Fund IX), and Wells Real Estate Fund X, L.P. (“Wells Fund X”), Georgia public limited partnerships affiliated with the Partnership through common general partners, entered into a joint venture agreement known as Fund IX-X Associates, which was subsequently amended, restated and renamed as Fund IX-X-XI-REIT Associates in order to admit the Partnership and Wells OP.

Prior to amending and restating the joint venture agreement, Fund IX-X Associates acquired and owned the following three properties: (i) the Alstom Power-Knoxville Building, (ii) the Ohmeda Building, and (iii) 360 Interlocken Building. On June 24, 1998, Fund IX-X-XI-REIT Associates purchased the Avaya Building, a one-story office building. On July 1, 1998, Wells Fund X contributed the Iomega Building, a

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single-story warehouse and office building with 108,250 rentable square feet, to Fund IX-X-XI-REIT Associates, which was recorded as a capital contribution.

As of December 31, 2002, the Partnership, Wells Fund IX, Wells Fund X, and Wells OP held equity interests in Fund IX-X-XI-REIT Associates of approximately 9%, 39%, 49%, and 3%, respectively.

Alstom Power-Knoxville Building

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

Alstom Power, Inc. (“Alstom Power”), took occupancy of 57,831 rentable square feet in December 1997. The initial term of the lease term of 9 years and 11 months commenced as Alstom Power took occupancy. Alstom Power has the option to extend the initial term of its lease for two consecutive five-year periods. The annual base rent payable during the initial term is $646,250 during the first five years and $728,750 during the last four years and 11 months of the initial term. The annual base rent for each extended term will be assessed at the then currently prevailing market rental rates. In addition to the base rent, Alstom Power is required to pay additional rent equal to its share of operating expenses during the lease term.

Commencing December 1, 1999, Alstom Power Environmental exercised its right of first refusal to lease an additional 23,992 square feet of space, and executed the third amendment to its lease on May 19, 2000 to lease the remaining 2,581 rentable square feet on the second floor of the building. Thus, Alstom Power currently occupies 100% of the building and pays rent thereon according to the terms and conditions of their original lease.

The average effective annual rental per square foot at the Alstom Power-Knoxville Building was $13.67 for 2002, $13.83 for 2001, $14.05 for 2000, $11.82 for 1999, and $9.97 for 1998.

Ohmeda Building

On February 13, 1998, Fund IX-X Associates acquired the Ohmeda Building, a two story office building with approximately 106,750 rentable square feet located on a 15-acre tract of land located in Louisville, Boulder County, Colorado, for a gross purchase price of $10,325,000, plus acquisition and additional closing costs of approximately $36,000. Wells Fund IX and Wells Fund X contributed $3,460,192 and $6,900,878 towards the purchase of the Ohmeda Building, respectively.

The entire 106,750 rentable square feet of the Ohmeda Building is currently under a net lease with Ohmeda, Inc., which was assigned to the Fund IX-X Associates upon acquisition. The Ohmeda Lease currently expires in January 2005, subject to (i) Ohmeda’s right to effectuate an early termination of the lease under the terms and conditions described below, and (ii) Ohmeda’s right to extend the lease for two additional five year periods of time at the then current market rental rates.

The monthly base rental payable under the lease is $83,710 through January 31, 2003; $87,891 from February 1, 2003 through January 31, 2004; and $92,250 from February 1, 2004 through January 31, 2005. Under the lease, Ohmeda is responsible for all utilities, taxes, insurance, and other operating costs with respect to the Ohmeda Building during the term of the lease. In addition,

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Ohmeda shall pay a $21,000 per year management fee to Fund IX-X-XI-REIT Associates, as landlord, for maintenance and administrative services of the Ohmeda Building. Fund IX-X-XI-REIT Associates is responsible for maintenance of the roof, exterior and structural walls, foundation, other structural members and floor slab, provided that the landlord’s obligation to make repairs specifically excludes items of cosmetic and routine maintenance such as the painting of walls.

The average effective annual rental per square foot at the Ohmeda Building was $9.64 for 2002, $9.62 for 2001, 2000, 1999, and 1998.

360 Interlocken Building

On March 20, 1998 Fund IX-X Associates acquired the 360 Interlocken Building, a three-story multi-tenant office building containing approximately 51,974 rentable square feet located on a 5.1 acre tract of land in Broomfield, Broomfield County, Colorado for a gross purchase price of $8,275,000, plus acquisition and closing costs of approximately $42,000. This acquisition was funded by capital contributions from Wells Fund IX and Wells Fund X of $6,642,466 and $1,674,271, respectively.

The second and third floors of the 360 Interlocken Building are currently occupied by two major tenants. On the first floor, 2910 square feet are occupied by one tenant with several suites available for releasing on that floor.

The initial term of the GAIAM lease expired on March 31, 2002 and was renewed and extended through May 31, 2005. In connection therewith, GAIAM’s space was increased to include 19,013 square feet on the third floor and 4,923 square feet on the second floor. The annual rent for the remaining term of the lease is $574,464 per year with a 2% increase each lease year beginning June 1, 2003. The lease for ODS Technologies, L.P. for 12,223 square feet on the second floor, expiring on September 30, 2003, is subject to a renewal option for three years. All tenants in the 360 Interlocken Building are responsible for paying a pro-rata share of the increases in taxes, utilities, insurance, and other operating costs over the respective base year as defined in their leases.

Currently, Wells Management Company is actively pursuing prospective tenants to lease the vacant space at the 360 Interlocken Building on the first floor, which encompasses approximately 25% of the premises. Rental revenue reductions associated with the vacant space approximately $400,000 annually.

The average effective annual rental rate per square foot at the 360 Interlocken Building was $18.49 for 2002, $16.12 for 2001, $16.23 for 2000 and, $15.97 for 1999 and 1998.

Avaya Building

On May 30, 1997, Fund IX-X Associates entered into a purchase and sale agreement with Wells Development Corporation (“Wells Development”), an affiliate of the General Partners, for the acquisition and development of the Avaya Building, a one-story office building containing 57,186 net rentable square feet on 5.3 acres of land. On June 24, 1998, Fund IX-X-XI-REIT Associates purchased this property for $5,504,276, plus acquisition and closing costs of approximately $8,000. The purchase price was funded by capital contributions of $2,482,810 from the Partnership, $657,804 from Wells Fund IX, $950,392 from Wells Fund X, and $1,421,466 from Wells OP.

Avaya, a worldwide leader in telecommunications technology producing a variety of communication products, occupies the entire Avaya Building. The initial term of the lease is ten years commencing

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January 5, 1998. Avaya has the option to extend the initial term of the lease for two additional five-year periods. The annual base rent payable during the initial term is $508,383 during the first five years and $594,152 during the second five years of the lease term. The annual base rent for each extended term will be at then currently prevailing market rental rates. In addition to the base rent, Avaya will be required to pay additional rent equal to its share of operating expenses during the lease term.

The average effective annual rental per square foot at the Avaya Building was $10.32 for 2002, $10.19 for 2001, 2000, and 1999, and $10.19 for 1998.

Iomega Building

On July 1, 1998, Wells Fund X contributed the Iomega Building, a single story warehouse and office building with 108,250 rentable square feet and located in Ogden, Utah to Fund IX-X-XI-REIT Associates. A capital contribution of $5,050,425 which represents the purchase price of $5,025,000, plus acquisition and closing costs of approximately $25,000, was originally paid by Wells Fund X on April 1, 1998.

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

On March 22, 1999, Fund IX-X-XI-REIT Associates purchased a four-acre tract of vacant land adjacent to the Iomega Building for a gross purchase price of $212,000. The Partnership funded this acquisition and related land improvement costs and, accordingly, was credited with a capital contribution to Fund IX-X-XI-REIT Associates of $874,625. This site was developed as additional parking and a loading-dock area, including 400 new parking stalls and new site work for truck maneuver, and was completed on July 31, 1999. Iomega Corporation has extended its lease term through April 30, 2009 and, in connection therewith, will pay additional base rent of $113,700.

The average effective annual rental per square foot at the Iomega Building was $6.36 for 2002, $6.22 for 2001 and 2000, $5.18 for 1999, and $4.60 for 1998.

Fund X-XI Associates

On July 17, 1998 the Partnership and Wells Fund X entered into a joint venture agreement known as Fund X-XI Associates. The investment objectives of Wells Fund X are substantially identical to those of the Partnership. As of December 31, 2002, the Partnership and Wells Fund X had contributed $2,398,767 and $3,296,233 respectively, for equity interests in Fund X-XI Associates of approximately 42%, and 58%, respectively.

Fund X-XI Associates—Fremont:

Fairchild Building

On July 15, 1998, Wells OP and Wells Development Corporation (“Wells Development”), wholly-owned subsidiary of Wells Management Company, entered into a joint venture agreement, the

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Fremont joint venture. On July 21, 1998, the Fremont joint venture acquired the Fairchild Building, a 58,424 square-foot manufacturing and office building located in Fremont, California (the “Fairchild Building”), for a purchase price of $8,900,000, plus acquisition and closing costs of approximately $60,000.

On October 8, 1998, Fund X-XI Associates purchased Wells Development’s interest in the Fremont Joint Venture, thus, creating Fund X-XI Associates – Fremont. As of December 31, 2002, Fund X-XI Associates and Wells OP had contributed $2,000,000 and $6,983,110 for equity interests in Fund X-XI Associates – Fremont of 22% and 78%, respectively.

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

The average effective annual rental per square foot at the Fairchild Building was $15.46 for 2002, 2001, 2000, 1999, and 1998.

Fund X-XI Associates—Orange County:

Cort Building

In July 1998, Wells OP and Wells Development entered into a joint venture agreement, the Orange County joint venture, for the purpose of acquiring the Cort Building for a purchase price of $6,400,000, plus acquisition and closing costs of approximately $150,000.

On September 1, 1998, Fund X-XI Associates purchased Wells Development’s interest in the Orange County Joint Venture, thus, creating Fund X-XI Associates – Orange County. As of December 31, 2002, Fund X-XI Associates and Wells OP had contributed $3,695,000 and $2,871,430 for equity interests in Fund X-XI Associates – Orange County of 56% and 44%, respectively.

The Cort Building is a 52,000-square-foot warehouse and office building located in Fountain Valley California. The building is leased to one tenant over a 15-year lease term, which commenced on November 1, 1988 and expires on October 31, 2003. The monthly base rent currently payable under the Cort lease is $69,574 through the remainder of the lease term. The Cort lease is a triple net lease, whereby, Cort is required to reimburse Fund X-XI Associates - Orange County for certain operating expenses, as defined in the lease.

The average effective annual rental per square foot at the Cort Building was $15.30 for 2002, 2001, 2000, 1999, and 1998.

Fund XI-XII-REIT Associates

On June 21, 1999, Fund XI-REIT Associates, a joint venture between the Partnership and Wells OP, was amended and restated to admit the Wells Real Estate Fund XII L.P. (“Wells Fund XII”), a Georgia public limited partnership. Wells Fund XII and Wells OP are affiliates of the Partnership through common general partners and have investment objectives substantially identical to those of the Partnership. Accordingly, Fund XI-REIT Associates subsequently changed its name to Fund XI-XII-REIT Associates. Fund XI-REIT Associates had previously acquired and owned the EYBL CarTex Building located in Greenville, South Carolina (further described below). As of December 31, 2002, the Partnership, Wells

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Fund XII, and Wells OP had contributed $8,131,351, $5,300,000, and $17,585,310 for equity interests in Fund XI-XII-REIT Associates of approximately 26%, 17%, and 57%, respectively.

EYBL CarTex Building

On May 18, 1999, Fund XI-XII-REIT Associates purchased the EYBL CarTex Building, a manufacturing and office building located in Fountain Inn, unincorporated Greenville County, South Carolina for a purchase price of $5,085,000, plus acquisition and closing costs of approximately $37,000. The purchase cost was funded by capital contributions of $1,530,000 from the partnership and $3,591,827 from Wells OP.

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

The entire 169,510 rentable square feet of the EYBL CarTex Building has a ten year lease with EYBL CarTex, Inc., a South Carolina corporation, beginning on March 1, 1998. EYBL CarTex has the right to extend the Lease for two additional five-year periods. Each extension option must be exercised by giving notice to the landlord at least twelve months prior to the expiration date of the then current lease term. The annual rent payable is $508,530 for the first four years, $550,907 for years five and six, $593,285 for years seven and eight, and $610,236 for years nine and ten.

The sole tenant vacated the Eybl CarTex building in November 2002 and is currently in default under the terms of the lease agreement as a result of failing to pay rent beginning in December 2002. Fund XI-XII-REIT Associates is currently pursuing legal actions to collect the delinquent rent due under this lease and, concurrently, actively seeking prospective tenants and marketing the property for releasing. The sole tenant vacated the Eybl CarTex building in November 2002 and is currently in default under the terms of the lease agreement as a result of failing to pay rent beginning in December 2002. Fund XI-XII-REIT Associates is currently pursuing legal actions to collect the delinquent rent due under this lease and, concurrently, actively seeking prospective tenants and marketing the property for releasing. Rental revenue reductions associated with the vacant space approximate $650,000 annually.

The average effective annual rental per square foot at the EBYL CarTex Building was $3.29 for 2002 and $3.31 for 2001, 2000, and 1999, the first year of ownership.

Sprint Building

On July 2, 1999, the Fund XI-XII-REIT Associates acquired the Sprint Building, a three-story office building with approximately 68,900 rentable square feet on a 7.12-acre tract of land located in Leawood, Johnson County, Kansas, for a purchase price of $9,500,000, plus acquisition and closing costs of approximately $46,200. As of December 31, 2002, the Partnership had contributed $3,000,000, Wells Fund XII had contributed $1,000,000 and Wells OP had contributed $5,546,210 to the purchase of this property.

The entire rentable area of the Sprint Building is currently under a net lease agreement with Sprint Communications, Inc. (“Sprint”) dated February 14, 1997. The seller’s interest in the lease was assigned to Fund XI-XII-REIT Associates at the closing. The initial term of the lease is ten

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years, which commenced on May 19, 1997 and expires on May 18, 2007. Sprint has the option to extend the lease for two additional five-year periods of time. The monthly base rent payable under the lease is $83,254 through May 18, 2002 and $91,867 for the remainder of the lease term. The monthly base rent payable for each extended term of the lease will be equal to 95% of the then current market rate which is calculated as a full-service rental rate less anticipated annual operating expenses on a rentable square foot basis charged for space of comparable location, size, and conditions in comparable office buildings in the suburban south Kansas City, Missouri, and south Johnson County, Kansas areas.

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

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

The average effective annual rental per square foot at the Sprint Building was $15.45 for 2002 and 2001, and $15.44 for 2000 and 1999, the first year of ownership.

Johnson Matthey Building

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

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

The entire rentable area of the Johnson Matthey Building is currently leased to Johnson Matthey. The annual base rent payable under the Johnson Matthey lease for the remainder of the lease term is as follows: year three-$789,750, year four-$809,250, year five-$828,750, year six-$854,750, year seven-$874,250, year eight-$897,000, year nine-$916,500, and year ten-$939,250. The current lease term expires in June 2007. Johnson Matthey has the right to extend the lease at the same terms and conditions for one additional three-year period.

Johnson Matthey has a right of first refusal to purchase the Johnson Matthey Building in the event that the Fund XI-XII-REIT Associates desires to sell the building to an unrelated third party. Fund XI-XII-REIT Associates must give Johnson Matthey written notice of its intent to sell the Johnson Matthey Building, and Johnson Matthey will have ten days from the date of such notice to provide written notice of its intent to purchase the building. If Johnson Matthey exercises its right of first

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refusal, it must purchase the Johnson Matthey Building on the same terms contained in the third-party offer.

The average effective annual rental per square foot at the Johnson Matthey Building was $6.77 for 2002, and $6.67 for 2001, 2000, and 1999, the first year of ownership.

Gartner Building

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

The entire rentable area of the Gartner Building is currently under a net lease agreement with Gartner dated July 30, 1997 (the “Gartner Lease”). The initial term of the Gartner Lease is ten years, commencing on February 1, 1998 and expiring on January 31, 2008. Gartner has the right to extend the Gartner Lease for two additional five-year periods. The annual base rent payable for the remainder of the Gartner Lease term is $830,656 through January 2003, and will increase by 2.5% through the remainder of the lease term.

In addition, Gartner was afforded two expansion options to construct additional buildings under the Gartner Lease, neither of which were not exercised and expired on April 15, 2002.

The average effective annual rental per square foot at the Gartner Building was $13.73 for 2002 and $13.68 for 2001, 2000, and 1999, the first year of ownership.

ITEM 3.    LEGAL PROCEEDINGS

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.

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

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

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PART II

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

The offering for sale of Units in the Partnership terminated on December 30, 1998, at which time the Partnership had 1,302,942 outstanding Class A Units held by a total of 1,250 Limited Partners and 350,338 outstanding Class B Units held by a total of 95 Limited Partners. As of February 28, 2003, the Partnership had 1,371,606 outstanding Class A Units held by a total of 1,260 Limited Partners and 281,674 outstanding Class B Units held by a total of 79 Limited Partners. The capital contribution per unit is $10.00. There is no established public trading for the Partnership’s limited partnership units, and it is not anticipated that a public trading market for the units will develop. Under the Partnership Agreement, the General Partners have the right to prohibit transfers of units.

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 $8.14 per Class A Unit and $11.79 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 and amortization deductions. These deductions will be allocated to the Class B Units,

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until their capital account balances have been reduced to zero. No distributions have been made to the General Partners as of December 31, 2002.

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 2001 and 2002 were as follows:

The fourth quarter distribution was accrued for accounting purposes in 2002 and paid to Limited Partners in February, 2003. No cash distributions were paid to holders of Class B Units in 2002.

ITEM 6.    SELECTED FINANCIAL DATA

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:

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(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 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 the 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 flows.

(b)    Results of Operations

Gross Revenues

Gross revenues of the Partnership were $839,691, $960,676, and $975,850 for the years ended December 31, 2002, 2001, and 2000, respectively. The 2002 decrease from 2001, and the 2001 decrease from 2000, resulted primarily from the corresponding changes in equity in income of joint ventures describe below.

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 a decrease in operating cost reimbursement billings to GAIAM, a tenant at the 360 Interlocken Building, as a result of renewing its lease in April 2002, and the vacancy of the Eybl CarTex Building beginning in December 2002. Pursuant to the terms of the renewed GAIAM lease, the first lease year will be considered a base year; accordingly, operating reimbursement billings to the GAIAM Group will begin in 2003. Gross revenues remained relatively stable for 2001, as compared to 2000.

Since the sole tenant of the EYBL CarTex Building vacated the premises, ceased making its rental payments in December 2002 and dissolved as a corporation with the Secretary of State of South Carolina effective December 31, 2002, and since this building has not yet been re-leased, gross revenues of Fund XI-XII-REIT Associates are anticipated to decrease in 2003 resulting in substantially lower gross revenues allocable to the Partnership with respect to its interest in the joint venture.

Expenses of Joint Ventures

The expenses of the joint ventures in which the Partnership holds an interest increased in 2002, as compared to 2001, primarily due to (i) increased administrative salaries and (ii) establishing new reserves for doubtful accounts receivable due from tenants at the Eybl CarTex Building, as the sole tenant vacated in November 2002 and filed for Corporate dissolution in December 2002, and the Gartner Building, as reimburseable real estate tax billings are currently under dispute with the sole tenant at this property. The 2001 increase in expenses, as compared to 2000, resulted primarily from an increase in administrative salaries. Expenses Total expenses of the Partnership were $92,876 for the year ended 2002, as compared to $90,326 for 2001 and $79,861 for 2000. Expenses remains relatively stable for 2002, as compared to 2001, as increases inadministrative salaries offset decreases in other general and administrative costs. The 2001 increase in expenses from 2000 resulted primarily from increases in administrative salaries.

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Expenses

Total expenses of the Partnership were $92,876 for the year ended 2002, as compared to $90,326 for 2001 and $79,861 for 2000. Expenses remains relatively stable for 2002, as compared to 2001, as increases in administrative salaries offset decreases in other general and administrative costs. The 2001 increase in expenses from 2000 resulted primarily from increases in administrative salaries.

As a result, net income of the Partnership was $746,815, $870,350, and $895,989 for the years ended December 31, 2002, 2001, and 2000, respectively.

(c)    Liquidity and Capital Resources

Cash Flows From Operating Activities

Net cash flows used in operating activities was $105,148, $128,985, and $72,925 for the years ended December 31, 2002, 2001, and 2000, respectively. The 2002 decrease from 2001 is primarily due to the decrease in the payments to the affiliates, as $50,000 was repaid to Fund IX-X-XI-REIT Associates in 2001, as compared to $15,000 that was repaid to Fund IX-X-XI-REIT Associates in 2002. 2001 increases, as compared to 2000, resulted primarily from the repayment of $50,000 to Fund IX-X-XI-REIT Associates in 2001, whereas no such repayments were made in 2000.

Cash Flows From Investing Activities

Net cash flows provided by investing activities was $1,473,190, $1,376,673, and $1,333,337 for the years ended December 31, 2002, 2001, and 2000, respectively, which is reflective of the income generated to the Partnership from its investments in joint ventures during the corresponding accounting periods; the Partnership receives distributions from joint ventures based on the cash generated during each immediately preceding quarterly accounting period.

Cash Flows From Financing Activities

Net cash flows used in financing activities was $1,294,485, $1,307,606, and $1,205,303 for 2002, 2001, and 2000, respectively. The changes in net cash flows used in financing activities resulted from the changes in cash generated by joint ventures during the corresponding periods.

Distributions

The Partnership made distributions to the limited partners holding Class A units of $0.94 per unit, $0.98 per unit and $0.94 per unit with respect to the year 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.

Since the cash flows generated from equity investments in joint ventures are anticipated to decrease in 2003 as a result of the sole tenant vacating the premises of the EYBL CarTex Building and ceasing to make rental payments, distributions to limited partners holding Class A units are also anticipated to decrease in 2003 until such time as this building is re-leased to one or more suitable replacement tenants. As a result of this vacancy, cash flows decreased by approximately $100,000 during 2002, of which approximately $26,000 is attributable to the Partnership. Further, in the event that we are unable to lease this space, we estimate that this property could generate negative cash flows of approximately $(580,000), of which approximately $(150,000) would be attributable to the partnership, for 2003. There can be no assurance when any such suitable replacement tenant or tenants will be located or at what rental rate this building will be re-leased.

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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. Other than those mentioned above, the General Partners are unaware of any specific need requiring capital resources.

(d)    Related-Party Transactions

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

The Partnership incurred management and leasing fees and lease acquisition costs, at the joint venture level, of $74,031, $74,478, and $75,700, for the years ended December 31, 2002, 2001, and 2000, respectively.

Administration Reimbursements

Wells Capital, Inc. performs certain administrative services for the Partnership, such as accounting and other partnership administration, and incurs the related expenses. Such expenses are allocated among the various Wells Real Estate Funds based on time spent on each fund by individual administrative personnel. During 2002, 2001 and 2000, the partnership reimbursed $43,979, $40,267 and $29,267, 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 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.

(e)    Inflation

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.

(f)    Application of Critical Accounting Policies

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

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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.

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.

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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

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

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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 February 28, 2002.

No arrangements exist which would, upon execution, 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 as follows:

Interest in Partnership Cash Flow and Net Sale Proceeds

The General Partners will receive a subordinated participation in net cash flow from operations equal to 10% of net cash flow after the Limited Partners holding Class A Units have received preferential distributions equal to 10% of their adjusted capital accounts in each fiscal year. The General Partners will also receive a subordinated participation in net sales proceeds and net financing proceeds equal to 20% of residual proceeds available for distribution after Limited Partners holding Class A Units have received a return of their adjusted capital contributions plus a 10% cumulative return on their adjusted capital contributions and Limited Partners holding Class B Units have received a return of their adjusted capital contributions plus a 15% cumulative return on their adjusted capital contributions; provided, however, that in no event shall the General Partners receive in the aggregate in excess of 15% of net sales proceeds and net financing proceeds remaining after payments to Limited Partners from such proceeds of amounts equal to the sum of their adjusted capital contributions plus a 6% cumulative return on their adjusted capital contributions. The General Partners did not receive any distributions from net cash flow from operations or net sales proceeds for the year ended December 31, 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) fees that would be paid to a comparable outside firm or (b) 4.5% of the gross revenues generally paid over the life of the lease plus a separate competitive fee for the one-time initial lease-up of newly constructed properties generally paid in conjunction with the receipt of the first month’s rent. In the case of commercial properties which are leased on a long-term (ten or more years) net lease basis, the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term.

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Wells Management Company, Inc. has received $74,031 in property management and leasing fee compensation for services rendered during the year ended December 31, 2002.

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 Reimbursement

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 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 XI, 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

F-1

REPORT OF INDEPENDENT AUDITORS

The Partners

Wells Real Estate Fund XI, L.P.

We have audited the accompanying balance sheet of Wells Real Estate Fund XI, 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 XI, 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 XI, 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 XI, 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 recorded 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 and Class B weighted average limited partner units outstanding for the years ended December 31, 2001 and 2000 on the statements of income. Our procedures with respect to this disclosure included recalculating the number of Class A and Class B 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 and net loss amount allocated to Class B 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 and net loss per weighted average Class B limited partner unit, previously reported on the statements of income in 2001 and 2000, respectively. In our opinion, the disclosure of the number of Class A and Class B weighted average limited partner units outstanding on the statements of income for the years ended December 31, 2001 and 2000 is 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 XI, 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 XI, 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 XI, L.P.:

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

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

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

ARTHUR ANDERSEN LLP

Atlanta, Georgia

January 25, 2002

F-3

WELLS REAL ESTATE FUND XI, 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 XI, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF INCOME

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

See accompanying notes.

F-5

WELLS REAL ESTATE FUND XI, L.P.

(A Georgia Public Limited Partnership)

STATEMENTS OF PARTNERS’ CAPITAL

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