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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2004 or

For the transition period from                                  to                                 

Commission file number 000-50647

WELLS REAL ESTATE FUND XIV, L.P.

(Exact name of registrant as specified in its charter)

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

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

Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund XIV, L.P. (the “Partnership”) other than historical facts may be considered 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. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Specifically, among others, we consider statements concerning projections of future operating results and cash flows, our ability to meet future obligations, the amount and timing of future distributions to limited partners, the quality, nature and cost of future acquisitions, and the amount and timing of the sale of limited partnership units to be forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to known and unknown risks, uncertainties and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations; provide distributions to limited partners; and maintain the value of our real estate properties, may be significantly hindered. Some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in certain forward-looking statements follow:

General economic risks

Real estate risks inherent in properties owned through joint ventures

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Other operational risks

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WELLS REAL ESTATE FUND XIV, L.P.

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WELLS REAL ESTATE FUND XIV, L.P.

BALANCE SHEETS

ASSETS

See accompanying notes.

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WELLS REAL ESTATE FUND XIV, L.P.

STATEMENTS OF OPERATIONS

(unaudited)

See accompanying notes.

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WELLS REAL ESTATE FUND XIV, L.P.

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2003

AND THE SIX MONTHS ENDED JUNE 30, 2004 (unaudited)

See accompanying notes.

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WELLS REAL ESTATE FUND XIV, L.P.

STATEMENT OF CASH FLOWS

(unaudited)

See accompanying notes

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WELLS REAL ESTATE FUND XIV, L.P.

CONDENSED NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2004 (unaudited)

Wells Real Estate Fund XIV, L.P. (the “Partnership”) is a public limited partnership organized on October 25, 2002 under the laws of the State of Georgia. The general partners are Leo F. Wells, III and Wells Capital (collectively, the “General Partners”). Upon subscription for units, each limited partner must elect whether to have his units treated as Cash Preferred Units or Tax Preferred Units. Thereafter, limited partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred Units one time during each quarterly 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; (c) remove a general partner; (d) elect a new general partner; (e) dissolve the Partnership; and (f) approve the sale of assets, subject to certain limitations. Each limited partnership unit generally has equal voting rights, regardless of class.

On May 14, 2003, the Partnership commenced a public offering of up to $45,000,000 of limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on July 24, 2003, upon receiving and accepting subscriptions for 125,000 units. As of June 30, 2004, the Partnership has sold 1,737,714 Cash Preferred Units and 672,772 Tax Preferred Units, net of conversions, for total limited partner capital contributions of $24,104,860.

The Partnership owns interests in all of its real estate assets through a joint venture with another entity affiliated with the General Partners. During the periods presented, the Partnership owned interests in the following three properties through the affiliated joint venture listed below (the “Joint Venture”):

Each of the aforementioned properties was acquired on an all-cash basis. The investment objectives of Wells Real Estate Fund XIII, L.P. are substantially identical to those of the Partnership. Approval of Wells Real Estate Fund III, L.P. is required for any major decision or any action that would materially affect the Joint Venture, or its real property investments. For further information regarding the Joint Venture and foregoing properties, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2003.

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On March 26, 2004, Fund XIII-XIV Associates acquired 7500 Setzler Parkway from an unrelated third party for approximately $7,040,000, including closing costs. The Partnership contributed approximately $4,204,000 and Wells Real Estate Fund XIII, L.P. contributed approximately $2,836,000 to Fund XIII-XIV Associates for their respective portions of the acquisition costs for 7500 Setzler Parkway. Subsequent to the acquisition of 7500 Setzler Parkway, the Partnership and Wells Real Estate Fund XIII, L.P. held equity interests in Fund XIII-XIV Associates of approximately 52.7% and 47.3%, respectively.

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are necessary to fairly present the information for these periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnership’s Form 10-K for the year ended December 31, 2003.

For the purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, and cost recovery and the gain on the sale of assets. Net income, as defined, of the Partnership is generally allocated each year in the same proportion that net cash from operations is distributed to the limited partners holding Cash Preferred Units and the General Partners. To the extent that the Partnership’s net income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners and 1% to the General Partners.

Net loss, depreciation, and amortization deductions for each fiscal year will be allocated as follows: (a) 99% to the limited partners holding Tax Preferred Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then to any partner having a positive balance in his capital account in an amount not to exceed such positive balance; and (c) thereafter to the General Partners.

Gains on the sale or exchange of the Partnership’s properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the deductions for depreciation and amortization previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale of such property.

Cash from operations, if available, is generally distributed quarterly to the partners as follows:

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No distributions of net cash flow from operations will be made to the limited partners holding Tax Preferred Units.

Upon the sale of properties, the net sale proceeds will be distributed in the following order:

During the periods presented, the Partnership owned interests in three properties through its ownership in the Joint Venture. The Partnership does not have control over the operations of the Joint Venture; however, it does exercise significant influence. Approval of the Partnership as well as Wells Real Estate Fund XIII, L.P. is required for any major decision or any action that would materially affect the Joint Venture, or its real property investments. Accordingly, the Partnership’s investment in the Joint Venture is recorded using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net

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income (loss) attributable to the Partnership. For further information regarding investment in the Joint Venture, refer to the financial statements and footnotes included in the Partnership’ Form 10-K for the year ended December 31, 2003.

The following information summarizes the operations of the Joint Venture for the three months and six months ended June 30, 2004:

In connection with its public offering of units, the Partnership pays sales commissions of up to 7% of aggregate gross offering proceeds to Wells Investment Securities, Inc., (“WIS”) an affiliated and registered securities broker-dealer, the majority of which are re-allowed to other broker-dealers participating in the offering of the Partnership’s limited partnership units (“Participating Dealers”). In addition, WIS earns a dealer-manager fee of 2.5% of the gross offering proceeds raised, of which up to 1.5% of aggregate gross offering proceeds may be re-allowed to Participating Dealers as marketing fees or to reimburse Participating Dealers for the costs and expenses for representatives of such Participating Dealers to attend educational conferences and seminars. The Partnership incurred sales commissions of $277,325 and $369,852 for the three months and six months ended June 30, 2004, respectively, of which $277,325 and $369,582, respectively, were re-allowed to Participating Dealers. The Partnership incurred dealer-manager fees of $180,093 and $219,950 for the three and six months ended June 30, 2004, respectively, of which $44,632 and $64,599, respectively, were re-allowed to Participating Dealers. Sales commissions and dealer-manager fees are charged to partners’ capital as incurred.

(b) Organizational and Offering Expense Reimbursements

The Partnership reimburses Wells Capital for organizational and offering expenses equal to the lesser of actual costs incurred or 3% of the aggregate gross offering proceeds, subject to the overall limitations of the Partnership Agreement. Offering expenses include such costs as legal and accounting fees, printing costs, and other offering expenses, however, specially exclude sales and underwriting commissions. From inception through June 30, 2004, the Partnership has incurred aggregate organization and offering expenses of $723,146, which amounted to 3% of the aggregate gross offering proceeds received to date. Organizational expense reimbursements are charged to expense and offering expense reimbursements are charged to partner’ capital as incurred.

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The Partnership pays Wells Capital for acquisition and advisory services and acquisition expense reimbursements in an amount equal to 3.5% of the aggregate gross offering proceeds, subject to certain overall limitations contained in the partnership agreement. From inception through June 30, 2004, the Partnership had incurred aggregate acquisition and advisory fees and expenses of $843,670, which amounted to 3.5% of the aggregate gross offering proceeds received to date. Acquisition and advisory fees and acquisition expense reimbursements are recorded as deferred project costs in the accompanying balance sheets as incurred. Upon the acquisition of properties directly or through the Joint Venture, such deferred project costs are applied to building or investment in joint venture, respectively.

The Partnership has entered into a property management agreement with Wells Management Company, Inc. (“Wells Management”), an affiliate of the General Partners. Accordingly, Wells Management receives compensation for the management and leasing of the Partnership’s properties owned directly or 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 collected monthly; 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-lease 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’s share of management and leasing fees and lease acquisition costs incurred through the Joint Venture was $15,062 for the three months ended June 30, 2004 and $29,910 for the six months ended June 30, 2004.

Wells Capital, one of the General Partners, and its affiliates perform certain administrative services for the Partnership, such as accounting, property management and other partnership administration, and incur the related expenses. Such expenses are allocated among various other entities affiliated with the General Partners (the “Wells Real Estate Funds”) based on time spent on each fund by individual administrative personnel. In the opinion of management, this allocation is a reasonable estimation of such expenses. The Partnership reimbursed Wells Capital $16,984 for the three months ended June 30, 2004 and $23,337 for the six months ended June 30, 2004.

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 in connection with property acquisitions or for tenants in similar geographic markets.

Sale of Limited Partnership Units

From July 1, 2004 through July 31, 2004, the Partnership raised approximately $1,479,878 through the issuance of approximately 96,068 Cash Preferred Units and 51,920 Tax Preferred Units. As of July 31, 2004 approximately 1,941,526 limited partnership units remain available for sale under the Partnership’s offering.

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By Order dated June 3, 2004, the Superior Court of Gwinnett County, Georgia, dismissed, without prejudice, the putative class action complaint filed on or about March 12, 2004 against Leo F. Wells, III, Wells Capital, and certain affiliates of Wells Capital relating to Wells Real Estate Fund I, an affiliate of the General Partners (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2).

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

Management believes that the Partnership typically operates through the course of the following five key life cycle phases. The time spent in each phase is dependent upon various economic, industry, market, and other internal/external factors. Some overlap naturally exists in the transition from one phase to the next.

The period during which the Partnership is raising capital through the sale and issuance of limited partner units to the public

The period during which the Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets

The period during which real estate assets are owned and operated by the Partnership during the initial lease terms of the tenants

The period during which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the real estate assets, evaluate various options for disposition, and market the real estate assets for sale.

The period during which the Partnership sells its real estate investments and distributes net sales proceeds to the partners

Portfolio Overview

The Partnership is in the fundraising and investing phase of its life cycle. The most recent acquisition was the 7500 Setzler Parkway in Brooklyn Park, Minnesota, which was acquired in March 2004. The Partnership now owns interests in three properties, all of which are 100% leased.

The acquisition of 7500 Setzler Parkway was the highlight for the Partnership in the first quarter 2004. This high-quality industrial asset enjoys a prime location in the greater Minneapolis market and we believe represents an excellent addition to the portfolio. Our focus in the near term is to continue to identify high-quality core assets for acquisition that will provide diversification to the existing assets.

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The second quarter 2004 operating distributions to the Cash-Preferred unit holders were 6.75%, consistent with the distribution rate for the prior quarter. The General Partners anticipate that operating distributions may decline in the near term, depending on the timing of new acquisitions. No operating distributions have been made to the investors holding Tax-Preferred units or to the General Partners in line with the partnership agreement.

Property Summary

Later as we move into the holding phase, we will focus our resources on managing the Partnership’s existing portfolio, providing quality service to our tenants in order to increase the likelihood of lease renewals in the future, and locating suitable replacement tenants for vacant space as necessary.

Industry Factors

Our results continue to be impacted by a number of factors influencing the real estate industry.

General Economic and Real Estate Market Commentary

The U.S. economy appears to be on the road to recovery. The economy has shown signs of growth recently, as companies have recommenced making investments in new employees. Job growth is the most significant demand driver for office markets. Market fundamentals are improving, and new office jobs are slowly being created. In general, the real estate office market lags behind the overall economic recovery and, therefore, recovery is not expected until late 2004 or 2005 at the earliest, and then will vary by market.

Overall, real estate market fundamentals are weak; however, capital continues to flow into this asset class. The increase in capital drives the prices of many properties upward and investor returns downward. There is a significant pricing differential in the underwriting parameters of well-leased assets with credit tenants and those with either existing vacancies or substantial near-term tenant rollover. Properties with long-term leases to strong credit tenants have seen an increase in value.

The office market has significant excess space. Vacancy levels are believed to have peaked, and are expected to trend downward moderately through the end of 2004. There is some encouraging news in that construction continues to taper off and has come to a complete halt in many markets. As a result of the slowdown in new construction and the modest decline in sublease space, net absorption has turned positive. Many industry professionals believe office market fundamentals have bottomed-out; however, a recovery cannot be expected until job growth and corresponding demand for office space continue to increase.

Because the Partnership did not commence active operations until July 24, 2003, there are no prior period operations to compare to the Partnership’s 2004 operations.

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Equity in Income of Joint Venture

The Partnership commenced active operations on July 24, 2003 upon receiving and accepting subscriptions for 125,000 units. Equity in income of joint venture was $86,602 and $158,236 for the three and six months ended June 30, 2004, respectively, and represents earnings generated by Siemens—Orlando Building (acquired in October 2003), the Randstad—Atlanta Building (acquired in December 2003), and 7500 Setzler Parkway (acquired in March 2004) through the Partnership’s interest in Fund XIII-XIV Associates (formed in August 2003).

Expenses of the Partnership

Total expenses of the Partnership were $73,348 and $124,491 for the three months and six months ended June 30, 2004, respectively, and consist primarily of legal and accounting fees and administrative costs.

Interest Income

Interest income was $4,950 and $13,891 for the three and six months ended June 30, 2004, respectively, and is comprised of interest earned on investor proceeds raised through the sale of limited partnership units and held by the Partnership pending investment in real properties.

Our operating strategy entails funding expenses related to the recurring operations of the properties and the portfolio with operating cash flows, including distributions received from the Joint Venture, and assessing the amount of remaining cash flows that will be required to fund known re-leasing costs and other capital improvements. Any residual operating cash flows are considered available for distribution to the limited partners and are generally paid quarterly. As a result, the ongoing monitoring of the Partnership’s cash position is critical to ensuring that adequate liquidity and capital resources are available. Economic downturns in one or more of our core markets could adversely impact the ability of our tenants to honor lease payments and our ability to re-lease space on favorable terms as leases expire or space otherwise becomes vacant. In the event of either situation, cash flows and, consequently, our ability to provide funding for capital needs would be adversely affected.

Short-Term Liquidity

During the six months ended June 30, 2004, we generated net operating cash flows, including distributions received from the Joint Venture, of approximately $195,000. Distributions from the Joint Venture are generally representative of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures. Such operating cash flows have been used to pay operating distributions to limited partners related to the first and second quarters of 2004. During the six months ended June 30, 2004, we invested approximately $4,200,000 in Fund XIII-XIV Associates for the purchase of 7500 Setzler Parkway and raised approximately $8,552,000 in gross offering proceeds through the sale of limited partnership units.

At this time, we expect to continue to generate cash flows from operations, including distributions from the Joint Venture, sufficient to cover our estimated future expenses. Future operating distributions paid to limited partners will be largely dependent upon the amount of cash generated from the Joint Venture, timing of new acquisitions, our expectations of future cash flows and determination of near-term cash needs for tenant re-leasing costs and other capital improvements.

We believe that the cash on hand and distributions due from the Joint Venture will be sufficient to cover the Partnership’s working capital needs, including liabilities of approximately $236,000 as of June 30, 2004; however, the General Partners anticipate that operating distributions may decline in the near term, depending on the timing of new acquisitions.

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Long-Term Liquidity

We expect that our future sources of capital will be primarily derived from the sale of additional limited partnership units and operating cash flows generated from the Joint Venture. Our future long-term liquidity requirements will include, but not be limited to, tenant improvements, renovations, expansions and other significant capital improvements necessary for properties owned through the Joint Venture. We expect to continue to use substantially all future net cash flows from operations, including distributions received from Joint Venture, less, expenses related to the recurring operations of the properties and the portfolio and reserves for known capital expenditures, to pay operating distributions to the limited partners.

We expect to continue to raise funds through the sale of limited partnership units until such time as total gross proceeds of $45,000,000 have been raised or two years has expired from the commencement of the Partnership’s offering (May 14, 2005). As of June 30, 2004, the Partnership had raised gross offering proceeds of approximately $24.1 million, of which approximately $6.9 million is on hand and available for investment. Management will actively seeking investment opportunities and expects to invest these funds in income-producing properties through its interest in the Joint Venture, or other affiliated joint ventures in 2004 and 2005. No property acquisitions were under contract as of the date of this filing.

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 the partners’ original capital contributions. Our investment strategy generally involves acquiring properties that are pre-leased to creditworthy tenants on an all-cash basis through joint ventures with affiliated partnerships.

We incur capital expenditures primarily in the form of building improvements for the purpose of maintaining the quality of our properties, and tenant improvements for the purpose of readying our properties for re-leasing. As leases expire, we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those funded in connection with new leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates.

As of June 30, 2004, the Partnership held investor proceeds of approximately $6.9 million, which are available for investment in properties. Operating cash flows, if available, are generally distributed from the Joint Venture to the Partnership during the second month following each calendar quarter-end. However, the Joint Venture will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management policy typically includes first utilizing current period operating cash flow until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event that current and prior period accumulated operating cash flows are insufficient to fund such costs, net property sale proceeds reserves, if available, would then be utilized.

The Partnership has entered into agreements with Wells Capital and its affiliates in accordance with the terms of the prospectus, whereby the Partnership pays certain fees and reimbursements to Wells Capital and its affiliates (e.g., dealer-manager fees, acquisition and advisory fees, reimbursements for acquisition expenses, reimbursements for organizational and offering expenses, etc.) and property management and leasing fees to Wells Management.

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 reset frequently enough to cover inflation.

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As the Partnership acquires real estate assets and commences operations, it will apply accounting policies in the preparation of its financial statements. The Partnership’s accounting policies will be 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 are different, it is possible that different accounting policies would be 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 believes will be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Investment in Real Estate Assets

Management will be required to make subjective assessments as to the useful lives of its depreciable assets. Management will consider the period of future benefit of assets to determine the appropriate useful lives. These assessments have a direct impact on net income. Management expects that the estimated useful lives of its assets by class will be 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 the Joint Venture, 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 as of June 30, 2004.

Projections of expected future cash flows require 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 Venture and net income of the Partnership.

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Allocation of Purchase Price of Acquired Assets

On January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FAS 141”), and Statement of Financial Accounting Standards No. 142, “Goodwill and Intangibles” (“FAS 142”). These standards govern business combinations, asset acquisitions and the accounting for acquired intangibles.

Upon the acquisition of real properties, it is the Partnership’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, and the value of in-place leases, based in each case on their fair values.

The fair values of the tangible assets of an acquired property (which includes land and building) are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on management’s determination of the relative fair value of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market demand. Management estimates costs to execute similar leases including leasing commissions and other related costs.

The fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases. The above-market and below-market lease values are capitalized as lease intangible assets or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. These direct costs are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These lease intangibles are amortized to expense over the remaining terms of the respective leases.

By Order dated June 3, 2004, the Superior Court of Gwinnett County, Georgia, dismissed, without prejudice, the putative class action complaint filed on or about March 12, 2004 against Leo F. Wells, III, Wells Capital, and certain affiliates of Wells Capital relating to Wells Real Estate Fund I, an affiliate of the General Partners (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2).

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Sale of Limited Partnership Units

From July 1, 2004 through July 31, 2004, the Partnership raised approximately $1,479,878 through the issuance of approximately 96,068 Cash Preferred Units and 51,920 Tax Preferred Units. As of July 31, 2004 approximately 1,941,526 limited partnership units remain available for sale under the Partnership’s offering.

Since the Partnership does not borrow any money, make any foreign investments or invest in any market risk- sensitive instruments, it is not subject to risks relating to interest rates, foreign current exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.

The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, 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 as of the end of the period covered by this report pursuant to 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 control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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PART II.    OTHER INFORMATION

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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EXHIBIT INDEX

TO

SECOND QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND XIV, L.P.