UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

__________________________________

(Mark One)



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

for the quarterly period ended ~~September 30, 2011~~March 31, 2012



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

for the transition period from ______ to ______

Commission file number 000-51262

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

(Exact name of registrant as specified in its charter)



Maryland		20-0068852
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

6200 The Corners Parkway

Norcross, Georgia 30092

(Address of principal executive offices)

(Zip Code)

(770) 449-7800

(Registrant’s telephone number, including area code)

N/A

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

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of ~~“large~~"large accelerated ~~filer”~~filer", ~~“accelerated filer”~~"accelerated filer", and ~~“smaller~~"smaller reporting ~~company”~~company" in Rule 12b-2 of the Exchange Act (check one).



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Number of shares outstanding of the ~~registrant’s~~registrant's

only class of common stock, as of ~~October 31, 2011~~April 30, 2012: ~~543,312,563~~545,581,297 shares

Table of Contents

FORM 10-Q

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	Page 4

	Consolidated Balance Sheets as of ~~September 30, 2011~~March 31, 2012 (unaudited) and December 31, ~~2010~~2011	Page 5

	Consolidated Statements of Operations for the Three Months ~~and Nine Months~~ Ended ~~September 30, 2011~~March 31, 2012 (unaudited) and ~~2010~~2011 (unaudited)	Page 6

	Consolidated Statements of ~~Equity~~Comprehensive Income for the ~~Nine~~Three Months Ended ~~September 30, 2011~~March 31, 2012 (unaudited) and ~~2010~~2011 (unaudited)	Page 7

	Consolidated Statements of ~~Cash Flows~~Equity for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2012 (unaudited) and 2011 ~~(unaudited) and 2010~~ (unaudited)	Page 98

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 (unaudited) and 2011 (unaudited)	Page 10

	Condensed Notes to Consolidated Financial Statements (unaudited)	Page 1011

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	Page 3230

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 4740

Item 4.	Controls and Procedures	Page 4941

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	Page 4941

Item 1A.	Risk Factors	Page 4941

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 5042

Item 3.	Defaults Upon Senior Securities	Page 5042

Item 4.	~~RESERVED~~Mine Safety Disclosures	Page 5042

Item 5.	Other Information	Page 5042

Item 6.	Exhibits	Page 5142

Page 2

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Investment Trust II, Inc. (“("Wells REIT II,~~” “we,” “our”~~" "we," "our" or ~~“us”~~"us") 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. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including 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,”~~"may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission ~~(“SEC”~~("SEC"). We make no representations or warranties (express or implied) about the accuracy of any such 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 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 conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in Wells REIT ~~II’s~~II's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2010~~2011 for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. The risk factors described in our Annual Report are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also harm our business.

Page 3

Table of Contents


PART I.	FINANCIAL INFORMATION


ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive income, equity and cash flows reflects all normal and recurring adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying consolidated financial statements should be read in conjunction with the condensed notes to Wells REIT ~~II’s~~II's financial statements and ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q, and with Wells REIT II’s Annual Report on Form 10-K and Form 10-K/A filed for the year ended December 31, ~~2010~~2011. Wells REIT II’s results of operations for the three months ~~and nine months~~ ended ~~September 30, 2011~~March 31, 2012 are not necessarily indicative of the operating results expected for the full year.

Page 4

Table of Contents

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per-share amounts)


	(Unaudited)						(Unaudited)
	September 30, 2011			December 31, 2010			March 31, 2012			December 31, 2011
Assets:
Real estate assets, at cost:
Land	$	715,872		$	571,696		$	704,336		$	704,336
Buildings and improvements, less accumulated depreciation of $491,264 and $414,040 as of September 30, 2011 and December 31, 2010, respectively	3,518,664			3,225,708
Intangible lease assets, less accumulated amortization of $367,650 and $355,823 as of September 30, 2011 and December 31, 2010, respectively	410,878			428,140
Buildings and improvements, less accumulated depreciation of $545,086 and $514,961 as of March 31, 2012 and December 31, 2011, respectively							3,448,122			3,472,971
Intangible lease assets, less accumulated amortization of $337,197 and $343,463 as of March 31, 2012 and December 31, 2011, respectively							374,802			391,989
Construction in progress	6,649			4,495			8,941			8,414
Real estate assets held for sale, less accumulated depreciation and amortization of $9,551 as of December 31, 2011							—			37,508
Total real estate assets	4,652,063			4,230,039			4,536,201			4,615,218
Cash and cash equivalents	31,809			38,882			49,156			39,468
Tenant receivables, net of allowance for doubtful accounts of $3,609 and $3,559 as of September 30, 2011 and December 31, 2010, respectively	123,169			108,057
Tenant receivables, net of allowance for doubtful accounts of $3,429 and $3,728 as of March 31, 2012 and December 31, 2011, respectively							126,518			130,549
Prepaid expenses and other assets	30,924			22,700			30,413			32,831
Deferred financing costs, less accumulated amortization of $6,128 and $3,975 as of September 30, 2011 and December 31, 2010, respectively	12,296			9,827
Intangible lease origination costs, less accumulated amortization of $236,457 and $219,447 as of September 30, 2011 and December 31, 2010, respectively	243,471			269,914
Deferred lease costs, less accumulated amortization of $20,167 and $15,734 as of September 30, 2011 and December 31, 2010, respectively	65,645			46,266
Deferred financing costs, less accumulated amortization of $6,215 and $5,590 as of March 31, 2012 and December 31, 2011, respectively							11,391			9,442
Intangible lease origination costs, less accumulated amortization of $235,671 and $236,679 as of March 31, 2012 and December 31, 2011, respectively							220,006			231,338
Deferred lease costs, less accumulated amortization of $23,818 and $22,390 as of March 31, 2012 and December 31, 2011, respectively							76,642			68,289
Investment in development authority bonds	646,000			646,000			646,000			646,000
Other assets held for sale, less accumulated amortization of $2,260 as of December 31, 2011							—			3,432
Total assets	$	5,805,377		$	5,371,685		$	5,696,327		$	5,776,567
Liabilities:
Line of credit and notes payable	$	1,194,996		$	886,939		$	1,177,754		$	1,221,060
Bonds payable, net of discount of $1,637 as of September 30, 2011	248,363			—
Bonds payable, net of discount of $1,511 and $1,574 as of March 31, 2012 and December 31, 2011 respectively							248,489			248,426
Accounts payable, accrued expenses, and accrued capital expenditures	133,468			102,697			71,091			72,349
Due to affiliates	1,625			4,479			1,618			3,329
Deferred income	35,791			26,403			36,153			35,079
Intangible lease liabilities, less accumulated amortization of $72,173 and $62,165 as of September 30, 2011 and December 31, 2010, respectively	94,028			87,934
Intangible lease liabilities, less accumulated amortization of $77,260 and $74,326 as of March 31, 2012 and December 31, 2011, respectively							85,286			89,581
Obligations under capital leases	646,000			646,000			646,000			646,000
Liabilities held for sale							—			624
Total liabilities	2,354,271			1,754,452			2,266,391			2,316,448
Commitments and Contingencies (Note 6)	—			—			—			—
Redeemable Common Stock	137,406			161,189			177,450			113,147
Equity:
Common stock, $0.01 par value; 900,000,000 shares authorized; 544,642,842 and 540,906,780 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively	5,446			5,409
Common stock, $0.01 par value; 900,000,000 shares authorized; 546,731,156 and 546,197,750 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively							5,467			5,462
Additional paid-in capital	4,872,810			4,835,088			4,886,844			4,880,806
Cumulative distributions in excess of earnings	(1,412,311		)	(1,212,472		)	(1,463,373		)	(1,426,550		)
Redeemable common stock	(137,406		)	(161,189		)	(177,450		)	(113,147		)
Other comprehensive loss	(15,164		)	(11,139		)
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity	3,313,375			3,455,697
Other comprehensive income							692			84
Total Wells Real Estate Investment Trust II, Inc. stockholders' equity							3,252,180			3,346,655
Nonredeemable noncontrolling interests	325			347			306			317
Total equity	3,313,700			3,456,044			3,252,486			3,346,972
Total liabilities, redeemable common stock, and equity	$	5,805,377		$	5,371,685		$	5,696,327		$	5,776,567

See accompanying notes.

Page 5

Table of Contents

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)


	(Unaudited)						(Unaudited)						(Unaudited)
	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2011			2010			2011			2010			2012			2011
Revenues:
Rental income	$	120,920		$	112,515		$	357,055		$	327,531		$	120,486		$	113,619
Tenant reimbursements	27,468			26,079			78,490			71,696			25,791			25,907
Hotel income	6,271			5,501			15,638			14,900			4,375			4,150
Other property income	3,744			485			6,027			1,253			1,699			283
	158,403			144,580			457,210			415,380			152,351			143,959
Expenses:
Property operating costs	45,687			42,568			133,058			122,842			44,534			41,688
Hotel operating costs	5,001			4,499			13,282			12,950			4,097			4,012
Asset and property management fees:
Related-party	9,470			8,532			27,526			24,983			9,351			8,760
Other	696			1,011			2,334			2,946			831			904
Depreciation	30,317			26,145			88,345			73,797			30,125			27,442
Amortization	29,450			28,452			91,330			85,823			27,050			30,166
General and administrative	6,114			6,025			19,188			18,387			5,343			6,614
Acquisition fees and expenses	29			2,081			11,249			9,749			—			10,026
	126,764			119,313			386,312			351,477			121,331			129,612
Real estate operating income	31,639			25,267			70,898			63,903			31,020			14,347
Other income (expense):
Interest expense	(28,660		)	(21,632		)	(81,490		)	(64,273		)	(26,856		)	(22,165		)
Interest and other income	10,317			11,901			32,383			32,025			10,016			12,055
Loss on interest rate swaps	(14,774		)	(9,885		)	(22,219		)	(29,068		)
(Loss) gain on interest rate swaps													(76		)	89
	(33,117		)	(19,616		)	(71,326		)	(61,316		)	(16,916		)	(10,021		)
(Loss) income before income tax (expense) benefit	(1,478		)	5,651			(428		)	2,587
Income tax (expense) benefit	(62		)	(111		)	337			105
(Loss) gain from continuing operations	(1,540		)	5,540			(91		)	2,692
Income before income tax benefit													14,104			4,326
Income tax benefit													97			231
Income from continuing operations													14,201			4,557
Discontinued operations:
Operating loss from discontinued operations	(1,059		)	(689		)	(4,571		)	(2,179		)
Gain (loss) on disposition of discontinued operations	7,705			(130		)	7,705			(130		)
Gain (loss) from discontinued operations	6,646			(819		)	3,134			(2,309		)
Operating income (loss) from discontinued operations													49			(2,142		)
Gain on disposition of discontinued operations													16,885			—
Income (loss) from discontinued operations													16,934			(2,142		)
Net income	5,106			4,721			3,043			383			31,135			2,415
Less: net income attributable to nonredeemable noncontrolling interests	(4		)	(19		)	(11		)	(59		)	(4		)	(4		)
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	5,102		$	4,702		$	3,032		$	324		$	31,131		$	2,411
Per-share information – basic and diluted:
Income from continuing operations	$	0.00		$	0.01		$	0.00		$	0.01		$	0.03		$	0.00
Gain (loss) from discontinued operations	$	0.01		$	0.00		$	0.01		$	(0.01	)
Income (loss) from discontinued operations													$	0.03		$	0.00
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	0.01		$	0.01		$	0.01		$	0.00		$	0.06		$	0.00
Weighted-average common shares outstanding – basic and diluted	543,288			536,582			542,169			520,221			545,600			541,012

See accompanying notes.

Page 6

Table of Contents

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



	(Unaudited) Three months ended March 31,
	2012		2011
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	31,131	$	2,411
Market value adjustment to interest rate swap	608		752
Comprehensive income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	31,739		3,163
Comprehensive income attributable to noncontrolling interests	4		4
Comprehensive income	$	31,743	$	3,167

See accompanying notes.

Page 7

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WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2011~~MARCH 31, 2012 (UNAUDITED)

(in thousands, except per-share amounts)


	Stockholders’ Equity																															Stockholders’ Equity
	Common Stock					Additional Paid-In Capital				Cumulative Distributions in Excess of Earnings				Redeemable Common Stock				Other Comprehensive Loss				Total Wells Real Estate Investment Trust II, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests				Total Equity			Common Stock							Additional Paid-In Capital				Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Income		Total Wells Real Estate Investment Trust II, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total Equity
	Shares		Amount										Shares					Other Comprehensive Loss			Amount																		Additional Paid-In Capital				Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Income					Nonredeemable Noncontrolling Interests			Total Equity
Balance, December 31, 2010	540,907		$	5,409		Additional Paid-In Capital			$	Cumulative Distributions in Excess of Earnings		4,835,088		Redeemable Common Stock		$	(1,212,472	)		$	(161,189			)	Nonredeemable Noncontrolling Interests			$	Total Equity		(11,139	)		$	3,455,697			$	347			$	3,456,044
Balance, December 31, 2011																																546,198			$	5,462			$	4,880,806			$	(1,426,550	)	$	(113,147	)	$	84	$	3,346,655		$	317		$	3,346,972
Issuance of common stock	10,281		103			97,905				—				—				—				98,008			—				98,008			4,356			44				31,017				—			—			—		31,061			—			31,061
Redemptions of common stock	(6,545	)	(66		)	(60,183		)		—				—				—				(60,249		)	—				(60,249		)	(3,823	)		(39		)		(24,979		)		—			—			—		(25,018		)	—			(25,018		)
Decrease in redeemable common stock	—		—			—				—				23,783				—				23,783			—				23,783
Distributions to common stockholders ($0.375 per share)	—		—			—				(202,871		)		—				—				(202,871		)	—				(202,871		)
Increase in redeemable common stock																																—			—				—				—			(64,303		)	—		(64,303		)	—			(64,303		)
Distributions to common stockholders ($0.125 per share)																																—			—				—				(67,954		)	—			—		(67,954		)	—			(67,954		)
Distributions to noncontrolling interests	—		—							—				—				—				—			(33		)		(33		)	—			—								—			—			—		—			(15		)	(15		)
Components of comprehensive loss:
Components of comprehensive income:
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	—		—			—				3,032				—				—				3,032			—				3,032			—			—				—				31,131			—			—		31,131			—			31,131
Net income attributable to noncontrolling interests	—		—			—				—				—				—				—			11				11			—			—				—							—			—		—			4			4
Market value adjustment to interest rate swap	—		—			—				—				—				(4,025		)		(4,025		)	—				(4,025		)	—			—				—				—			—			608		608			—			608
Comprehensive (loss) income	—		—			—				—				—				—				(993		)	11				(982		)
Balance, September 30, 2011	544,643		$	5,446		$	4,872,810			$	(1,412,311	)		$	(137,406	)		$	(15,164	)		$	3,313,375		$	325			$	3,313,700
Balance, March 31, 2012																																546,731			$	5,467			$	4,886,844			$	(1,463,373	)	$	(177,450	)	$	692	$	3,252,180		$	306		$	3,252,486

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WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2010~~March 31, 2011 (UNAUDITED)

(in thousands, except per-share amounts)

Stockholders’ Equity
Common Stock
Additional
Paid-In
Capital

Cumulative
Distributions
in Excess of
Earnings

Redeemable
Common
Stock

Other
Comprehensive
Loss

Total Wells Real
Estate Investment
Trust II, Inc.
Stockholders’
Equity

Nonredeemable
Noncontrolling
Interests

Total
Equity
Shares Amount
Balance, December 31, 2009 499,895
$ 4,999
$ 4,461,980
$ (935,019 ) $ (805,844 ) $ (8,029 ) $ 2,718,087
$ 5,274
$ 2,723,361
Issuance of common stock 44,916
449
446,753
—
—
—
447,202
—
447,202
Redemptions of common stock (6,145 ) (61 ) (55,094 ) —
—
—
(55,155 ) —
(55,155 )
Decrease in redeemable common stock —
—
—
—
627,038
—
627,038
—
627,038
Distributions to common stockholders
($0.43 per share)
—
—
—
(220,119 ) —
—
(220,119 ) —
(220,119 )
Distributions to noncontrolling interests —
—
—
—
—
—
—
(161 ) (161 )
Acquisition of noncontrolling interest in consolidated joint venture —
—
(1,989 ) —
—
—
(1,989 ) (3,589 ) (5,578 )
Commissions and discounts on stock sales and
related dealer-manager fees
—
—
(34,292 ) —
—
—
(34,292 ) —
(34,292 )
Other offering costs —
—
(4,447 ) —
—
—
(4,447 ) —
(4,447 )
Components of comprehensive income:
Net income attributable to common
stockholders of Wells Real Estate Investment Trust II, Inc.
—
—
—
324
—
—
324
—
324
Net income attributable to noncontrolling interests —
—
—
—
—
—
—
59
59
Market value adjustment to interest rate swap —
—
—
—

(6,709 ) (6,709 ) —
(6,709 )
Comprehensive (loss) income —
—
—
—
—
—
(6,385 ) 59
(6,326 )
Balance, September 30, 2010 538,666
$ 5,387
$ 4,812,911
$ (1,154,814 ) $ (178,806 ) $ (14,738 ) $ 3,469,940
$ 1,583
$ 3,471,523



	Stockholders’ Equity
	Common Stock					Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Loss			Total Wells Real Estate Investment Trust II, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total Equity
	Shares		Amount			Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Loss						Nonredeemable Noncontrolling Interests			Total Equity
Balance, December 31, 2010	540,907		$	5,409		$	4,835,088		$	(1,212,472	)	$	(161,189	)	$	(11,139	)	$	3,455,697		$	347		$	3,456,044
Issuance of common stock	3,392		34			32,360			—			—			—			32,394			—			32,394
Redemptions of common stock	(1,901	)	(19		)	(17,086		)	—			—			—			(17,105		)	—			(17,105		)
Increase in redeemable common stock	—		—			—			—			(84,952		)	—			(84,952		)	—			(84,952		)
Distributions to common stockholders ($0.125 per share)	—		—			—			(67,485		)	—			—			(67,485		)	—			(67,485		)
Distributions to noncontrolling interests	—		—			—			—			—			—			—			(13		)	(13		)
Components of comprehensive income:
Net income attributable to common stockholders of Wells Real Estate Investment Trust II, Inc.	—		—			—			2,411			—			—			2,411			—			2,411
Net income attributable to noncontrolling interests	—		—			—			—			—			—			—			4			4
Market value adjustment to interest rate swap	—		—			—			—						752			752			—			752
Balance, March 31, 2011	542,398		$	5,424		$	4,850,362		$	(1,277,546	)	$	(246,141	)	$	(10,387	)	$	3,321,712		$	338		$	3,322,050

See accompanying notes.

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WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	(unaudited)						(unaudited)
	Nine months ended September 30,						Three months ended March 31,
	2011			2010			2012			2011
Cash Flows from Operating Activities:
Net income	$	3,043		$	383		$	31,135		$	2,415
Adjustments to reconcile net income to net cash provided by operating activities:
Straight-line rental income	(13,046		)	(4,261		)	(809		)	(1,092		)
Depreciation	89,538			75,350			30,125			28,118
Amortization	93,847			91,762			26,792			32,183
Loss on interest rate swaps	14,644			21,945
Loss on sale of discontinued operations	—			130
Impairment loss on discontinued operations	5,817			—
Gain on early extinguishment of debt on discontinued operations	(13,522		)	—
Remeasurement gain on foreign currency	—			(167		)
Gain on interest rate swaps							(231		)	(2,554		)
Gain on sale of discontinued operations							(16,885		)	—
Noncash interest expense	19,619			14,009			909			5,356
Changes in assets and liabilities, net of acquisitions:
Increase in tenant receivables, net	(1,702		)	(1,296		)
Increase in prepaid expenses and other assets	(3,621		)	(5,962		)
Increase in accounts payable and accrued expenses	7,261			187
Decrease in tenant receivables, net							4,061			146
Decrease (increase) in prepaid expenses and other assets							2,271			(1,613		)
Decrease in accounts payable and accrued expenses							(2,689		)	(2,086		)
Decrease in due to affiliates	(2,850		)	(3,110		)	(1,713		)	(2,729		)
Increase (decrease) in deferred income	9,388			(267		)	628			(384		)
Net cash provided by operating activities	208,416			188,703			73,594			57,760
Cash Flows from Investing Activities:
Net proceeds from the sale of real estate	—			15,250			57,685			—
Investment in real estate and earnest money paid	(628,141		)	(269,184		)	(6,327		)	(604,143		)
Deferred lease costs paid	(21,782		)	(5,448		)	(6,671		)	(8,187		)
Net cash used in investing activities	(649,923		)	(259,382		)
Net cash provided by (used in) investing activities							44,687			(612,330		)
Cash Flows from Financing Activities:
Financing costs paid	(12,337		)	(7,314		)	(2,721		)	(3,847		)
Proceeds from lines of credit and notes payable	1,254,000			56,000			409,000			624,000
Repayments of lines of credit and notes payable	(891,772		)	(146,264		)	(452,415		)	(20,485		)
Proceeds from issuance of bonds payable	248,237			—
Redemption of noncontrolling interest	(87		)	—
Distributions paid to nonredeemable noncontrolling interests	(33		)	(235		)	(15		)	(13		)
Issuance of common stock	98,008			442,678			31,061			32,394
Redemptions of common stock	(58,634		)	(54,883		)	(25,261		)	(16,292		)
Distributions paid to stockholders	(104,863		)	(110,528		)	(36,893		)	(35,048		)
Distributions paid to stockholders and reinvested in shares of our common stock	(98,008		)	(122,687		)	(31,061		)	(32,437		)
Commissions on stock sales and related dealer-manager fees paid	—			(29,821		)
Other offering costs paid	—			(5,495		)
Net cash provided by financing activities	434,511			21,451
Net decrease in cash and cash equivalents	(6,996		)	(49,228		)
Net cash (used in) provided by financing activities							(108,305		)	548,272
Net increase (decrease) in cash and cash equivalents							9,976			(6,298		)
Effect of foreign exchange rate on cash and cash equivalents	(77		)	41			(288		)	36
Cash and cash equivalents, beginning of period	38,882			102,725			39,468			38,882
Cash and cash equivalents, end of period	$	31,809		$	53,538		$	49,156		$	32,620

See accompanying notes.

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WELLS REAL ESTATE INVESTMENT TRUST II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2011~~MARCH 31, 2012

(unaudited)


1.	Organization

Wells Real Estate Investment Trust II, Inc. (“("Wells REIT ~~II”~~II") is a Maryland corporation that has elected to be taxed as a real estate investment trust ~~(“REIT”~~("REIT") for federal income tax purposes. Wells REIT II engages in the acquisition and ownership of commercial real estate properties, including properties that are under construction, are newly constructed, or have operating histories. Wells REIT II was incorporated on July 3, 2003 and commenced operations on January 22, 2004. Wells REIT II conducts business primarily through Wells Operating Partnership II, L.P. (“("Wells OP ~~II”~~II"), a Delaware limited partnership. Wells REIT II is the sole general partner of Wells OP II, and Wells OP II LP, LLC, a wholly owned subsidiary of Wells REIT II, is the sole limited partner of Wells OP II. Therefore, Wells REIT II owns 100% of the equity interests in, and possesses full legal control and authority over, the operations of Wells OP II. Wells OP II acquires, develops, owns, leases, and operates real properties directly, through wholly owned subsidiaries, or through joint ventures. References to Wells REIT II herein shall include Wells REIT II and all subsidiaries of Wells REIT II, ~~including consolidated joint ventures, Wells OP II, Wells OP II LP, LLC, and Wells OP II’s~~ direct and indirect, ~~subsidiaries.~~and consolidated joint ventures. Wells Real Estate Advisory Services II, LLC ("WREAS II") serves as the external advisor to Wells REIT II. See Note 8 for a discussion of the advisory services provided by WREAS II.

As of ~~September 30, 2011~~March 31, 2012, Wells REIT II owned controlling interests in 7169 office properties and one hotel, which include 9391 operational buildings. These properties are comprised of approximately ~~22.6~~22.3 million square feet of commercial space and are located in 2322 states, the District of Columbia, and Moscow, Russia. ~~Of these~~As of March 31, 2012, 66 of the office properties ~~69 are~~were wholly owned and the remaining three ~~are~~ were owned through consolidated joint ~~ventures. As of~~ ~~September 30, 2011~~,ventures; the office properties were approximately ~~94.3%~~92.9% leased.

On December 1, 2003, Wells REIT II commenced its initial public offering of up to 785.0 million shares of common stock, of which 185.0 million shares were reserved for issuance through Wells REIT ~~II’s~~II's dividend reinvestment plan ~~(“DRP”~~("DRP"), pursuant to a Registration Statement filed on Form S-11 with the SEC (the ~~“Initial~~"Initial Public ~~Offering”~~Offering"). Except for continuing to offer shares for sale through its DRP, Wells REIT II stopped offering shares for sale under the Initial Public Offering on November 26, 2005. Wells REIT II raised gross offering proceeds of approximately $2.0 billion from the sale of approximately 197.1 million shares under the Initial Public Offering, including shares sold under the DRP through March 2006. On November 10, 2005, Wells REIT II commenced a follow-on offering of up to 300.6 million shares of common stock, of which 0.6 million shares were reserved for issuance under Wells REIT ~~II’s~~II's DRP, pursuant to a Registration Statement filed on Form S-11 with the SEC (the ~~“Follow-On Offering”~~"Follow-On Offering"). On April 14, 2006, Wells REIT II amended the aforementioned registration statements to offer in a combined prospectus 300.6 million shares registered under the Follow-On Offering and 174.4 million unsold shares related to the DRP originally registered under the Initial Public Offering. Wells REIT II raised gross offering proceeds of approximately $2.6 billion from the sale of approximately 257.6 million shares under the Follow-On Offering, including shares sold under the DRP, through November 2008. Wells REIT II stopped offering shares for sale under the Follow-On Offering on November 10, 2008.

On November 11, 2008, Wells REIT II commenced a third offering of up to 375.0 million shares of common stock pursuant to a Registration Statement filed on Form S-11 with the SEC (the ~~“Third Offering”~~"Third Offering"). Under the Third Offering registration statement, as amended, Wells REIT II offered up to 300.0 million shares of common stock in a primary offering for $10 ~~per-share,~~per share, with discounts available to certain categories of purchasers, and up to 75.0 million shares pursuant to its DRP at a purchase price equal to $9.55. Effective June 30, 2010, Wells REIT II ceased offering shares under the Third Offering. On August 27, 2010, the Third Offering was deregistered under the Form S-11 filing and the shares issuable pursuant to the DRP were registered on Form S-3. As of ~~September 30, 2011~~March 31, 2012, Wells REIT II had raised gross offering proceeds of approximately ~~$1.4~~$1.5 billion from the sale of approximately ~~137.2~~146.0 million shares under the Third Offering, including shares sold under the DRP.

As of ~~September 30, 2011~~March 31, 2012, Wells REIT II had raised gross offering proceeds from the sale of common stock under its public offerings of approximately $5.9 billion. After deductions from such gross offering proceeds for selling commissions and dealer-manager fees of approximately $509.5 million, acquisition fees of approximately $116.8 million, other organization and offering expenses of approximately $75.9 million, and common stock redemptions pursuant to our share redemption program of approximately ~~$472.6~~$540.5 million, Wells REIT II had received aggregate net offering proceeds of approximately $4.7 billion. Substantially all of Wells REIT ~~II’s~~II's net offering proceeds have been invested in real estate.

Wells REIT ~~II’s~~II's stock is not listed on a public securities exchange. However, Wells REIT ~~II’s~~II's charter requires that in the event Wells REIT ~~II’s~~II's stock is not listed on a national securities exchange by October 2015, Wells REIT II must either seek stockholder

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approval to extend or amend this listing deadline or seek stockholder approval to begin liquidating investments and distributing the resulting proceeds to the stockholders. If Wells REIT II seeks stockholder approval to extend or amend this listing date and does not obtain it, Wells REIT II will then be required to seek stockholder approval to liquidate. In this circumstance, if Wells

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REIT II seeks and does not obtain approval to liquidate, Wells REIT II will not be required to list or liquidate and could continue to operate indefinitely as an unlisted company.


2.	Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements of Wells REIT II have been prepared in accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ~~(“GAAP”~~("GAAP") for complete financial statements. In the opinion of management, the statements for these unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full ~~year’s~~year's results. Wells REIT ~~II’s~~II's consolidated financial statements include the accounts of Wells REIT II, Wells OP II, and any variable interest entity in which Wells REIT II or Wells OP II was deemed the primary beneficiary. With respect to entities that are not variable interest entities, Wells REIT ~~II’s~~II's consolidated financial statements shall also include the accounts of any entity in which Wells REIT II, Wells OP II, or their subsidiaries own a controlling financial interest and any limited partnership in which Wells REIT II, Wells OP II, or its subsidiaries own a controlling general partnership interest. All intercompany balances and transactions eliminate in consolidation. For further information, refer to the financial statements and footnotes included in Wells REIT ~~II’s~~II's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2010~~2011.

Fair Value Measurements

Wells REIT II estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent with the provisions of the accounting standard for fair value measurements and disclosures. Under this standard, fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures provides the following fair value technique parameters and hierarchy, depending upon availability:

Level 1 – Assets or liabilities for which the identical term is traded on an active exchange, such as publicly traded instruments or futures contracts.

Level 2 – Assets and liabilities valued based on observable market data for similar instruments.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market. Such assets or liabilities are valued based on the best available data, some of which may be internally developed. Significant assumptions may include risk premiums that a market participant would consider.

~~Investment in~~ Real Estate Assets

Wells REIT II is required to make subjective assessments as to the useful lives of ~~our~~its depreciable assets. ~~We consider~~Wells REIT II 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 ~~our~~its assets by class are as follows:



	Buildings		40 years
	Building improvements		5-25 years
	Site improvements		15 years
	Tenant improvements		Shorter of economic life or lease term
	Intangible lease assets		Lease term

Evaluating the Recoverability of Real Estate Assets

Wells REIT II continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of both operating properties and properties under construction, in which Wells REIT II has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of real estate assets and related intangible assets (liabilities) may

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not be recoverable, Wells REIT II assesses the recoverability of these assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying values, Wells

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REIT II adjusts the carrying value of the real estate assets and related intangible assets to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, in order of preference, depending upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage value. Certain of our assets may be carried at more than an amount that could be realized in a current disposition transaction.

Assets Held for Sale

~~During the third quarter of 2011,~~ Wells REIT II ~~evaluated~~classifies assets as held for sale according to ASC 360, Accounting for the ~~recoverability~~Impairment or Disposal of Long-Lived Assets ("ASC 360"). According to ASC 360, assets are considered held for sale when the ~~carrying value of~~following criteria are met:

Management, having the ~~Manhattan Towers property and determined that it was not recoverable, as defined by~~authority to approve the ~~accounting policy outlined above.~~ action, commits to a plan to sell the property.

The ~~Manhattan Towers~~ property is ~~located~~available for immediate sale in ~~Manhattan Beach, California~~its present condition subject only to terms that are usual and ~~includes two office buildings with total occupancy~~customary for sales of ~~22%. In~~such property.

An active program to locate a buyer and other actions required to complete the ~~third quarter of 2011, upon considering~~plan to sell the ~~economic impact of various~~ property disposition scenarios not previously contemplated, including the likelihood of achieving the projected returns associated with each scenario, Wells REIT II opted to transfer the Manhattan Towers property to an affiliate of the lender in full settlement of a $75.0 million nonrecourse mortgage loan through a deed in lieu of foreclosure transaction, which closed on September 6, 2011. As a result of this transaction, Wells REIT II reduced the carrying value of the Manhattan Towers property to its fair value, estimated based on the present value of estimated future property cash flows, by recognizing a property impairment loss of approximately $5.8 million, and recognized a gain on early extinguishment of debt of $13.5 million. have been initiated.

The ~~gain on early extinguishment of debt, net~~sale of the property ~~impairment loss,~~ is ~~reflected~~probable, and transfer of the property is expected to qualify for recognition as ~~loss on disposition of discontinued operations in the statement of operations.~~

a completed sale, within one year.

The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value.

Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

At such time that a property is determined to be held for sale, its carrying amount is reduced to the lower of its depreciated book value or its estimated fair value, ~~measurements used in this evaluation~~less costs to sell, and depreciation is no longer recognized. As of ~~nonfinancial assets are considered to be Level 3 valuations within~~December 31, 2011, Emerald Point and 5995 Opus Parkway were classified as held for sale at their respective depreciated book values (see Note 9. Assets Held for Sale and Discontinued Operations for additional information). Both 5995 Opus Parkway and Emerald Point were sold during the ~~fair value hierarchy outlined above, as there are significant unobservable inputs. Examples~~first three months of inputs that were utilized in the fair value calculations include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, and sales prices. The table below represents the detail of the adjustments recognized quarter and year to date as of September 30, 2011 (in thousands) using Level 3 inputs.

Property Net Book Value Impairment Loss Recognized Fair Value
Manhattan Towers $ 65,317
$ (5,817 ) $ 59,500

2012.

Intangible Assets and Liabilities Arising from In-Place Leases where Wells REIT II is the Lessor

As of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, Wells REIT II had the following gross intangible in-place lease assets and liabilities (in thousands):

Intangible Lease Assets
Intangible
Lease
Origination
Costs

Intangible
Below-Market
In-Place Lease
Liabilities

Above-Market
In-Place Lease
Assets

Absorption
Period Costs

September 30, 2011 Gross $ 127,709
$ 540,147
$ 479,928
$ 166,201
Accumulated Amortization $ (83,855 ) $ (275,401 ) $ (236,457 ) $ (72,173 )
Net $ 43,854
$ 264,746
$ 243,471
$ 94,028
December 31, 2010 Gross $ 139,014
$ 534,277
$ 489,361
$ 150,099
Accumulated Amortization $ (83,233 ) $ (265,747 ) $ (219,447 ) $ (62,165 )
Net $ 55,781
$ 268,530
$ 269,914
$ 87,934



		Intangible Lease Assets						Intangible Lease Origination Costs			Intangible Below-Market In-Place Lease Liabilities
		Above-Market In-Place Lease Assets			Absorption Period Costs			Intangible Lease Origination Costs			Intangible Below-Market In-Place Lease Liabilities
March 31, 2012	Gross	$	102,143		$	499,184		$	455,677		$	162,546
	Accumulated Amortization	$	(64,210	)	$	(263,557	)	$	(235,671	)	$	(77,260	)
	Net	$	37,933		$	235,627		$	220,006		$	85,286
December 31, 2011	Gross	$	109,457		$	515,322		$	468,017		$	163,907
	Accumulated Amortization	$	(68,706	)	$	(265,844	)	$	(236,679	)	$	(74,326	)
	Net	$	40,751		$	249,478		$	231,338		$	89,581

For the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 and the year ended December 31, ~~2010~~2011, Wells REIT II recognized the following amortization of intangible lease assets and liabilities (in thousands):

Intangible Lease Assets
Intangible
Lease
Origination
Costs

Intangible
Below-Market
In-Place Lease
Liabilities
Above-Market
In-Place Lease
Assets

Absorption
Period Costs

For the nine months ended September 30, 2011 $ 11,104
$ 47,695
$ 37,922
$ 12,764
For the year ended December 31, 2010 $ 17,810
$ 61,743
$ 51,241
$ 14,472



	Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-Place Lease Assets		Absorption Period Costs		Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
For the three months ended March 31, 2012	$	2,532	$	13,838	$	11,344	$	4,296
For the year ended December 31, 2011	$	14,244	$	62,902	$	50,006	$	17,203
For the three months ended March 31, 2011	$	3,810	$	15,273	$	12,601	$	3,828

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The remaining net intangible assets and liabilities as of ~~September 30, 2011~~March 31, 2012 will be amortized as follows (in thousands):


	Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities		Intangible Lease Assets				Intangible Lease Origination Costs		Intangible Below-Market In-Place Lease Liabilities
	Above-Market In-Place Lease Assets		Absorption Period Costs						Above-Market In-Place Lease Assets		Absorption Period Costs
For the three months ending December 31, 2011	$	2,879	$	15,277	$	12,132	$	4,447
For the nine months ended December 31, 2012									$	6,694	$	37,690	$	31,809	$	12,408
For the years ending December 31:
2012	9,451		52,045		43,090		16,704
2013	7,867		45,930		40,040		16,061		7,620		45,321		40,109		16,061
2014	6,722		40,390		37,082		15,629		6,578		40,283		37,151		15,629
2015	6,102		34,905		33,356		13,217		5,993		34,965		33,425		13,217
2016	5,689		24,546		25,585		8,209		5,718		24,688		25,654		8,209
2017									2,418		16,227		17,167		5,715
Thereafter	5,144		51,653		52,186		19,761		2,912		36,453		34,691		14,047
	$	43,854	$	264,746	$	243,471	$	94,028	$	37,933	$	235,627	$	220,006	$	85,286

Intangible Assets and Liabilities Arising from In-Place Leases where Wells REIT II is the Lessee

In-place ground leases where Wells REIT II is the lessee may have value associated with effective contractual rental rates that are above or below market rates. Such values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) ~~management’s~~management's estimate of fair market lease rates for the corresponding in-place lease, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities or assets and amortized as an adjustment to property operating cost over the remaining term of the respective leases. Wells REIT II had gross below-market lease assets of approximately $110.7 million as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, and recognized amortization of these assets of approximately ~~$1.6~~$0.5 million for the ~~nine~~three months ended ~~September 30,~~ March 31, 2012 and 2011, and approximately $2.1 million for the year ended December 31, ~~2010~~2011.

As of ~~September 30, 2011~~March 31, 2012, the remaining net below-market lease asset will be amortized as follows (in thousands):


For the year ending December 31:
2011	$	517
2012	2,069		$	1,552
2013	2,069		2,069
2014	2,069		2,069
2015	2,069		2,069
2016	2,069		2,069
2017			2,069
Thereafter	91,416		89,345
	$	102,278	$	101,242

Bonds Payable

~~On April 4,~~In 2011, Wells REIT II ~~sold $250~~issued $250.0 million of its 7-year, unsecured 5.875% senior notes at 99.295 percent of their face value. The discount on bonds payable is amortized to interest expense over the term of the bonds using the effective-interest method.

~~Redeemable Common Stock~~

Under Wells REIT II's share redemption program (“SRP”), the decision to honor redemptions, subject to certain plan requirements and limitations, falls outside the control of Wells REIT II. As a result, Wells REIT II records redeemable common stock in the temporary equity section of its consolidated balance sheet. Total redemptions (including those tendered within two years of a stockholder's death) are limited to the extent that they would cause both (i) the aggregate amount paid for all redemptions during the then-current calendar year to exceed 100% of the net proceeds raised under the DRP during such calendar year and (ii) the

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total number of shares redeemed during the then-current calendar year to exceed 5% of the weighted-average number of shares outstanding in the prior calendar year. Therefore, Wells REIT II measures redeemable common stock at the greater of these limits (or, for the periods presented in this report, 5% of the weighted-average number of shares outstanding in the prior calendar year, multiplied by the maximum price at which future shares could be redeemed), less the amount incurred to redeem shares during the current calendar year. The maximum price at which shares could be redeemed (i.e. in cases of death, disability, or qualification for federal assistance for confinement to a long-term care facility) was measured at the gross issue price under Wells REIT II's primary offerings (generally, $10.00 per share) as of December 31, 2010, and measured at the most recently reported net asset value per share ($7.47 per share - see Subsequent Events Section of Item 2. "Management's Discussion and Analysis" for additional details) as of September 30, 2011.

Interest Rate Swap Agreements

Wells REIT II enters into interest rate swap contracts to mitigate its interest rate risk on the related financial instruments. Wells REIT II does not enter into derivative or interest rate transactions for speculative purposes; however, certain of its derivatives may not qualify for hedge accounting treatment. Wells REIT II records the fair value of its interest rate swaps either as prepaid expenses and other assets or as accounts payable, accrued expenses, and accrued capital expenditures. Changes in the fair value of the effective portion of interest rate swaps that are designated as hedges are recorded as other comprehensive income (loss), while changes in the fair value of the ineffective portion of a hedge, if any, is recognized currently in earnings. Changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment are recorded as gain (loss) on interest rate swaps. Amounts

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received or paid under interest rate swap agreements are recorded as interest expense for contracts that qualify for hedge accounting treatment and as gain (loss) on interest rate swaps for contracts that do not qualify for hedge accounting treatment.

The following tables provide additional information related to Wells REIT ~~II’s~~II's interest rate swaps as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 (in thousands):


		Estimated Fair Value as of							Estimated Fair Value as of
Instrument Type	Balance Sheet Classification	September 30, 2011			December 31, 2010			Balance Sheet Classification	March 31, 2012			December 31, 2011
Derivatives designated as hedging instruments:
Interest rate contracts	Accounts payable	$	(15,248	)	$	(11,222	)	Prepaid expenses and other assets	$	608		$	—
Interest rate contracts								Accounts payable	$	—		$	—
Derivatives not designated as hedging instruments:
Interest rate contracts	Accounts payable	$	(51,853	)	$	(37,208	)	Accounts payable	$	(1,491	)	$	(1,722	)

Wells REIT II applied the provisions of the accounting standard for fair value measurements and disclosures in recording its interest rate swaps at fair value. The fair values of the interest rate swap, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ~~(“LIBOR”~~("LIBOR") information, and reasonable estimates about relevant future market conditions. The fair value of Wells REIT ~~II’s~~II's interest rate swaps were ~~$(67.1) million~~($0.9 million) and ~~$(48.4) million~~($1.7 million) at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, respectively. ~~Please refer to the~~ ~~Interest Rate Swap Agreements~~ ~~disclosure below for additional details.~~


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2011			2010			2011			2010			2012			2011
Market value adjustment to interest rate swap designated as a hedge instrument and included in other comprehensive income	$	(3,198	)	$	(2,311	)	$	(4,025	)	$	(6,709	)	$	608		$	752
Loss on interest rate swaps recognized through earnings	$	(14,774	)	$	(9,885	)	$	(22,219	)	$	(29,068	)	$	(76	)	$	89

During the periods presented, there was no hedge ineffectiveness required to be recognized into earnings on the interest rate swaps that qualified for hedge accounting treatment.

Income Taxes

Wells REIT II has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the ~~“Code”~~"Code"), and has operated as such beginning with its taxable year ended December 31, 2003. To qualify as a REIT, Wells REIT II must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income, as defined by the Code, to its stockholders. As a REIT, Wells REIT II generally is not subject to income tax on income it distributes

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to stockholders. Wells REIT II is subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in the accompanying consolidated financial statements.

Wells TRS II, LLC (“("Wells ~~TRS”~~TRS") ~~and~~; Wells KCP TRS, LLC ("Wells KCP TRS"); and Wells Energy TRS, LLC ("Wells Energy TRS") are wholly owned subsidiaries of Wells REIT II, are organized as Delaware limited liability companies, and operate, among other things, a full-service hotel. Wells REIT II has elected to treat Wells TRS, Wells KCP TRS, and Wells ~~KCP~~Energy TRS as taxable REIT subsidiaries. Wells REIT II may perform certain additional, noncustomary services for tenants of its buildings through Wells TRS, Wells KCP TRS, or Wells ~~KCP~~Energy TRS; however, any earnings related to such services are subject to federal and state income taxes. In addition, for Wells REIT II to continue to qualify as a REIT, Wells REIT II must limit its investments in taxable REIT subsidiaries to 25% of the value of the total assets. Deferred tax assets and liabilities represent temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. Wells REIT II records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.

~~Noncontrolling Interests~~

Nonredeemable noncontrolling interests are presented separately in the consolidated statements of equity and represent equity interests of consolidated subsidiaries that are not owned by Wells REIT II. Nonredeemable noncontrolling interests are adjusted for contributions, distributions, and earnings attributable to the nonredeemable noncontrolling interests in the consolidated joint ventures. Pursuant to the terms of the consolidated joint venture agreements, all earnings and distributions are allocated to joint venturers in accordance with the terms of the respective joint venture agreements. Earnings allocated to such nonredeemable noncontrolling interest holders are recorded as net (income) loss attributable to nonredeemable noncontrolling interests in the accompanying consolidated statements of operations.

Until June 30, 2011, Wells Capital, Inc. ("Wells Capital") held an interest in Wells OP II's limited partnership units which was redeemable under certain circumstances, and, therefore, the noncontrolling interest in Wells OP II was included in accounts payable, accrued expenses, and accrued capital expenditures in the consolidated balance sheets as of December 31, 2010 ($0.1 million). Effective June 30, 2011, Wells Capital's interest in Wells OP II partnership units were exchanged for shares of Wells REIT II common stock.

Recent Accounting Pronouncements

FASB Accounting Standards Codification (ASC) is a major restructuring of accounting and reporting standards designed to simplify user access to all authoritative U.S. generally accepted accounting principles (GAAP) by providing the authoritative literature in a topically organized structure.

In ~~January 2010,~~May 2011, the Financial Accounting Standards Board (the ~~“FASB”~~"FASB") clarified previously issued GAAP and issued new requirements related to Accounting Standards Codifications Topic Fair Value Measurements and Disclosures (“ASU 2010-6”). The clarification component includes disclosures about inputs and valuation techniques used in determining fair value, and providing fair value measurement information for each class of assets and liabilities. The new requirements relate to disclosures of transfers between the levels in the fair value hierarchy, as well as the individual components in the rollforward of the lowest level (Level 3) in the fair value hierarchy. This change in GAAP became effective for Wells REIT II beginning January 1, 2010, except for the provision concerning the rollforward of activity of the Level 3 fair value measurement, which became effective for Wells REIT II on January 1, 2011. The adoption of ASU 2010-6 has not had a material impact on Wells REIT II’s consolidated financial statements or disclosures.

~~In May 2011, the FASB~~ issued Accounting Standards Update 2011-04, Fair Value Measurement Topic Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ ("ASU ~~2011-04”~~2011-04"). ASU 2011-04 converges the U.S. GAAP and ~~IFRS~~IFRSs definition of ~~“fair~~"fair value,”" the requirements for

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measuring amounts at fair value, and disclosures about these measurements. The update does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The adoption of ASU 2011-04 iswas effective for Wells REIT II on December 15, 2011. Wells REIT ~~II expects that the~~II's adoption of ASU 2011-04 ~~will~~has not ~~have~~had a material impact on Wells REIT II's consolidated financial statements or disclosures.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Comprehensive Income Topic Presentation of Comprehensive Income (“ ("ASU ~~2011-05”~~2011-05"). ASU 2011-05 gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The adoption of

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ASU 2011-05 iswas effective for Wells REIT II onafter December 15, 2011, except for the specific requirement to present items that are reclassified from other comprehensive income to net income alongside their respective components of net income and other comprehensive income that has been deferred. Wells REIT ~~II expects that the~~II's adoption of ASU 2011-05 ~~will~~has not ~~have~~had a material impact on Wells REIT II's consolidated financial statements or disclosures.


3.	Real Estate Acquisitions

~~During~~Wells REIT II did not acquire real properties during the ~~nine~~three months ended ~~September 30, 2011, Wells REIT II acquired interests in the following properties (in thousands):~~

Intangibles
Property Name City State
Acquisition
Date
Land
Buildings
and
Improvements

Intangible
Lease
Assets

Intangible
Lease
Origination

Below-
Market
Lease
Liability

Total
Purchase
Price

Lease
Details
Market Square Buildings Washington, DC N/A 3/7/2011 $ 152,629
$ 412,548
$ 45,858
$ 12,031
$ (19,680 ) $ 603,386

⁽¹⁾
544 Lakeview⁽²⁾
Vernon Hills IL 4/1/2011 3,006
3,100
—
—
—
6,106

⁽³⁾
$ 155,635
$ 415,648
$ 45,858
$ 12,031
$ (19,680 ) $ 609,492


⁽¹⁾	~~As of the acquisition date, the Market Square Buildings were 96.2% leased to 41 tenants, including Fulbright and Jaworski (18.8%), Shearman and Sterling (16.6%), and Edison Electric Institute (11.3%).~~


⁽²⁾	Wells REIT II acquired a 50% controlling interest in a consolidated joint venture that owns 100% of 544 Lakeview by paying cash of $0.9 million and assuming (i) a mortgage note of $9.1 million, which is included on the consolidated balance sheets as of September 30, 2011, net of discount of $0.4 million, and (ii) escrow balances of approximately $3.2 million.


⁽³⁾	~~As of the acquisition date, the Lakeview Building is vacant.~~

~~Wells REIT II recognized revenues of $26.2 million and a net loss of $12.6 million from the Market Square Buildings acquisition for the period from~~ March ~~7, 2011 through~~ ~~September 30, 2011~~31, 2012. Wells REIT II ~~recognized acquisition-related expenses associated with~~acquired the Market Square Buildings ~~acquisition of $9.4 million, all of which are recorded as acquisition fees and expenses in the accompanying consolidated statements of operations for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011. Please refer to Note 2.~~ ~~Summary of Significant Accounting Policies~~ ~~for a discussion of the estimated useful life for each asset class.~~

~~Pro Forma Financial Information for Market Square Buildings Acquisition~~

on March 7, 2011. The following unaudited pro forma statement of operations presented for the ~~three and~~ ~~nine~~three months ended ~~September 30,~~March 31, 2011 ~~and 2010 have~~has been prepared for Wells REIT II to give effect to the acquisition of the Market Square Buildings as if the acquisition occurred on January 1, ~~2011 and January 1, 2010, respectively.~~2011. The unaudited pro forma financial information has been prepared for informational purposes only and is not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of the Market Square Buildings acquisition been consummated as of January 1, 2011 ~~or January 1, 2010. The acquisition of 544 Lakeview is immaterial and, as a result, was not taken into consideration when preparing the following pro forma financial information~~ (in thousands).


	Three months ended September 30,					Nine months ended September 30,
	2011		2010			2011			2010			Three months ended March 31, 2011
Revenues	$	158,403	$	156,036		$	465,950		$	449,205		$	154,248
Net income (loss) attributable to common stockholders	$	5,102	$	(264	)	$	(382	)	$	(15,392	)
Net loss attributable to common stockholders												$	(664	)

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4.	Line of Credit and Notes Payable

As of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, Wells REIT II had the following line of credit and notes payable indebtedness outstanding (excluding bonds payable, see Note 5. Bonds Payable,) in ~~thousands):~~thousands:


Facility	September 30, 2011		December 31, 2010		March 31, 2012		December 31, 2011
Market Square mortgage note	$	325,000	$	—
$450 Million Term Loan					$	375,000	$	—
Market Square Buildings mortgage note					325,000		325,000
100 East Pratt Street Building mortgage note					105,000		105,000
JPMorgan Chase Credit Facility	220,500		72,000		100,000		484,000
222 E. 41st Street Building mortgage note	173,032		164,151
100 East Pratt Street Building mortgage note	105,000		105,000
Wildwood Buildings mortgage note	90,000		90,000		90,000		90,000
80 Park Plaza Building mortgage note	64,010		60,894
263 Shuman Boulevard Building mortgage note	49,000		49,000		49,000		49,000
SanTan Corporate Center mortgage notes					39,000		39,000
One West Fourth Street Building mortgage note	40,061		41,537		38,980		39,555
SanTan Corporate Center mortgage notes	39,000		39,000
Highland Landmark Building mortgage note	33,840		33,840
Three Glenlake Building mortgage note	25,880		25,721		26,033		25,958
215 Diehl Road Building mortgage note	21,000		21,000		21,000		21,000
544 Lakeview Building mortgage note	8,673		—		8,741		8,707
Manhattan Towers Building mortgage note	—		75,000
Cranberry Woods Drive mortgage note	—		63,396
800 North Frederick Building mortgage note	—		46,400
Highland Landmark Building mortgage note					—		33,840
Total indebtedness	$	1,194,996	$	886,939	$	1,177,754	$	1,221,060

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On July 8, 2011, Wells REIT II entered an amendment to the JPMorgan Chase Credit Facility (the “JPMorgan Chase Credit Facility Amendment”) with JPMorgan Chase Bank (the "JPMorgan Chase Bank") to, among other things, (i) extend the maturity date of the facility to May 7, 2015, (ii) enable Wells REIT II to increase the JPMorgan Chase Credit Facility amount by an aggregate of up to $150.0 million to a total facility amount not to exceed $650.0 million on two occasions on or before December 7, 2014, upon meeting certain criteria, and (iii) reduce the interest rate and the facility fee as described below. Except as noted above and described below, the terms of the facility remain materially unchanged by the amendment.

The JPMorgan Chase Credit Facility Amendment provides for interest costs to be incurred based on, at the option of Wells REIT II, the LIBOR for one-, two-, three-, or six-month periods, plus an applicable margin ranging from 1.25% to 2.05% (the “LIBOR Rate”) or at the alternate base rate, plus an applicable margin ranging from 0.25% to 1.05% (the “Base Rate”). The alternate base rate for any day is the greatest of the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect in its principal office in New York City for such day, the federal funds rate for such day plus 0.50%, and the one-month LIBOR Rate for such day plus 1.00%. The margin component of the LIBOR Rate and the Base Rate is based on Wells REIT II's applicable credit rating (as defined in the facility agreement). Additionally, Wells REIT II must pay a per-annum facility fee on the aggregate revolving commitment (used or unused) ranging from 0.25% to 0.45% based on Wells REIT II's applicable credit rating.

~~In the third quarter of 2011,~~January 10, 2012, Wells REIT II used cash on hand and proceeds from the JPMorgan Chase ~~Credit Facility~~credit facility to fully repay the ~~Cranberry Woods Drive mortgage note ($63.4 million) and the 800 North Frederick~~Highland Landmark Building mortgage note ~~($46.4 million).~~ of $33.8 million at its maturity.

On ~~September 6, 2011,~~February 3, 2012, Wells REIT II ~~settled the Manhattan Towers mortgage note~~closed on a four-year, unsecured term loan with a syndicate of banks led by ~~transferring the Manhattan Towers property,~~JPMorgan Chase Bank N.A. (the “$450.0 Million Term Loan”). The $450.0 Million Term Loan bears interest at LIBOR, plus an ~~office building located in Manhattan Beach, California, to an affiliate of its mortgagee through a deed in lieu of foreclosure transaction. As a result of this transaction,~~applicable base margin; however, Wells REIT II ~~recognized a property impairment loss~~effectively fixed the interest rate (assuming no change in our corporate credit rating) at 2.64% per annum with an interest rate swap executed contemporaneously with the loan. At closing, the $450.0 Million Term Loan yielded initial gross proceeds of ~~$5.8 million and a gain on early extinguishment of debt of $13.5 million, which are included in loss on disposition of discontinued operations in the statement of operations. During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ ~~and~~ ~~2010~~,$375.0 million. Wells REIT II ~~also made interest payments~~has the ability to increase the amount of ~~approximately $34.2~~borrowings under the $450.0 Million Term Loan up to a maximum amount of $450.0 million on two occasions during the borrowing period in minimum increments of $25.0 million; however, none of the current banks are obligated to participate in such increases. The $450.0 Million Term Loan matures on February 3, 2016 provided that certain conditions are met prior to that date. Furthermore, provided that certain additional conditions are met prior to, and ~~$31.8~~at, maturity, the $450.0 Million Term Loan shall become eligible for a one-year extension upon paying an extension fee equal to 0.15% of the outstanding balance.

The initial gross proceeds of $375.0 million ~~respectively, including amounts capitalized~~were used to repay temporary borrowings on the JPMorgan Chase Credit Facility, which were drawn to repay mortgages in the third and fourth quarters of ~~$0.0~~2011. In April 2012, Wells REIT II exercised one of the options to increase borrowings under the $450.0 Million Term Loan from $375.0 million to $410.0 million, which additional proceeds were used to further reduce temporary borrowings, and ~~$0.5 million, respectively.~~thereby create additional short-term borrowing capacity, under the JPMorgan Chase Credit Facility. The $450.0 Million Term Loan contains the same restrictions and financial covenants as those included in the JPMorgan Chase Credit Facility, which are further described in the "Debt Covenants" section of Item 2. Management's Discussion and Analysis.

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The estimated fair value of Wells REIT ~~II’s~~II's line of credit and notes payable as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 was approximately ~~$1,251.3~~$1,216.4 million and ~~$915.9~~$1,282.6 million, respectively. Wells REIT II estimated the fair value of its line of credit by obtaining estimates for similar facilities from multiple market participants as of the respective reporting dates. Therefore, the fair values determined are considered to be based on observable market data for similar instruments (Level 2). The fair values of all other debt instruments were estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized. During the three months ended

March 31, 2012 and 2011, Wells REIT II also made interest payments of approximately $10.1 million and $8.2 million, respectively. There was no interest capitalized in either period. As of ~~September 30, 2011~~March 31, 2012, Wells REIT II believes it was in compliance with the restrictive covenants on its $450 Million Term Loan, outstanding line of credit, and notes payable obligations.


5.	Bonds Payable

~~On April 4,~~In 2011, Wells REIT II ~~sold~~issued $250.0 million of its 7-year, unsecured 5.875% senior notes at 99.295 percent of their face ~~value. These notes, and the equivalent notes issued in exchange therefor (as described below), are referred to as the 2018 Bonds Payable~~value (the "2018 Bonds Payable").Wells REIT II received proceeds from the 2018 Bonds Payable, net of fees, of $246.7 million. The 2018 Bonds Payable require semi-annual interest payments ~~each~~ in April and October based on a contractual annual interest rate of 5.875%, which is subject to adjustment in certain circumstances. In the accompanying consolidated balance sheets, the 2018 Bonds Payable are shown net of the initial issuance discount of approximately $1.8 million, which is amortized to interest expense over the term of the 2018 Bonds Payable using the effective interest method. The principal amount of the 2018 Bonds Payable is due and payable on the maturity date. No interest payments were made on the 2018 Bonds Payable during the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012.

~~The restrictive covenants on the 2018 Bonds Payable as defined pursuant to an indenture (the "Indenture") include:~~

limits to Wells REIT II's ability to merge or consolidate with another entity or transfer all or substantially all of Wells REIT II’s property and assets, subject to important exceptions and qualifications;

~~a limitation on the ratio of debt to total assets, as defined, to 60%;~~

limits to Wells REIT II's ability to incur debt if the consolidated income available for debt service to annual debt service charge, as defined, for four previous consecutive fiscal quarters is less than 1.5:1 on a pro forma basis;

~~limits to Wells REIT II's ability to incur liens if, on an aggregate basis for Wells REIT II, the secured debt amount would exceed 40% of the value of the total assets; and~~

~~a requirement that the ratio of unencumbered asset value, as defined, to total unsecured debt be at least 150% at all times.~~

As of ~~September 30, 2011~~March 31, 2012, Wells REIT II believes it was in compliance with the restrictive covenants on its 2018 Bonds Payable.

The 2018 Bonds Payable were originally issued through a private offering. On September 12, 2011, Wells OP II completed its offer to exchange the 2018 Bonds Payable, for equivalent bonds issued in an offering registered under the Securities Act of 1933, as amended.

The estimated fair value of Wells REIT ~~II’s~~II's 2018 Bonds Payable as of ~~September 30,~~March 31, 2012 and December 31, 2011 was approximately ~~$251.2~~$251.1 million. The fair value of the 2018 Bonds Payable was estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing as the 2018 Bonds Payable arrangements as of the respective reporting ~~dates.~~dates (Level 2). The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.


6.	Commitments and Contingencies

Commitments Under Existing Lease Agreements

Certain lease agreements include provisions that, at the option of the tenant, may obligate Wells REIT II to expend capital to expand an existing property or provide other expenditures for the benefit of the tenant. As of ~~September 30, 2011~~March 31, 2012, no tenants have exercised such options that had not been materially satisfied.

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Litigation

Wells REIT II is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. Wells REIT II records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be

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reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Wells REIT II accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, Wells REIT II accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, Wells REIT II discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, Wells REIT II discloses the nature and estimate of the possible loss of the litigation. Wells REIT II does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of Wells REIT II. Wells REIT II is not currently involved in any legal proceedings of which management would consider the outcome to be reasonably likely to have a material adverse effect on the results of operations or financial condition of Wells REIT II.


7.	Supplemental Disclosures of Noncash Investing and Financing Activities

Outlined below are significant noncash investing and financing activities for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011 (in thousands):


	Nine months ended September 30,						Three months ended March 31,
	2011			2010			2012		2011
Other assets assumed upon acquisition of properties	$	3,202		$	—		$	50	$	—
Other liabilities assumed upon acquisition of property	$	1,174		$	6,878		$	—	$	6,430
Notes payable assumed upon acquisition of properties	$	8,607		$	—
Noncash interest accruing to notes payable	$	11,809		$	11,104		$	75	$	3,840
Market value adjustment to interest rate swap that qualifies for hedge accounting treatment	$	(4,025	)	$	(6,709	)	$	608	$	752
Accrued capital expenditures and deferred lease costs	$	6,191		$	1,547		$	8,660	$	8,481
Accrued deferred financing costs	$	63		$	—		$	10	$	342
Accrued redemptions of common stock	$	1,629		$	272		$	1,397	$	827
Settlement of redeemable noncontrolling interest through issuance of common stock	$	13		$	—
Other offering costs due to affiliate	$	—		$	56
Discounts applied to issuance of common stock	$	—		$	4,524
Decrease in redeemable common stock	$	(23,783	)	$	(627,038	)
Transfer of Manhattan Towers to lender affiliate in settlement of mortgage note	$	75,000		$	—
Transfer of development authority bond and corresponding capital lease in connection with sale of New Manchester One	$	—		$	18,000
Increase in redeemable common stock							$	64,303	$	84,952


8.	Related-Party Transactions and Agreements

Advisory Agreement

Wells REIT II is party to an agreement with WREAS II, under which WREAS II is required to perform certain key functions on behalf of Wells REIT II, including, among others, the investment of capital proceeds and management of day-to-day operations (the ~~“Advisory Agreement”~~"Advisory Agreement"). WREAS II has executed master services agreements with Wells Capital, Inc. ("Wells Capital") and Wells Management Company, Inc. ("Wells Management") whereby WREAS II may retain the use of Wells ~~Capital’s~~Capital's and Wells ~~Management’s~~Management's employees as necessary to perform the services required under the Advisory Agreement, and in return, shall reimburse Wells Capital and Wells Management for the associated personnel costs. Further, under the terms of the Advisory Agreement, Wells Real Estate Funds, Inc. ("WREF") guarantees WREAS ~~II’s~~II's performance of services and any amounts payable to Wells REIT II in connection therewith. The ~~Advisory Agreement expires on December 31, 2011 and~~agreement may be terminated, without cause or penalty, by either party upon providing 60 ~~days’~~days' prior written notice to the other party.

Under the terms of the Advisory Agreement, Wells REIT II incurs fees and reimbursements payable to WREAS II and its affiliates for services as described below:

Reimbursement of organization and offering costs paid by WREAS II and its affiliates on behalf of Wells REIT II, not to exceed 2.0% of gross offering proceeds.

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Through July 31, 2011, acquisition fees were incurred at 2.0% of gross offering proceeds, subject to certain limitations. Effective August 1, 2011, acquisition fees have been incurred at 1% of the property purchase price (excluding acquisition expenses); however, in no event may total acquisition fees for the ~~2011~~ calendar year exceed 2% of total gross offering proceeds. Wells REIT II also reimburses WREAS II and its affiliates for expenses it pays to third parties in connection with acquisitions or potential acquisitions.

~~Monthly asset~~Asset management fees ~~equal to~~are incurred monthly at one-twelfth of 0.625% of the ~~cost~~lesser of (i) gross cost, as defined, of all properties of Wells REIT II (other than those that fail to meet specified occupancy thresholds) and ~~(ii)~~ investments in joint ventures, or (ii) the aggregate value of Wells REIT II's interest in the properties and joint ventures as established with the most recent asset-based valuation, until the monthly payment equals $2.7 million (or $32.5 million annualized), as of the last day of each preceding month. ~~The~~For the first three months of 2011, Wells REIT II generally paid monthly ~~payment remains capped at that amount until~~asset management fees equal to one-twelfth of 0.625% of the cost of ~~(i)~~ all ~~properties~~ of Wells REIT IIII's properties (other than those that fail to meet specified occupancy thresholds) and ~~(ii)~~its investments in joint ventures are at least $6.5 billion, after which the monthly asset management fee will equal one-twelfth of 0.5% of the cost of (i) all properties of Wells REIT II (other than those that fail to meet specified occupancy thresholds) and (ii) investments in joint ventures. However, monthly asset management fees shall be assessed on the Lindbergh Center Buildings and the Energy Center I Building, which were acquired on July 1, 2008 and June 28, 2010, respectively, at one-twelfth of 0.5% immediately. The amount of asset management fees paid in any three-month period is limited to 0.25% of the average of the preceding three months’ net asset value calculations less Wells REIT II’s outstanding debt. Effectiveventures; from April 2011 through March 2012, asset management fees were capped at $2.7 million per month (or $32.5 million annualized) following the March 2011 acquisition of the Market Square Buildings. With respect to (ii) above, Wells REIT II published its first net asset-based valuation (per share) on November 8, 2011, which has not impacted asset management fees incurred to date due to continued applicability of the $2.7 million per month ($32.5 million per annum) cap described above.

Reimbursement for all costs and expenses WREAS II and its affiliates incur in fulfilling its duties as the asset portfolio manager, including (i) wages and salaries (but excluding bonuses other than the signing bonus paid to E. Nelson Mills upon his appointment as President of Wells REIT II) and other employee-related expenses of WREAS II and its ~~affiliates’~~affiliates' employees, who perform a full range of real estate services for Wells REIT II, including management, administration, operations, and marketing, and are billed to Wells REIT II based on the amount of time spent on Wells REIT II by such personnel, provided that such expenses are not reimbursed if incurred in connection with services for which WREAS II and its affiliates receive a disposition fee (described below) or an acquisition fee, and (ii) amounts paid for IRA custodial service costs allocated to Wells REIT II accounts. The Advisory Agreement limits the amount of reimbursements to the Advisor of ~~“portfolio~~"portfolio general and administrative ~~expenses”~~expenses" and ~~“personnel~~"personnel expenses,”" as defined, to the extent they would exceed $18.7 million and $10.5 million, respectively, for the period from January 1, 2011 through December 31, ~~2011.~~2011 and $4.5 million and $2.5 million, respectively, for the period from January 1, 2012 through March 31, 2012.

For any property sold by Wells REIT II, other than part of a ~~“bulk sale”~~"bulk sale" of assets, as defined, a disposition fee equal to 1.0% of the sales price, with the limitation that the total real estate commissions (including such disposition fee) for any Wells REIT II property sold may not exceed the lesser of (i) 6.0% of the sales price of each property or (ii) the level of real estate commissions customarily charged in light of the size, type, and location of the property.

Incentive fee of 10% of net sales proceeds remaining after stockholders have received distributions equal to the sum of the ~~stockholders’~~stockholders' invested capital, plus an 8% per annum cumulative return of invested capital, which fee is payable only if the shares of common stock of Wells REIT II are not listed on an exchange.

Listing fee of 10% of the amount by which the market value of the stock plus distributions paid prior to listing exceeds the sum of 100% of the invested capital, plus an 8% per annum cumulative return on invested capital, which fee will be reduced by the amount of any incentive fees paid as described in the preceding bullet.

Effective November 8, 2011, the date of Wells REIT II's net asset value publication, asset management fees will be calculated based on the lesser of (i) the amount determined in accordance with the agreement as described above or (ii) the aggregate value of Wells REIT II's interest in the properties and joint ventures as established with the most recent asset-based valuation.Advisory Agreement Renewal

~~Dealer-Manager Agreement~~

~~With respect to the Third Offering,~~On April 1, 2012, Wells REIT II renewed the advisory agreement with WREAS II for an additional three months (the "April Renewed Advisory Agreement"). The April Renewed Advisory Agreement is effective from April 1, 2012 through June 30, 2012 and has materially the same terms as the agreement that was ~~party~~in effect through March 31, 2012, with limits on reimbursements to WREAS II of "portfolio general and administrative expenses" and "personnel expenses," as defined, to the extent they would exceed approximately $4.5 million and $2.5 million, respectively, for the period from April 1, 2012 through June 30, 2012. In addition, the April Renewed Advisory Agreement includes a ~~dealer-manager agreement (the “Dealer-Manager Agreement”)~~limit of $1.5 million on acquisition fees during the term of the agreement.

Proposed Agreements with Wells Investment Securities, Inc. (“WIS”), whereby WIS, an affiliate of Wells Capital, performed the dealer-manager function for Wells REIT II. For these services, WIS earned a commission of up to 7% of the gross offering proceeds from the sale of the shares ofReal Estate Funds and its Affiliates

Although Wells REIT II ~~of which substantially all was re-allowed~~can give no assurance that the parties will be able to ~~participating broker/dealers.~~come to agreement, Wells REIT II ~~pays no commissions on shares issued under its DRP.~~

~~Additionally, with respect~~is working to document and agree to the ~~Third Offering,~~following proposed arrangements with Wells Real Estate Funds and its affiliates:

Advisory Agreements. Wells REIT II ~~was required~~is in negotiations to ~~pay WIS a dealer-manager fee~~enter into an advisory agreement for the period from July 1 through December 31, 2012. The parties expect that the total fees and reimbursements under this agreement (the "Initial Term Advisory Agreement"), would reflect savings of ~~2.5%~~approximately $375,000 to the company. Following the expiration of the gross offering proceeds from the sale of Wells REIT II’s stock at the time the shares were sold. Under the Dealer-Manager Agreement, up to 1.5% of the gross offering proceeds were re-allowable by WIS to participating broker/dealers. Wells REIT II pays no dealer-manager fees on shares issued under its DRP.

Initial Term

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Advisory Agreement, the parties expect to enter into a subsequent advisory agreement for another year with fees and reimbursements being approximately $1,750,000 less than Wells REIT II pays for such services under the current payment terms. This one-year advisory agreement, which is referred to as the "Renewal Advisory Agreement," and the Initial Term Advisory Agreement would each be terminable on 60 days' notice without penalty by either party. The Renewal Advisory Agreement would also automatically terminate upon the exercise of the WREAS II Assignment Option, which is described below.

Wells REIT II expects that stockholder and communications services (currently provided under Well REIT II's advisory agreement) would be covered under a separate agreement with Wells Real Estate Funds or an affiliate of WREF (the "Investor Services Agreement"). The savings referenced in the prior paragraph are inclusive of the amounts expected to be paid under the Investor Services Agreement. Accordingly, if WREF enters into the Initial Term Advisory Agreement, the Renewal Advisory Agreement and the Investor Services Agreement, from July 1, 2012 through December 31, 2013, Wells REIT II would expect to receive all of the services Wells REIT II currently receive from the Advisor and its affiliates under Wells REIT II's current advisory agreement for a total cost that is approximately $2,125,000 less than Wells REIT II would pay for such services under current payment terms. The Investor Services Agreement would commence on July 1, 2012 for a six-month term. Wells REIT II expects the Investor Services Agreement would be renewed on the same terms for a one-year term commencing January 1, 2013. The Investor Services Agreement would be terminable on 60 days' notice without penalty. Also, upon the exercise of the WREAS II Assignment Option, certain caps designed to ensure the savings described above would expire.

Transitional Services Agreement. Subject to coming to terms on final documentation, WREF has indicated a willingness to enter into a Transitional Services Agreement pursuant to which WREF would be obligated to assign WREAS II to Wells REIT II at a time of Wells REIT II's choosing during the term of the Renewal Advisory Agreement (the "WREAS II Assignment Option"). No payment would be associated with this assignment. However, Wells REIT II would agree to pay WREF for the work required to transfer sufficient employees, proprietary systems and processes and assets to WREAS II to prepare for a successful transition to self-management. The Transitional Services Agreement would commence on July 1, 2012 and run through December 31, 2013. Wells REIT II would pay WREF $500,000 per month for the first 12 months for these services, with no additional payments required during the last six months of the agreement's term. The Transitional Services Agreement would not be terminable by either party except for cause. Should Wells REIT II exercise the proposed WREAS II Assignment Option prior to December 31, 2013, Wells REIT II must also agree to enter into a consulting agreement with WREF pursuant to which WREF would consult with Wells REIT II regarding certain of the matters covered by the Renewal Advisory Agreement at a price equal to the amounts remaining to be paid under that agreement less the costs assumed by Wells REIT II in connection with the assignment.

Agreements with WREF After Wells REIT II's Self-management. Upon becoming self-managed through the exercise of the WREAS II Assignment Option, Wells REIT II would expect to have the following agreements in place with WREF or its affiliates:

Investor Services Agreement (described above), with payment terms to be negotiated.

Operations and Administrative Support Agreement, with respect to the provision of human resources services, certain information technology services (such as desktop support services) and accounts payable administration. Whether Wells REIT II enters into this agreement would be solely at its discretion depending upon Wells REIT II's needs at that time. Assuming Wells REIT II had 50 employees during the first year that it was self-managed, Wells REIT II estimates the maximum annual costs under such an agreement would be less than $900,000.

Lease and Occupancy Agreement, with respect to the leasing of office space at a cost of approximately $250,000 per year. Whether Wells REIT II enters into this agreement would be solely at Wells REIT II's discretion as Wells REIT II might choose to lease space elsewhere.

Master Property Management, Leasing and Construction Management Agreement (the "Master Property Management Agreement"). Wells REIT II is already party to this agreement with Wells Management. The current agreement is terminable without penalty on 60 days' notice. Whether Wells REIT II terminates this agreement or renew or modify it following Wells REIT II's becoming self-managed would be solely at Wells REIT II's discretion. Wells REIT II expects this agreement would be at market rates.

Property Management, Leasing, and Construction Agreement

Wells REIT II and Wells Management, an affiliate of WREAS II, were party to a master property management, leasing, and construction agreement (the ~~“Management Agreement”~~"Management Agreement") during ~~2008, 2009,~~2011 and ~~2010,~~2012, under which Wells Management received the following fees and reimbursements in consideration for supervising the management, leasing, and construction of certain Wells REIT II properties:

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Property management fees in an amount equal to a percentage negotiated for each property managed by Wells Management of the gross monthly income collected for that property for the preceding month;

Leasing commissions for new, renewal, or expansion leases entered into with respect to any property for which Wells Management serves as leasing agent equal to a percentage as negotiated for that property of the total base rental and operating expenses to be paid to Wells REIT II during the applicable term of the lease, provided, however, that no commission shall be payable as to any portion of such term beyond 10 years;

Initial lease-up fees for newly constructed properties under the agreement, generally equal to one ~~month’s~~month's rent;

Fees equal to a specified percentage of up to 5% of all construction build-out funded by Wells REIT II, given as a leasing concession, and overseen by Wells Management; and

Other fees as negotiated with the addition of each specific property covered under the agreement.

~~Assignment of Management Agreement~~

Effective January 1, 2011, Wells Management assigned all of its rights, title, and interest in the Management Agreement to WREAS II, and Wells REIT II consented to such assignment. As part of this assignment, Wells Management has guaranteed the performance of all of WREAS II’s obligations under the Management Agreement. Pursuant to its terms, the Management Agreement was renewed on October 24, 2011 for an additional one-year term.

Related-Party Costs

Pursuant to the terms of the agreements described above, Wells REIT II incurred the following related-party costs for the three months ~~and nine months~~ ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011, respectively (in thousands):


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
	2011		2010		2011		2010		2012		2011
Asset management fees	$	8,125	$	7,802	$	23,969	$	22,724	$	8,125	7,719
Administrative reimbursements, net⁽¹⁾	2,913		2,682		9,337		9,565		2,752		2,840
Property management fees	1,350		874		3,566		2,686		1,226		1,049
Acquisition fees	—		1,933		1,307		8,853		—		648
Construction fees⁽⁴⁾⁽²⁾	60		33		109		157		41		39
Commissions, net of discounts⁽²⁾⁽³⁾	—		3,762		—		21,926
Dealer-manager fees, net of discounts⁽²⁾	—		1,380		—		7,842
Other offering costs⁽²⁾	—		269		—		4,447
Total	$	12,448	$	18,735	$	38,288	$	78,200	$	12,144	$	12,295


⁽¹⁾	Administrative reimbursements are presented net of reimbursements from tenants of approximately ~~$1.2~~$1.1 million and ~~$0.6~~$0.8 million for the three months ended ~~September 30, 2011~~March 31, 2012 and ~~2010, respectively, and approximately $3.0 million and 2.0 million for the~~ ~~nine~~ ~~months ended~~ ~~September 30,~~ 2011 ~~and~~ ~~2010~~, respectively.


⁽²⁾	~~Commissions, dealer-manager fees, and other offering costs were charged against equity as incurred.~~


⁽³⁾	~~Substantially all commissions were re-allowed to participating broker/dealers during 2010.~~


⁽⁴⁾	Construction fees are capitalized to real estate assets as incurred.

Wells REIT II incurred no related-party commissions, dealer-manager fees, other offering costs, incentive fees, listing fees, disposition fees or leasing commissions during the three months ~~and nine months~~ ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011, respectively.

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Due to Affiliates

The detail of amounts due to WREAS II and its affiliates is provided below as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 (in thousands):


	September 30, 2011		December 31, 2010		March 31, 2012		December 31, 2011
Administrative reimbursements	$	1,160	$	1,551	$	1,259	$	217
Asset and property management fees	465		2,924		359		3,112
Commissions and dealer-manager fees	—		4
	$	1,625	$	4,479	$	1,618	$	3,329

~~Economic~~Operational Dependency

Wells REIT II has engaged WREAS II and Wells Management to provide certain services that are essential to Wells REIT II, including asset management services, supervision of the property management and leasing of some properties owned by Wells REIT II, asset acquisition and disposition services, as well as other administrative responsibilities for Wells REIT II, including accounting services, stockholder communications, and investor relations. Further, WREAS II has engaged Wells Capital to retain the use of its employees to carry out certain of the services listed above. As a result of these relationships, Wells REIT ~~II is~~II's operations are dependent upon WREAS II, Wells Capital, and Wells Management.

WREAS II, Wells Capital, and Wells Management are owned and controlled by WREF. Historically, the operations of WREAS II, Wells Capital, and Wells Management have represented substantially all of the business of WREF. Accordingly, Wells REIT II

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focuses on the financial condition of WREF when assessing the financial condition of WREAS II, Wells Capital, and Wells Management. In the event that WREF were to become unable to meet its obligations as they become due, Wells REIT II might be required to find alternative service providers.

Future net income generated by WREF will be largely dependent upon the amount of fees earned by ~~WREF’s~~WREF's subsidiaries based on, among other things, the level of investor proceeds raised and the volume of future acquisitions and dispositions of real estate assets by other WREF-sponsored real estate programs, as well as distribution income earned from equity interests in another REIT previously sponsored by Wells Capital. As of ~~September 30, 2011~~,March 31, 2012, Wells REIT II has no reason to believe that WREF does not have access to adequate liquidity and capital resources, including cash flow generated from operations, cash on hand, and other investments and borrowing capacity necessary to meet its ~~current and future~~ obligations as they become due. Modifying Wells REIT II's service agreements, as described in the preceding section Proposed Agreements with Wells Real Estate Funds and its Affiliates, could impact WREF's future net income and future access to liquidity and capital resources.

~~9. Comprehensive Income (Loss)~~

~~The detail of comprehensive loss is provided below for the three and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ ~~and~~ ~~2010, respectively (in thousands):~~

Three months ended
September 30, Nine months ended
September 30,
2011 2010 2011 2010
Net income $ 5,106
$ 4,721
$ 3,043
$ 383
Market value adjustment to interest rate swap (3,198 ) (2,311 ) (4,025 ) (6,709 )
Comprehensive income (loss) 1,908
2,410
(982 ) (6,326 )
Less: Comprehensive income attributable to noncontrolling interests (4 ) (18 ) (11 ) (59 )
Comprehensive income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc. $ 1,904
$ 2,392
$ (993 ) $ (6,385 )

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~~10.~~9.	Assets Held for Sale and Discontinued Operations

Assets Held for Sale

In accordance with GAAP, assets that meet certain criteria for disposal are required to be classified as "held for sale" in the accompanying balance sheets. As of December 31, 2011, Emerald Point, a four-story office building in Dublin, California, and 5995 Opus Parkway, a five-story office building in Minnetonka, Minnesota, were subject to firm sales contracts and, thus, classified as "held for sale" in the accompanying consolidated balance sheet as of December 31, 2011. The Emerald Point sale closed on January 9, 2012 for $37.3 million, exclusive of transaction costs, and the 5995 Opus Parkway sale closed on January 12, 2012 for $22.8 million, exclusive of transaction costs.

The major classes of assets and liabilities classified as held for sale as of December 31, 2011 is provided below (in thousands):



	December 31, 2011
Real estate assets held for sale:
Real estate assets, at cost:
Land	$	11,536
Buildings and improvements, less accumulated depreciation of $6,509	25,972
Intangible lease assets, less accumulated amortization of $3,042	—
Total real estate assets held for sale, net	$	37,508

Other assets held for sale:
Tenant receivables	$	1,747
Prepaid expenses and other assets	39
Intangible lease origination costs, less accumulated amortization of $2,018	—
Deferred lease costs, less accumulated amortization of $242	1,646
Total other assets held for sale, net	$	3,432

Liabilities held for sale:
Accounts payable, accrued expenses, and accrued capital expenditures	$	176
Due to affiliates	2
Deferred income	446
Total liabilities held for sale	$	624

Discontinued Operations

The historical operating results and gains ~~and losses~~(losses) from the disposition of certain ~~real estate~~ assets, including assets "held for sale" and ~~the related historical~~ operating ~~results~~properties sold, are required to be ~~included~~reflected in a separate section ("discontinued operations") in the consolidated statements of operations for all periods presented. As a result, the revenues and expenses of Emerald Point, 5995 Opus Parkway and the Manhattan Towers property are included in income (loss) from discontinued operations in the accompanying consolidated statements of operations for all periods presented. On September 6, 2011, Wells REIT II transferred the Manhattan Towers property, an office building located in Manhattan Beach, California, to an affiliate of its lender in connection with settling a $75.0 million mortgage note through a deed in lieu of foreclosure transaction, resulting in a $13.5 million gain on extinguishment of debt. ~~On September 15, 2010, Wells REIT II sold New Manchester One, an industrial property located in Douglasville, Georgia, for $15.3 million.~~

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The following table shows the revenues and expenses of the ~~Manhattan Towers property and New Manchester One are presented below:~~above-described discontinued operations (in thousands):


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2011			2010			2011			2010			2012		2011
Revenues:
Rental income	$	404		$	2,007		$	1,511		$	5,882		$	89	$	1,247
Tenant reimbursements	5			533			61			1,521			203		302
Other property income	42			—			42			—
	451			2,540			1,614			7,403
													292		1,549
Expenses:
Property operating costs	382			921			1,842			2,649			186		1,597
Asset and property management fees	5			178			18			531			38		31
Depreciation	305			498			1,193			1,553			—		676
Amortization	18			476			65			1,428			6		226
General and administrative	61			58			168			104			13		87
Total expenses	771			2,131			3,286			6,265			243		2,617
Real estate operating loss	(320		)	409			(1,672		)	1,138			49		(1,068		)
Other income (expense):
Interest expense	(740		)	(1,368		)	(2,900		)	(4,127		)	—		(1,074		)
Interest and other income	1			270			1			810
Loss from discontinued operations	(1,059		)	(689		)	(4,571		)	(2,179		)
Loss on sale of real estate assets	—			(130		)	—			(130		)
Impairment loss on real estate assets	(5,817		)	—			(5,817		)	—
Gain on early extinguishment of debt	13,522			—			13,522			—
Gain (loss) from discontinued operations	$	6,646		$	(819	)	$	3,134		$	(2,309	)
Operating income (loss) from discontinued operations													49		(2,142		)
Gain on sale of real estate assets													16,885		—
Income (loss) from discontinued operations													$	16,934	$	(2,142	)

~~11.~~10. Financial Information for Parent Guarantor, Other Guarantor Subsidiaries and Non-Guarantor Subsidiaries

~~On April 4, 2011, Wells OP II generated net proceeds of $246.7 million from its sale of the~~The 2018 Bonds Payable (see Note 5.Bonds Payable).

The 2018 Bonds Payable require semi-annual interest payments each in April and October based on a contractual annual interest rate of 5.875%. The 2018 Bonds Payable are shown net of the initial issuance discount of approximately $1.8 million on the accompanying consolidated balance sheets. This discount is accreted on the effective interest method, as additional interest expense from the date of issuance through the maturity date in April 2018 of the 2018 Bonds Payable. The net proceeds from the issuance of the 2018 Bonds Payable in the amount of $246.7 million were used to repay a portion of the JPMorgan Chase Bridge Loan ("the JPMorgan Chase Bridge Loan") , which was used to finance a portion of the March 2011 acquisition of the Market Square Buildings.

~~The 2018 Bonds Payable~~ are guaranteed by Wells REIT II and certain direct and indirect subsidiaries of each of Wells REIT II and Wells OP II.

On February 3, 2012, in connection with the execution of the $450 Million Term Loan, Wells REIT II added two subsidiaries as guarantors to the $450 Million Term Loan, the JPMorgan Chase Credit Facility, and the 2018 Bonds Payable, which resulted in the reclassification of prior-period amounts between the guarantor and non-guarantor groupings within the condensed consolidating financial statements to conform with the current period presentation. In accordance with SEC Rule 3-10(d), Wells REIT II includes herein condensed consolidating financial information in lieu of separate financial statements of the subsidiary issuer (Wells OP II) and Subsidiary Guarantors, as defined in the bond indenture, because all of the following criteria are met:

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(1)	The subsidiary issuer (Wells OP II) and all Subsidiary Guarantors are 100% owned by the parent company guarantor (Wells REIT II);


(2)	The guarantees are full and unconditional; and


(3)	The guarantees are joint and several.

Wells REIT II uses the equity method with respect to its investment in subsidiaries included in its condensed consolidating financial statements. Set forth below are Wells REIT ~~II’s~~II's condensed consolidating balance sheets as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 (in thousands) as well as its condensed consolidating statements of operations (in thousands) for the ~~three and~~ ~~nine~~three month periods ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011; its condensed consolidating statements of comprehensive income; and its condensed consolidating statements of cash flows (in thousands), ~~each~~ for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011.

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~~Condensed Consolidating Balance Sheets~~ ~~(in thousands)~~

As of September 30, 2011
Wells REIT II (Parent)
Wells OP II
(the Issuer)
Guarantors Non-Guarantors Consolidating adjustments Wells REIT II (Consolidated)
Assets
Real estate assets, at cost
Land $ —
$ —
$ 199,824
$ 516,048
$ —
$ 715,872
Building and improvements —
—
1,392,591
2,126,073
—
3,518,664
Intangible lease assets —
—
154,743
256,135
—
410,878
Construction in progress —
—
3,105
3,544
—
6,649
Total real estate assets —
—
1,750,263
2,901,800
—
4,652,063

Cash and cash equivalents 11,029
5,735
4,757
10,288
—
31,809
Investment in subsidiaries 3,458,442
2,950,695
—
—
(6,409,137 ) —
Tenant receivables, net of allowance —
—
54,630
74,527
(5,988 ) 123,169
Prepaid expenses and other assets 1,418
200,074
2,088
28,085
(200,741 ) 30,924
Deferred financing costs —
8,849
—
3,447
—
12,296
Intangible lease origination costs —
—
137,230
106,241
—
243,471
Deferred lease costs —
—
14,454
51,191
—
65,645
Investments in development authority bonds —
—
466,000
180,000
—
646,000
Total assets $ 3,470,889
$ 3,165,353
$ 2,429,422
$ 3,355,579
$ (6,615,866 ) $ 5,805,377

Liabilities
Lines of credit and notes payable $ —
$ 220,500
$ 148,150
$ 1,026,966
$ (200,620 ) $ 1,194,996
Bonds payable —
248,363
—
—
—
248,363
Accounts payable, accrued expenses, and accrued capital expenditures 1,667
8,575
16,842
112,372
(5,988 ) 133,468
Due to affiliates (66 ) (210 ) 1,198
824
(121 ) 1,625
Deferred income —
—
20,176
15,615
—
35,791
Intangible lease liabilities —
—
40,562
53,466
—
94,028
Obligations under capital leases —
—
466,000
180,000
—
646,000
Total liabilities 1,601
477,228
692,928
1,389,243
(206,729 ) 2,354,271

Redeemable common stock 137,406
—
—
—
—
137,406

Stockholders’ Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity 3,331,882
2,688,125
1,736,494
1,966,011
(6,409,137 ) 3,313,375

Nonredeemable noncontrolling interests —
—
—
325
—
325

Total equity 3,331,882
2,688,125
1,736,494
1,966,336
(6,409,137 ) 3,313,700

Total liabilities, redeemable common stock, and equity $ 3,470,889
$ 3,165,353
$ 2,429,422
$ 3,355,579
$ (6,615,866 ) $ 5,805,377

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Condensed Consolidating Balance Sheets (in thousands)



	As of March 31, 2012
	Wells REIT II (Parent)		Wells OP II (the Issuer)		Guarantors		Non- Guarantors		Consolidating adjustments			Wells REIT II (Consolidated)
Assets:
Real estate assets, at cost
Land	$	—	$	12,175	$	223,522	$	468,639	$	—		$	704,336
Buildings and improvements	—		62,296		1,625,531		1,760,295		—			3,448,122
Intangible lease assets	—		1,838		145,689		227,275		—			374,802
Construction in progress	—		447		3,206		5,288		—			8,941
Total real estate assets	—		76,756		1,997,948		2,461,497		—			4,536,201
Cash and cash equivalents	22,579		8,124		6,616		11,837		—			49,156
Investment in subsidiaries	3,233,016		2,748,670		—		—		(5,981,686		)	—
Tenant receivables, net of allowance	—		3,435		60,328		68,356		(5,601		)	126,518
Prepaid expenses and other assets	178,078		204,297		4,070		24,917		(380,949		)	30,413
Deferred financing costs	—		10,280		—		1,111		—			11,391
Intangible lease origination costs	—		1,240		127,278		91,488		—			220,006
Deferred lease costs	—		1,919		34,386		40,337		—			76,642
Investments in development authority bonds	—		60,000		466,000		120,000		—			646,000
Total assets	$	3,433,673	$	3,114,721	$	2,696,626	$	2,819,543	$	(6,368,236	)	$	5,696,327

Liabilities:
Line of credit and notes payable	$	—	$	475,000	$	147,304	$	934,757	$	(379,307	)	$	1,177,754
Bonds payable	—		248,489		—		—		—			248,489
Accounts payable, accrued expenses, and accrued capital expenditures	1,391		10,477		22,999		41,825		(5,601		)	71,091
Due to affiliates	—		891		1,221		1,148		(1,642		)	1,618
Deferred income	—		1,160		20,898		14,095		—			36,153
Intangible lease liabilities	—		—		37,747		47,539		—			85,286
Obligations under capital leases	—		60,000		466,000		120,000		—			646,000
Total liabilities	1,391		796,017		696,169		1,159,364		(386,550		)	2,266,391

Redeemable common stock	177,450		—		—		—		—			177,450

Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity	3,254,832		2,318,704		2,000,457		1,659,873		(5,981,686		)	3,252,180
Nonredeemable noncontrolling interests	—		—		—		306		—			306
Total equity	3,254,832		2,318,704		2,000,457		1,660,179		(5,981,686		)	3,252,486
Total liabilities, redeemable common stock, and equity	$	3,433,673	$	3,114,721	$	2,696,626	$	2,819,543	$	(6,368,236	)	$	5,696,327

Page 24

Table of Contents

Condensed Consolidating Balance Sheets (in thousands)



	As of December 31, 2011
	Wells REIT II (Parent)		Wells OP II (the Issuer)		Guarantors		Non- Guarantors		Consolidating adjustments			Wells REIT II (Consolidated)
Assets:
Real estate assets, at cost
Land	$	—	$	—	$	223,522	$	480,814	$	—		$	704,336
Building and improvements	—		—		1,635,910		1,837,061		—			3,472,971
Intangible lease assets	—		—		153,070		238,919		—			391,989
Construction in progress	—		—		4,224		4,190		—			8,414
Real estate assets held for sale	—		—		—		37,508		—			37,508
Total real estate assets	—		—		2,016,726		2,598,492		—			4,615,218
Cash and cash equivalents	11,291		10,597		9,133		8,447		—			39,468
Investment in subsidiaries	3,275,979		2,786,248		—		—		(6,062,227		)	—
Tenant receivables, net of allowance	—		—		58,435		77,471		(5,357		)	130,549
Prepaid expenses and other assets	177,444		202,126		2,056		29,009		(377,804		)	32,831
Deferred financing costs	—		8,287		—		1,155		—			9,442
Intangible lease origination costs	—		—		133,052		98,286		—			231,338
Deferred lease costs	—		—		28,650		39,639		—			68,289
Investments in development authority bonds	—		—		466,000		180,000		—			646,000
Other assets held for sale	—		—		—		3,432		—			3,432
Total assets	$	3,464,714	$	3,007,258	$	2,714,052	$	3,035,931	$	(6,445,388	)	$	5,776,567

Liabilities:
Lines of credit and notes payable	$	—	$	484,000	$	147,730	$	966,123	$	(376,793	)	$	1,221,060
Bonds payable	—		248,426		—		—		—			248,426
Accounts payable, accrued expenses, and accrued capital expenditures	1,652		5,696		24,871		45,487		(5,357		)	72,349
Due to affiliates	—		2,779		1,178		383		(1,011		)	3,329
Deferred income	—		—		22,280		12,799		—			35,079
Intangible lease liabilities	—		—		39,224		50,357		—			89,581
Obligations under capital leases	—		—		466,000		180,000		—			646,000
Liabilities held for sale	—		—		—		624		—			624
Total liabilities	1,652		740,901		701,283		1,255,773		(383,161		)	2,316,448

Redeemable common stock	113,147		—		—		—		—			113,147

Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity	3,349,915		2,266,357		2,012,769		1,779,841		(6,062,227		)	3,346,655
Nonredeemable noncontrolling interests	—		—		—		317		—			317
Total equity	3,349,915		2,266,357		2,012,769		1,780,158		(6,062,227		)	3,346,972
Total liabilities, redeemable common stock, and equity	$	3,464,714	$	3,007,258	$	2,714,052	$	3,035,931	$	(6,445,388	)	$	5,776,567

Page 25

Table of Contents

Consolidating Statements of Operations (in thousands)

As of December 31, 2010
Wells REIT II (Parent)
Wells OP II
(the Issuer)
Guarantors Non-Guarantors Consolidating adjustments Wells REIT II (Consolidated)
Assets
Real estate assets, at cost
Land $ —
$ —
$ 199,825
$ 371,871
$ —
$ 571,696
Building and improvements —
—
1,423,546
1,802,162
—
3,225,708
Intangible lease assets —
—
181,085
247,055
—
428,140
Construction in progress —
—
2,424
2,071
—
4,495
Total real estate assets —
—
1,806,880
2,423,159
—
4,230,039

Cash and cash equivalents 8,281
11,074
8,250
11,277
—
38,882
Investment in subsidiaries 3,623,220
3,386,229
—
—
(7,009,449 ) —
Tenant receivables, net of allowance —
—
49,495
62,487
(3,925 ) 108,057
Prepaid expenses and other assets —
196,062
988
21,205
(195,555 ) 22,700
Deferred financing costs —
5,679
—
4,148
—
9,827
Intangible lease origination costs —
—
154,923
114,991
—
269,914
Deferred lease costs —
—
11,218
35,048
—
46,266
Investments in development authority bonds —
—
466,000
180,000
—
646,000
Total assets $ 3,631,501
$ 3,599,044
$ 2,497,754
$ 2,852,315
$ (7,208,929 ) $ 5,371,685

Liabilities
Lines of credit and notes payable $ —
$ 72,000
$ 149,361
$ 861,133
$ (195,555 ) $ 886,939
Accounts payable, accrued expenses, and accrued capital expenditures 137
966
19,132
86,387
(3,925 ) 102,697
Due to affiliates —
2,614
1,217
648
—
4,479
Deferred income —
—
10,988
15,415
—
26,403
Intangible lease liabilities —
—
45,895
42,039
—
87,934
Obligations under capital leases —
—
466,000
180,000
—
646,000
Total liabilities 137
75,580
692,593
1,185,622
(199,480 ) 1,754,452

Redeemable common stock 161,189
—
—
—
—
161,189

Stockholders’ Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity 3,470,175
3,523,464
1,805,161
1,666,346
(7,009,449 ) 3,455,697

Nonredeemable noncontrolling interests —
—
—
347
—
347

Total equity 3,470,175
3,523,464
1,805,161
1,666,693
(7,009,449 ) 3,456,044

Total liabilities, redeemable common stock, and equity $ 3,631,501
$ 3,599,044
$ 2,497,754
$ 2,852,315
$ (7,208,929 ) $ 5,371,685



	For the three months ended March 31, 2012
	Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non- Guarantors			Consolidating adjustments			Wells REIT II (Consolidated)
Revenues:
Rental income	$	—		$	3,523		$	58,188		$	59,525		$	(750	)	$	120,486
Tenant reimbursements	—			153			9,901			15,737			—			25,791
Hotel income	—			—			—			4,375			—			4,375
Other property income	—			36			201			1,604			(142		)	1,699
	—			3,712			68,290			81,241			(892		)	152,351
Expenses:
Property operating costs	—			1,219			16,568			26,853			(106		)	44,534
Hotel operating costs	—			—			—			4,847			(750		)	4,097
Asset and property management fees:
Related-party	8,008			86			452			841			(36		)	9,351
Other	—			—			452			379			—			831
Depreciation	—			603			13,699			15,823			—			30,125
Amortization	—			629			12,630			13,791			—			27,050
General and administrative	—			4,364			191			788			—			5,343
	8,008			6,901			43,992			63,322			(892		)	121,331
Real estate operating (loss) income	(8,008		)	(3,189		)	24,298			17,919			—			31,020
Other income (expense):
Interest expense	—			(8,704		)	(10,072		)	(14,540		)	6,460			(26,856		)
Interest and other income	1,997			5,366			7,307			1,806			(6,460		)	10,016
Loss on interest rate swap	—			—			—			(76		)	—			(76		)
Income (loss) from equity investment	37,142			43,282			—			—			(80,424		)	—
	39,139			39,944			(2,765		)	(12,810		)	(80,424		)	(16,916		)
Income (loss) before income tax (expense) benefit	31,131			36,755			21,533			5,109			(80,424		)	14,104
Income tax (expense) benefit	—			(11		)	(49		)	157			—			97
Income (loss) from continuing operations	31,131			36,744			21,484			5,266			(80,424		)	14,201
Discontinued operations:
Operating income from discontinued operations	—			—			—			49			—			49
Gains on dispositions of discontinued operations	—			—			—			16,885			—			16,885
Income from discontinued operations	—			—			—			16,934			—			16,934
Net income (loss)	31,131			36,744			21,484			22,200			(80,424		)	31,135
Less: net income attributable to noncontrolling interests	—			—			—			(4		)	—			(4		)
Net income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	31,131		$	36,744		$	21,484		$	22,196		$	(80,424	)	$	31,131

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Table of Contents

Consolidating Statements of Operations (in thousands)


	For the three months ended September 30, 2011																		For the three months ended March 31, 2011
	Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non-Guarantors			Consolidating adjustments			Wells REIT II (Consolidated)			Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non- Guarantors			Consolidating adjustments			Wells REIT II (Consolidated)
Revenues:
Rental income	$	—		$	—		$	52,155		$	70,058		$	(1,293	)	$	120,920		$	—		$	—		$	58,825		$	56,035		$	(1,241	)	$	113,619
Tenant reimbursements	—			—			9,699			17,769			—			27,468			—			—			10,546			15,361			—			25,907
Hotel income	—			—			—			6,271			—			6,271			—			—			—			4,150			—			4,150
Other property income	151			38			209			3,683			(337		)	3,744			—			35			118			297			(167		)	283
	151			38			62,063			97,781			(1,630		)	158,403			—			35			69,489			75,843			(1,408		)	143,959

Expenses:
Property operating costs	—			—			16,326			29,509			(148		)	45,687			—			—			17,241			24,579			(132		)	41,688
Hotel operating costs	—			—			—			6,294			(1,293		)	5,001			—			—			—			5,253			(1,241		)	4,012
Asset & property management fees:
Asset and property management fees:
Related-party	7,952			—			380			1,327			(189		)	9,470			7,546			—			352			897			(35		)	8,760
Other	—			—			443			253			—			696			—			—			577			327			—			904
Depreciation	—			—			11,609			18,708			—			30,317			—			—			13,751			13,691			—			27,442
Amortization	—			—			11,817			17,633			—			29,450			—			—			15,331			14,835			—			30,166
General and administrative	—			4,583			267			1,264			—			6,114			25			4,786			1,095			708			—			6,614
Acquisition fees and expenses	—			—			—			29			—			29			651			—			—			9,375			—			10,026
	7,952			4,583			40,842			75,017			(1,630		)	126,764			8,222			4,786			48,347			69,665			(1,408		)	129,612

Real estate operating income (loss)	(7,801		)	(4,545		)	21,221			22,764			—			31,639

Real estate operating (loss) income																			(8,222		)	(4,751		)	21,142			6,178			—			14,347
Other income (expense):
Interest expense	(11		)	(6,264		)	(10,087		)	(16,738		)	4,440			(28,660		)	—			(3,909		)	(11,020		)	(11,528		)	4,292			(22,165		)
Interest and other income	26			4,717			7,307			2,707			(4,440		)	10,317			2,042			4,292			7,309			2,704			(4,292		)	12,055
Loss on interest rate swap	—			—			—			(14,774		)	—			(14,774		)
Income from equity investment	12,887			18,980			—			—			(31,867		)	—
	12,902			17,433			(2,780		)	(28,805		)	(31,867		)	(33,117		)
Gain on interest rate swap																			—			—			—			89			—			89
Income (loss) from equity investment																			8,593			19,712			—			—			(28,305		)	—
																			10,635			20,095			(3,711		)	(8,735		)	(28,305		)	(10,021		)
Income (loss) before income tax (expense) benefit	5,101			12,888			18,441			(6,041		)	(31,867		)	(1,478		)	2,413			15,344			17,431			(2,557		)	(28,305		)	4,326
Income tax (expense) benefit	—			—			(91		)	29			—			(62		)	—			—			(59		)	290			—			231
Gain (loss) from continuing operations	5,101			12,888			18,350			(6,012		)	(31,867		)	(1,540		)

Income (loss) from continuing operations																			2,413			15,344			17,372			(2,267		)	(28,305		)	4,557
Discontinued operations:
Operating loss from discontinued operations	—			—			—			(1,059		)	—			(1,059		)	—			—			—			(2,142		)	—			(2,142		)
Gain on disposition of discontinued operations	—			—			—			7,705			—			7,705
Gain from discontinued operations	—			—			—			6,646			—			6,646
Loss from discontinued operations																			—			—			—			(2,142		)	—			(2,142		)
Net income (loss)	5,101			12,888			18,350			634			(31,867		)	5,106			2,413			15,344			17,372			(4,409		)	(28,305		)	2,415

Less: Net income attributable to noncontrolling interests	—			—			—			(4		)	—			(4		)

Net income (loss) attributable to the common stockholders of Wells REIT II	$	5,101		$	12,888		$	18,350		$	630		$	(31,867	)	$	5,102
Less: net income attributable to noncontrolling interests																			—			—			—			(4		)	—			(4		)
Net income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.																			$	2,413		$	15,344		$	17,372		$	(4,413	)	$	(28,305	)	$	2,411

Page 27

Table of Contents

Consolidating Statements of ~~Operations~~Comprehensive Income (in thousands)



	For the three months ended March 31, 2012
	Wells REIT II (Parent)		Wells OP II (the Issuer)		Guarantors		Non- Guarantors		Consolidating adjustments			Wells REIT II (Consolidated)
Net income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	31,131	$	36,744	$	21,484	$	22,196	$	(80,424	)	$	31,131
Market value adjustment to interest rate swap	—		608		—		—		—			608
Comprehensive income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	31,131		37,352		21,484		22,196		(80,424		)	31,739
Comprehensive income attributable to noncontrolling interests	—		—		—		4		—			4
Comprehensive income (loss)	$	31,131	$	37,352	$	21,484	$	22,200	$	(80,424	)	$	31,743

For the three months ended September 30, 2010
Wells REIT II (Parent)
Wells OP II
(the Issuer)
Guarantors Non-Guarantors Consolidating adjustments Wells REIT II (Consolidated)
Revenues:
Rental Income $ —
$ —
$ 52,078
$ 61,540
$ (1,103 ) $ 112,515
Tenant reimbursements —
—
8,852
17,227
—
26,079
Hotel income —
—
—
5,501
—
5,501
Other property income —
42
7
667
(231 ) 485
—
42
60,937
84,935
(1,334 ) 144,580

Expenses:
Property operating costs —
—
15,574
27,183
(189 ) 42,568
Hotel operating costs —
—
—
5,602
(1,103 ) 4,499
Asset & property management fees:
Related-party 7,629
—
234
711
(42 ) 8,532
Other —
—
568
443
—
1,011
Depreciation —
—
11,204
14,941
—
26,145
Amortization —
—
12,116
16,336
—
28,452
General and administrative 69
4,592
308
1,056
—
6,025
Acquisition fees and expenses 1,931
—
—
150
—
2,081
9,629
4,592
40,004
66,422
(1,334 ) 119,313

Real estate operating income (loss) (9,629 ) (4,550 ) 20,933
18,513
—
25,267

Other income (expense):
Interest expense —
(1,478 ) (10,117 ) (14,925 ) 4,888
(21,632 )
Interest and other income 46
4,897
7,314
4,532
(4,888 ) 11,901
Loss on interest rate swap —
—
—
(9,885 ) —
(9,885 )
Income from equity investment 14,277
12,009
—
—
(26,286 ) —
14,323
15,428
(2,803 ) (20,278 ) (26,286 ) (19,616 )

Income (loss) before income tax expense 4,694
10,878
18,130
(1,765 ) (26,286 ) 5,651
Income tax expense —
—
(23 ) (88 ) —
(111 )
Gain (loss) from continuing operations 4,694
10,878
18,107
(1,853 ) (26,286 ) 5,540

Discontinued operations:
Operating loss from discontinued operations —
—
—
(689 ) —
(689 )
Loss on sale of discontinued operations —
—
—
(130 ) —
(130 )
Loss from discontinued operations —
—
—
(819 ) —
(819 )
Net income (loss) 4,694
10,878
18,107
(2,672 ) (26,286 ) 4,721

Less: Net income attributable to noncontrolling interests —
—
—
(19 ) —
(19 )

Net income (loss) attributable to the common stockholders of Wells REIT II $ 4,694
$ 10,878
$ 18,107
$ (2,691 ) $ (26,286 ) $ 4,702

~~Page 28~~

~~Table of Contents~~

~~Consolidating Statements of Operations~~ ~~(in thousands)~~

For the nine months ended September 30, 2011
Wells REIT II (Parent)
Wells OP II
(the Issuer)
Guarantors Non-Guarantors Consolidating adjustments Wells REIT II (Consolidated)
Revenues:
Rental Income $ —
$ —
$ 155,759
$ 205,123
$ (3,827 ) $ 357,055
Tenant reimbursements —
—
26,619
51,871
—
78,490
Hotel income —
—
—
15,638
—
15,638
Other property income 151
109
704
5,735
(672 ) 6,027
151
109
183,082
278,367
(4,499 ) 457,210

Expenses:
Property operating costs —
—
46,965
86,505
(412 ) 133,058
Hotel operating costs —
—
—
17,109
(3,827 ) 13,282
Asset & property management fees:
Related-party 23,188
—
912
3,686
(260 ) 27,526
Other —
—
1,498
836
—
2,334
Depreciation —
—
34,748
53,597
—
88,345
Amortization —
—
37,759
53,571
—
91,330
General and administrative 43
14,157
1,709
3,279
—
19,188
Acquisition fees and expenses 1,307
—
—
9,942
—
11,249
24,538
14,157
123,591
228,525
(4,499 ) 386,312

Real estate operating income (loss) (24,387 ) (14,048 ) 59,491
49,842
—
70,898

Other income (expense):
Interest expense (11 ) (22,277 ) (30,285 ) (42,032 ) 13,115
(81,490 )
Interest and other income 2,079
13,381
21,923
8,115
(13,115 ) 32,383
Loss on interest rate swap —
—
—
(22,219 ) —
(22,219 )
Income from equity investment 25,350
53,071
—
—
(78,421 ) —
27,418
44,175
(8,362 ) (56,136 ) (78,421 ) (71,326 )

Income (loss) before income tax (expense) benefit 3,031
30,127
51,129
(6,294 ) (78,421 ) (428 )
Income tax (expense) benefit —
—
(134 ) 471
—
337
Gain (loss) from continuing operations 3,031
30,127
50,995
(5,823 ) (78,421 ) (91 )

Discontinued operations:
Operating loss from discontinued operations —
—
—
(4,571 ) —
(4,571 )
Gain (loss) on disposition of discontinued operations —
—
—
7,705
—
7,705
Gain from discontinued operations —
—
—
3,134
—
3,134
Net income (loss) 3,031
30,127
50,995
(2,689 ) (78,421 ) 3,043

Less: Net income attributable to noncontrolling interests —
—
—
(11 ) —
(11 )

Net income (loss) attributable to the common stockholders of Wells REIT II $ 3,031
$ 30,127
$ 50,995
$ (2,700 ) $ (78,421 ) $ 3,032

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~~Consolidating Statements of Operations~~ ~~(in thousands)~~

For the nine months ended September 30, 2010
Wells REIT II (Parent)
Wells OP II
(the Issuer)
Guarantors Non-Guarantors Consolidating adjustments Wells REIT II (Consolidated)
Revenues:
Rental Income $ —
$ —
$ 155,760
$ 175,080
$ (3,309 ) $ 327,531
Tenant reimbursements —
—
25,637
46,059
—
71,696
Hotel income —
—
—
14,900
—
14,900
Other property income —
67
296
1,448
(558 ) 1,253
—
67
181,693
237,487
(3,867 ) 415,380

Expenses:
Property operating costs —
—
46,563
76,770
(491 ) 122,842
Hotel operating costs —
—
—
16,259
(3,309 ) 12,950
Asset & property management fees:
Related-party 22,203
—
694
2,153
(67 ) 24,983
Other —
—
1,657
1,289
—
2,946
Depreciation —
—
33,312
40,485
—
73,797
Amortization —
—
36,636
49,187
—
85,823
General and administrative 182
15,883
669
1,653
—
18,387
Acquisition fees and expenses 8,852
—
206
691
—
9,749
31,237
15,883
119,737
188,487
(3,867 ) 351,477

Real estate operating income (loss) (31,237 ) (15,816 ) 61,956
49,000
—
63,903

Other income (expense):
Interest expense —
(3,607 ) (30,372 ) (41,709 ) 11,415
(64,273 )
Interest and other income 111
11,455
21,928
9,946
(11,415 ) 32,025
Loss on interest rate swap —
—
—
(29,068 ) —
(29,068 )
Income from equity investment 31,455
31,825
—
—
(63,280 ) —
31,566
39,673
(8,444 ) (60,831 ) (63,280 ) (61,316 )

Income (loss) before income tax (expense) benefit 329
23,857
53,512
(11,831 ) (63,280 ) 2,587
Income tax (expense) benefit —
—
(63 ) 168
—
105
Gain (loss) from continuing operations 329
23,857
53,449
(11,663 ) (63,280 ) 2,692

Discontinued operations:
Operating loss from discontinued operations —
—
—
(2,179 ) —
(2,179 )
Loss on sale of discontinued operations —
—
—
(130 ) —
(130 )
Loss from discontinued operations —
—
—
(2,309 ) —
(2,309 )
Net income (loss) 329
23,857
53,449
(13,972 ) (63,280 ) 383

Less: Net income attributable to noncontrolling interests —
—
—
(59 ) —
(59 )

Net income (loss) attributable to the common stockholders of Wells REIT II $ 329
$ 23,857
$ 53,449
$ (14,031 ) $ (63,280 ) $ 324



	For the three months ended March 31, 2011
	Wells REIT II (Parent)		Wells OP II (the Issuer)		Guarantors		Non- Guarantors			Consolidating adjustments			Wells REIT II (Consolidated)
Net income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	2,413	$	15,344	$	17,372	$	(4,413	)	$	(28,305	)	$	2,411
Market value adjustment to interest rate swap	—		—		—		752			—			752
Comprehensive income (loss) attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	2,413		15,344		17,372		(3,661		)	(28,305		)	3,163
Comprehensive income attributable to noncontrolling interests	—		—		—		4			—			4
Comprehensive income (loss)	$	2,413	$	15,344	$	17,372	$	(3,657	)	$	(28,305	)	$	3,167

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Consolidating Statements of Cash Flows (in thousands)


	For the nine months ended September 30, 2011															For the three months ended March 31, 2012
	Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non-Guarantors			Wells REIT II (Consolidated)			Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non- Guarantors			Wells REIT II (Consolidated)
Cash flow from operations	$	859		$	(60,743	)	$	137,365		$	130,935		$	208,416
Cash flows from operating activities:																$	—		$	(18,568	)	$	51,862		$	40,300		$	73,594

Cash from investing activities:
Cash flows from investing activities:
Net proceeds from sale of real estate																—			57,685			—			—			57,685
Investment in real estate and related assets	(604,126		)	—			(11,297		)	(34,500		)	(649,923		)	—			(1,730		)	(7,230		)	(4,038		)	(12,998		)
Net cash used in investing activities	(604,126		)	—			(11,297		)	(34,500		)	(649,923		)
Net cash provided by (used in) investing activities																—			55,955			(7,230		)	(4,038		)	44,687

Cash from financing activities:
Cash flows from financing activities:
Borrowings, net of fees	—			1,165,529			—			324,371			1,489,900			—			406,279			—			—			406,279
Repayments	—			(780,500		)	—			(111,272		)	(891,772		)	—			(418,000		)	—			(34,415		)	(452,415		)
Redemption of noncontrolling interest	—			(87		)	—			—			(87		)
Distributions	(202,871		)	—			—			(33		)	(202,904		)	(67,954		)	—			—			(15		)	(67,969		)
Intercompany transfers, net	769,512			(329,538		)	(129,561		)	(310,413		)	—			73,442			(28,139		)	(47,149		)	1,846			—
Issuance of common stock, net of redemptions and fees	39,374			—			—			—			39,374			5,800			—			—			—			5,800
Net cash provided by (used in) financing activities	606,015			55,404			(129,561		)	(97,347		)	434,511			11,288			(39,860		)	(47,149		)	(32,584		)	(108,305		)

Net (decrease) increase in cash and cash equivalents	2,748			(5,339		)	(3,493		)	(912		)	(6,996		)
Net increase (decrease) in cash and cash equivalents																11,288			(2,473		)	(2,517		)	3,678			9,976
Effect of foreign exchange rate on cash and cash equivalents	—			—			—			(77		)	(77		)	—			—			—			(288		)	(288		)
Cash and cash equivalents, beginning of period	8,281			11,074			8,250			11,277			38,882			11,291			10,597			9,133			8,447			39,468
Cash and cash equivalents, end of period	$	11,029		$	5,735		$	4,757		$	10,288		$	31,809		$	22,579		$	8,124		$	6,616		$	11,837		$	49,156

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Consolidating Statements of Cash Flows (in thousands)


	For the nine months ended September 30, 2010																	For the three months ended March 31, 2011
	Wells REIT II (Parent)			Wells OP II (the Issuer)				Guarantors				Non-Guarantors			Wells REIT II (Consolidated)			Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors			Non- Guarantors			Wells REIT II (Consolidated)
Cash flow from operations	$	(9,820	)	$	(45,508	)		$	126,833			$	117,198		$	188,703
Cash flows from operating activities:																		$	1,365		$	(17,684	)	$	48,315		$	25,764		$	57,760

Cash from investing activities:
Cash flows from investing activities:
Investment in real estate and related assets	(12,145		)	(242,636		)		(8,319		)		(11,532		)	(274,632		)	(598,425		)	—			(2,741		)	(11,164		)	(612,330		)
Net proceeds from the sale of real estate assets	15,250			—			—	—			—	—			15,250
Net cash used in investing activities	3,105			(242,636		)		(8,319		)		(11,532		)	(259,382		)	(598,425		)	—			(2,741		)	(11,164		)	(612,330		)

Cash from financing activities:
Cash flows from financing activities:
Borrowings, net of fees	—			48,686				—				—			48,686			—			620,153			—			—			620,153
Repayments	—			—				—				(146,264		)	(146,264		)	—			(20,000		)	—			(485		)	(20,485		)
Distributions	(233,215		)	—				—				(235		)	(233,450		)	(67,485		)	—			—			(13		)	(67,498		)
Intercompany transfers	(151,296		)	228,593				(119,327		)		42,030			—			651,971			(591,030		)	(46,111		)	(14,830		)	—
Issuance of common stock, net of fees	352,479			—				—				—			352,479
Net cash provided by financing activities	(32,032		)	277,279				(119,327		)		(104,469		)	21,451
Issuance of common stock, net of redemptions and fees																		16,102			—			—			—			16,102
Net cash provided by (used in) financing activities																		600,588			9,123			(46,111		)	(15,328		)	548,272

Net (decrease) increase in cash and cash equivalents	(38,747		)	(10,865		)		(813		)		1,197			(49,228		)
Net increase (decrease) in cash and cash equivalents																		3,528			(8,561		)	(537		)	(728		)	(6,298		)
Effect of foreign exchange rate on cash and cash equivalents	—			—				—				41			41			—			—			—			36			36
Cash and cash equivalents, beginning of period	60,919			24,241				8,292				9,273			102,725			8,281			11,074			8,250			11,277			38,882
Cash and cash equivalents, end of period	$	22,172		$	13,376			$	7,479			$	10,511		$	53,538		$	11,809		$	2,513		$	7,713		$	10,585		$	32,620


~~12.~~11.	Subsequent Event

~~Wells REIT II has evaluated subsequent events in~~In connection with the preparation of its consolidated financial statements and notes thereto included in this report on Form 10-Q, ~~and notes the following item in addition to those disclosed elsewhere in this report:~~

~~Declaration of Distributions~~

~~On November 4, 2011,~~ Wells REIT ~~II's board~~II has evaluated its subsequent events and provided disclosures for such material subsequent events in, among others, Note 4. Lines of directors declared distributions for the fourth quarter of 2011 in the amount of $0.125 (12.5 cents) per-share on the outstanding shares of common stock payable to stockholders of record as of December 15, 2011. These distributions will be paid in December 2011.

Credit and Notes Payable within this filing.


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

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. See also ~~“Cautionary~~"Cautionary Note Regarding Forward-Looking ~~Statements”~~Statements" preceding Part I, as well as our consolidated financial statements and the notes thereto and ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2010~~2011.

Overview

~~During the periods presented,~~From 2004 through 2010, we ~~continued to receive net~~raised approximately $5.9 billion in gross equity proceeds ~~from the sale of our common stock under the Third Offering (until it closed in the third quarter of 2010)~~ and, ~~through the dividend reinvestment plan (“DRP”). We have used such net equity proceeds,~~ along with borrowings, ~~primarily to invest in~~invested those proceeds, net of fees, into commercial real estate ~~assets. As a result,~~consisting primarily of high-quality, income-producing office and industrial properties leased to creditworthy entities located in major metropolitan areas throughout the United States. Following our initial growth period, during ~~the periods presented,~~2011 and 2012, we have concentrated our ~~real~~

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~~estate portfolio has grown and~~efforts on actively managing our ~~real estate operating income has increased. In addition, the closing of the Third Offering has impacted our outlook on future sources of capital.~~

~~Liquidity and Capital Resources~~

~~Overview~~

After careful consideration of the size and strength of our portfolio, our board of directors decided to close our primary public equity offering effective mid-2010. As we transitioned out of our offering stage during the second half of 2010, we continued to actively manage our real estate assets and ~~at the same time, began to explore~~exploring a variety of strategic opportunities focused on enhancing the composition of our portfolio and the total return potential for the REIT. In ~~2011,~~doing so, we have ~~concentrated such exploration efforts~~made strategic acquisitions and dispositions, and entered into a number of favorable debt transactions. These activities have given rise to fluctuations in property operating results and interest expense over the periods presented.

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Liquidity and Capital Resources

Overview

In 2011 and 2012, we actively managed our real estate portfolio with an emphasis on aleasing and re-leasing space, and pursuing and closing on strategic ~~acquisition opportunity, managing the composition~~acquisitions and ~~maturities of the borrowings within~~selective dispositions to better align our portfolio with our current investment objectives. During this period, we also promoted our capital structure by continuing to raise net equity proceeds through our dividend reinvestment program (“DRP”), improving the composition, maturities and ~~evaluating~~capacity of our debt portfolio, while lowering our overall borrowing costs, accessing new sources of capital, and identifying additional sources of future capital. ~~To date, these efforts have culminated in the following notable events:~~

~~On March 7, 2011, we acquired the Market Square Buildings, which are located in the Capitol Hill district of Washington D.C., for approximately $603.4 million.~~

On April 4, 2011, we issued $250.0 million of our seven-year, investment-grade, unsecured senior bonds at 99.295 percent of their face value. The coupon interest rate of the bonds is 5.875% per annum, which is subject to adjustment in certain circumstances. We used the bond proceeds to repay amounts drawn on a $300.0 million bridge loan that was used to fund a portion of the purchase price of the Market Square Buildings.

On June 30, 2011, we closed on a $325.0 million mortgage secured by the Market Square Buildings, the net proceeds from which were used to pay down borrowings on the JPMorgan Chase Credit Facility that were used to fund substantially all of the remaining purchase price of the Market Square Buildings.

~~On July 8, 2011, we closed on an amendment to the JPMorgan Chase Credit Facility to extend the maturity date of the line until May 2015 at more favorable terms.~~

~~Short-term Liquidity and Capital Resources~~

In determining how and when to allocate cash resources, we initially consider the source of the cash. We ~~expect to continue to~~ use substantially all net operating cash flows to fund distributions to stockholders. We expect to continue to use a portion of our future DRP proceeds to fund future share redemptions (subject to the limitations of our share redemption program), and to make residual DRP proceeds available to fund capital improvements required for our properties and to fund additional real estate investments.

The amount of distributions that we pay to our common stockholders is determined by our board of directors and is dependent upon a number of factors, including the funds available for distribution to common stockholders, our financial condition, our capital expenditure requirements, our expectations of future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code. When evaluating funds available for stockholder distributions, we consider net cash provided by operating activities, as presented in the accompanying GAAP-basis consolidated statements of cash flows, adjusted to exclude certain costs that were incurred for the purpose of generating future earnings and appreciation in value over the long term, including acquisition fees and expenses. We use DRP proceeds to fund share redemptions (subject to the limitations of our share redemption program), and make residual DRP proceeds available to fund capital improvements for our existing portfolio, additional real estate investments, and other cash needs.

Short-term Liquidity and Capital Resources

During the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, we generated net cash flows from operating activities of $~~208.4~~73.6 million, which consists primarily of receipts from tenants for rent and reimbursements, reduced by payments for operating costs, administrative expenses, and interest expense. ~~Such net cash flows from operating activities are also reduced for acquisition-related costs of~~ ~~$11.2 million~~. During the same period, we paid total distributions to stockholders, including $~~98.0~~31.1 million reinvested in our common stock pursuant to our DRP, of $~~202.9~~68.0 million. We expect to use the majority of our future net cash flow from operating activities to fund distributions to stockholders.

In the first quarter of 2011, we acquired the Market Square Buildings for approximately $603.4 million using primarily short-term borrowings. In the second quarter of 2011, we repaid these short-term borrowings with long-term, fixed rate borrowings, which included approximately $250.0 million from 7-year, unsecured bonds, and approximately $325.0 million from a 12-year mortgage secured by the Market Square Buildings. On July 8, 2011, we amended our JPMorgan Chase Credit Facility to extend the maturity date until May 2015 at more favorable terms. During the ~~nine~~three months ended ~~September 30, 2011~~,March 31, 2012, we sold the 5995 Opus Parkway building and the Emerald Point building for net proceeds of $57.7 million and made net debt repayments of $43.4 million. During this period, we also generated net proceeds from the sale of common stock under our DRP ~~net~~ of ~~acquisition fees~~$31.1 million and used those proceeds, along with cash on hand, to fund share redemptions of ~~$28.1~~$25.3 million ~~a portion of which was used to fund~~and capital expenditures ~~and leasing costs for our properties.~~of $13.0 million.

We believe that we have adequate liquidity and capital resources to meet our current obligations as they come due. As of ~~October 31, 2011~~,April 30, 2012, we had access to the borrowing capacity under the JPMorgan Chase Credit Facility of ~~$277.0~~$435.0 million.

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Long-term Liquidity and Capital Resources

Over the long term, we expect that our primary sources of capital will include operating cash flows, proceeds from our DRP, proceeds from secured or unsecured borrowings from third-party lenders, and, if and when deemed appropriate, proceeds from strategic property sales. We expect that our primary uses of capital will continue to include stockholder distributions; redemptions of shares of our common stock under our share redemption program; capital expenditures, such as building improvements, tenant improvements, and leasing costs; repaying or refinancing ~~debt,~~debt; and selective property acquisitions, either directly or through investments in joint ventures.

On February 3, 2012, we closed on a four-year, unsecured term loan with a syndicate of banks led by JPMorgan Chase Bank N.A. (the "$450.0 Million Term Loan"). The $450.0 Million Term Loan bears interest at LIBOR, plus an applicable base margin; however, we effectively fixed the interest rate (assuming no change in our corporate credit rating) at 2.64% per annum with an interest rate swap executed contemporaneously with the loan. At closing, the $450.0 Million Term Loan yielded initial gross proceeds of $375.0 million. We have the ability to increase the amount of borrowings under the $450.0 Million Term Loan up to a maximum amount of $450.0 million on two occasions during the borrowing period in minimum increments of $25.0 million; however, none of the current banks are obligated to participate in such increases. The $450.0 Million Term Loan matures on February 3, 2016 provided that certain conditions are met prior to that date. Furthermore, provided that certain additional conditions are met prior to, and at, maturity, the $450.0 Million Term Loan shall become eligible for a one-year extension upon paying an extension fee equal to 0.15% of the outstanding balance. The $450.0 Million Term Loan contains the same restrictions and financial covenants as those included in our JPMorgan Chase Credit Facility, which are further described in the "Debt Covenants" section, which follows.

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The initial gross proceeds of $375.0 million were used to repay temporary borrowings on the JPMorgan Chase Credit Facility, which were drawn to repay mortgages in the third and fourth quarters of 2011. In April 2012, we exercised one of the options to increase borrowings under the $450.0 Million Term Loan from $375.0 million to $410.0 million, which additional proceeds were used to further reduce temporary borrowings outstanding, and thereby create additional short-term borrowing capacity, under the JPMorgan Chase Credit Facility.

We have a policy of maintaining our debt level at no more than 50% of the cost of our assets (before depreciation) and, ideally, at significantly less than this 50% ~~debt-to-real-estate asset~~debt-to-real-estate-asset ratio. This conservative leverage goal could reduce the amount of current income we can generate for our stockholders, but it also reduces their risk of loss. We believe that preserving investor capital while generating stable current income is in the best interest of our stockholders. Our debt-to-real-estate-asset ratio is calculated using the outstanding debt balance and real estate at cost. As of ~~September 30, 2011~~,March 31, 2012, our debt-to-real-estate-asset ratio was approximately ~~24.8%~~25.0%.

Our board of directors ~~has~~ elected to maintain the quarterly stockholder distribution rate at $0.125 ~~per-share~~per share for ~~both~~ the ~~third and fourth quarters~~first quarter of ~~2011 (fourth quarter 2011 distributions will be paid in December 2011).~~2012. While our operational cash ~~flow~~flows from ~~our~~ properties ~~remains~~remain strong, economic downturns in our markets, or in the particular industries in which our tenants operate, and capital funding requirements for our real estate portfolio, or for future strategic acquisitions, could ~~adversely impact the ability of our tenants to make lease payments and our ability to re-lease space~~exert negative pressure on ~~favorable terms when leases expire, either of which circumstance could adversely affect our ability to fund~~funds available for future ~~distributions to stockholders.~~stockholder distributions. We are continuing to carefully monitor our cash flows and market conditions and to assess their impact on our future earnings and future distribution projections.

Debt Covenants

Our portfolio debt instruments, the $450 Million Term Loan, the JPMorgan Chase Credit Facility, and the unsecured senior notes, contain certain covenants and restrictions that require us to meet certain financial ratios, including the following key financial covenants and respective covenant levels as of ~~September 30, 2011:~~March 31, 2012:



		Actual Performance
	Covenant Level	~~September 30, 2011~~March 31, 2012
~~Credit Facility (as defined in the JPMorgan~~JP Morgan Chase Credit Facility ~~Amendment):~~and $450 Million Term Loan
Total debt to total asset value ratio	Less than 50%	29%
Secured debt to total asset value ratio	Less than 40%	~~19%~~14%
Fixed charge coverage ratio	Greater than 1.75x	~~4.51x~~4.70x
Unencumbered interest coverage ratio	Greater than 2.0x	~~8.72x~~6.78x
Unencumbered asset coverage ratio	Greater than 2.0x	~~4.50x~~3.25x
Unsecured Senior Notes due ~~2018 (as defined in the Indenture):~~2018:
Aggregate debt test	Less than 60%	24%
Debt service test	Greater than 1.5x	~~5.00x~~4.41x
Secured debt test	Less than 40%	~~16%~~12%
Maintenance of total unencumbered assets	Greater than 150%	~~845%~~6.24x

We were in compliance with all of our debt covenants as of ~~September 30, 2011~~March 31, 2012. Currently, we expect to continue to meet the requirements of our debt covenants over the short and long term.

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Contractual Commitments and Contingencies

As of ~~September 30, 2011~~March 31, 2012, our contractual obligations will become payable in the following periods (in thousands):


Contractual Obligations	Total		2011		2012-2013		2014-2015		Thereafter		Total		2012		2013-2014		2015-2016		Thereafter
Debt obligations	$	1,445,422	$	506	$	64,561	$	325,035	$	1,055,320	$	1,428,113	$	1,775	$	130,263	$	519,759	$	776,316
Interest obligations on debt⁽¹⁾	492,617		19,620		146,686		126,067		200,244		404,818		49,284		121,579		99,994		133,961
Capital lease obligations⁽²⁾	646,000		—		526,000		—		120,000		646,000		60,000		466,000		—		120,000
Operating lease obligations	228,455		1,246		5,233		5,260		216,716		227,506		2,609		5,272		5,272		214,353
Total	$	2,812,494	$	21,372	$	742,480	$	456,362	$	1,592,280	$	2,706,437	$	113,668	$	723,114	$	625,025	$	1,244,630

⁽¹⁾

Interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate swaps agreements (where applicable), a portion of which is reflected as Loss on interest rate swaps in our consolidated statements of operations. Interest obligations on all other debt are measured at the contractual rate. See Item 3. Quantitative and Qualitative Disclosure About Market Risk for more information regarding our interest rate swaps.


⁽²⁾	Amounts include principal obligations only. We made interest payments on these obligations of ~~$30.0~~$10.0 million during the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, all of which was funded with interest income earned on the corresponding investments in development authority bonds.

Results of Operations

Overview

As of ~~September 30, 2011~~March 31, 2012, we owned controlling interests in 7169 office properties, which were approximately ~~94.3%~~92.9% leased, and one hotel. Our real estate operating results have increased for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, as compared to the same period of ~~2010~~2011, primarily due to ~~acquiring properties in 2010 and~~the Market Square Buildings acquisition in the first quarter of 2011. In the near term, we expect future real estate operating income to ~~continue to increase as compared to prior-year levels as a result of the acquisition of the Market Square Buildings for approximately $603.4 million in March of 2011.~~fluctuate based on future strategic acquisitions and dispositions.

Comparison of the three months ended ~~September 30, 2010~~March 31, 2011 versus the three months ended ~~September 30, 2011~~March 31, 2012

~~Continuing Operations~~

Rental income increased from $~~112.5~~113.6 million for the three months ended ~~September 30, 2010~~March 31, 2011 to $~~120.9~~120.5 million for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to ~~properties acquired or placed in service during 2010 and~~acquiring the Market Square Buildings on March 7, 2011. Absent changes to the leases currently in place at our properties, rental income is expected to remain at similar levels in future periods.

Tenant reimbursements remained stable at $25.9 million for the three months ended March 31, 2011 and $25.8 million for the three months ended March 31, 2012, as additional reimbursements from the Market Square property are offset by fewer reimbursements for the remainder of the portfolio primarily due to concessions offered in connection with new and modified leases executed in 2011 and 2012. Property operating costs increased from $~~26.1~~41.7 million ~~and~~ ~~$42.6 million, respectively,~~ for the three months ended ~~September 30, 2010~~March 31, 2011 to $~~27.5~~44.5 million ~~and~~ ~~$45.7 million, respectively,~~ for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to ~~properties acquired or placed in service during 2010 and 2011.~~the acquisition of the Market Square Buildings on March 7, 2012. Absent changes to the leases currently in place at our properties, future tenant reimbursement fluctuations are generally expected to correspond with future property operating cost reimbursements.

Hotel income, net of hotel operating costs, ~~increased slightly from~~remained relatively stable at $~~1.0~~0.1 million for the three months ended ~~September 30, 2010~~March 31, 2011 toand $~~1.3~~0.3 million for the three months ended ~~September 30, 2011~~March 31, 2012. Hotel income and hotel operating costs are primarily driven by the local economic conditions and, as a result, are expected to fluctuate in the future primarily based on changes in the supply of, and demand for, hotel and banquet space in Cleveland, Ohio, similar to that offered by the Key Center Marriott hotel.

Other property income increased from ~~$0.5~~$0.3 million for the three months ended ~~September 30, 2010~~March 31, 2011 to ~~$3.7~~$1.7 million for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to fees earned in connection with a lease ~~terminations.~~restructuring at 4100-4300 Wildwood Parkway. Future other property income fluctuations are expected to primarily relate to future lease restructuring activities.

Asset and property management fees increased from $~~9.5~~9.7 million for the three months ended ~~September 30, 2010~~March 31, 2011 to $10.2 million for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to ~~properties acquired and placed into service during 2010 and~~the acquisition of the Market Square Buildings on March 7, 2011. Future asset and property management fees may fluctuate in response to property dispositions or leasing activities. Pursuant to the limitations outlined in the Advisory Agreement, monthly asset management fees ~~were~~have remained capped at $2.7 million (or $32.5 million annualized) ~~beginning in~~since April 2011 ~~as a result of~~following the March 2011 acquisition of the Market Square Buildings for $603.4 million. Effective November 8, 2011, the date of our net asset value publication, asset management fees will be based on the lesser of (i) gross cost, as defined by the Advisory Agreement, or (ii) the aggregate value of our investment in the properties and joint ventures as established with the most recent asset-based valuation. Please refer tomillion (see Note 8. ~~Related-Party~~Related Party Transactions and Agreements).

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~~Agreements~~ ~~in the accompanying consolidated financial statements for additional details.~~

Depreciation increased from $~~26.1~~27.4 million for the three months ended ~~September 30, 2010~~March 31, 2011 to $~~30.3~~30.1 million for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to ~~growth in~~ the ~~portfolio in 2010 and~~Market Square Buildings acquisition on March 7, 2011. Excluding the impact of changes to the leases currently in place at our properties, depreciation is expected to continue to increase in future periods, as compared to historical periods, due to ongoing capital improvements to our properties.

Amortization ~~increased~~decreased from ~~$28.5~~$30.2 million for the three months ended ~~September 30, 2010~~March 31, 2011 to ~~$29.5~~$27.1 million for the three months ended ~~September 30, 2011, primarily~~March 31, 2012 due to ~~growth~~the impact of a lease termination at 1950 University Circle in the ~~portfolio~~first quarter of 2011, and discontinuing future amortization of in-place lease assets that were written-down or written-off in ~~2010~~connection with other lease modification and termination activities in 2011. ~~Excluding~~In addition to the impact of changes to the leases currently in place at our properties, amortization is expected to ~~increase~~fluctuate in future periods due ~~to owning new properties for a full period.~~strategic acquisition and disposition activity.

General and administrative expenses ~~remained relatively stable at~~decreased from $~~6.0~~6.6 million for the three months ended ~~September 30, 2010~~March 31, 2011 ~~and~~to $~~6.1~~5.3 million for the three months ended ~~September 30,~~March 31, 2012 due to bad debt expense incurred in the first quarter of 2011, and the limit imposed on "portfolio general and administrative expenses" under the Advisory Agreement in the first quarter of 2012 (see Note 8. Related-Party Transactions and Agreements).

Acquisition fees and expenses ~~decreased from~~were $~~2.1~~10.0 million for the three months ended ~~September 30, 2010~~ to ~~$0.0 million~~ ~~for the three months ended~~ ~~September 30,~~March 31, 2011, primarily due to the ~~closing~~acquisition of the ~~Third Offering effective June 30, 2010 and changing the manner in which~~Market Square Buildings. No acquisition fees ~~are incurred. Through~~were incurred during the three months ended March 31, 2012 as we did not acquire any properties during this period. Until July 31, 2011, acquisition fees were incurred at 2.0% of gross offering proceeds, subject to certain limitations; effective August 1, 2011, acquisition fees are incurred at 1% of the property purchase price (excluding acquisition expenses); however, in no event may ~~acquisition fees cause~~ total acquisition fees for the ~~2011~~2012 calendar year to exceed 2% of total gross offering proceeds. As a result of the change, we expect future acquisition fees and expenses to fluctuate based on future acquisition activity.

Interest expense increased from $~~21.6~~22.2 million for the three months ended ~~September 30, 2010~~March 31, 2011 to $~~28.7~~26.9 million for the three months ended ~~September 30, 2011~~March 31, 2012, primarily due to ~~debt obtained to fund~~changes in the ~~acquisition~~composition of ~~the Market Square Buildings in March 2011.~~borrowings within our capital structure. Future interest expense will depend largely upon changes in market interest rates and our ability to secure financings or refinancings.

Interest and other income decreased from $~~11.9~~12.1 million for the three months ended ~~September 30, 2010~~March 31, 2011 to $~~10.3~~10.0 million for the three months ended ~~September 30, 2011~~, primarily due to recovering a tax payment made in connection with a prior-period acquisition in 2010. Interest income is expected to remain relatively consistent in future periods given that the majority of this activity consists of interest income earned on investments in development authority bonds, which had a weighted-average remaining term of approximately 5.9 years as of ~~September 30, 2011. Interest income earned on investments in development authority bonds is entirely offset by interest expense incurred on the corresponding capital leases.~~

~~We recognized a loss on interest rate swaps that do not qualify for hedge accounting treatment of~~ ~~$9.9 million~~ ~~for the three months ended~~ ~~September 30, 2010, compared with a loss of~~ ~~$14.8 million~~ ~~for the three months ended~~ ~~September 30, 2011~~. We anticipate that future gains and losses on interest rate swaps that do not qualify for hedge accounting treatment will fluctuate, primarily due to changes in the estimated fair values of our interest rate swaps relative to then-current market conditions. Market value adjustments to swaps that qualify for hedge accounting treatment are recorded directly to equity, and therefore do not impact net income (loss).

~~We recognized net income attributable to Wells REIT II of~~ ~~$4.7 million~~ (~~$0.01~~ ~~per share) for the three months ended~~ ~~September 30, 2010, as compared to net income of~~ ~~$5.1 million~~ (~~$0.01~~ ~~per share) for the three months ended~~ ~~September 30, 2011~~. The increase in earnings is primarily due to growth in the portfolio in 2010 and 2011. Absent future fluctuations in the market value of our interest rate swaps that do not qualify for hedge accounting treatment, we expect future net income to remain at a level similar to the ~~third~~ quarter 2011 in future periods. Should the decline in the U.S. economy or U.S. real estate markets continue for a prolonged period of time, the creditworthiness of our tenants and our ability to achieve market rents comparable to the leases currently in place at our properties may suffer and could lead to a decline in net income over the long term.

~~Discontinued Operations~~

In the third quarter of 2011, we transferred the Manhattan Towers property, an office building located in Manhattan Beach, California, to an affiliate of its lender in connection with settling a $75.0 million mortgage note through a deed in lieu of foreclosure transaction. As a result, we recognized a property impairment loss of $5.8 million and a gain on early extinguishment of debt of $13.5 million, which are included in gain (loss) on disposition of discontinued operations in the statement of operations. In the third quarter of 2010, we sold New Manchester One, an industrial property located in Douglasville, Georgia, for $15.3 million, which resulted in a loss on sale of $0.2 million. In accordance with GAAP, we have classified the results of operations related to Manhattan Towers and New Manchester One as discontinued operations for all periods presented. As a result, earnings from discontinued operations increased from a loss of ~~$(0.8) million~~ ~~for the three months ended~~ ~~September 30, 2010~~ ~~to a gain of~~ ~~$6.6 million~~ ~~for the three months ended~~ ~~September 30, 2011~~ ~~due to disposing of Manhattan Towers in the third quarter of 2011.~~

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~~Comparison of the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ ~~versus the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~

~~Continuing Operations~~

~~Rental income increased from~~ ~~$327.5 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$357.1 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to properties acquired or placed in service during 2010 and the first three months of 2011. Absent changes to the leases currently in place at our properties, rental income is expected to remain at similar levels in future periods.

~~Tenant reimbursements and property operating costs increased from~~ ~~$71.7 million~~ ~~and~~ ~~$122.8 million, respectively, for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$78.5 million~~ ~~and~~ ~~$133.1 million, respectively, for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to properties acquired or placed in service during 2010 and 2011. Absent changes to the leases currently in place at our properties, future tenant reimbursement fluctuations are generally expected to correspond with future property operating cost reimbursements.

~~Hotel income, net of hotel operating costs, increased from approximately~~ ~~$2.0 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$2.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~. Hotel income and hotel operating costs are primarily driven by the local economic conditions and, as a result, are expected to fluctuate in the future primarily based on changes in the supply of, and demand for, hotel and banquet space in Cleveland, Ohio similar to that offered by the Key Center Marriott hotel.

Other property income increased from $1.2 million for the nine months ended September 30, 2010 to $6.0 million for the nine months ended September 30, 2011, primarily due to fees earned in connection with lease terminations. Fluctuations in other property income in the future are expected to primarily relate to future lease restructuring activities.

~~Asset and property management fees increased from~~ ~~$27.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$29.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to properties acquired and placed into service during 2010 and 2011. Future asset and property management fees may fluctuate in response to property dispositions or leasing activities. Pursuant to the limitations outlined in the Advisory Agreement, monthly asset management fees were capped at $2.7 million (or $32.5 million annualized) beginning in April 2011 as a result of the March 2011 acquisition of the Market Square Buildings for $603.4 million. Effective November 8, 2011, the date of our net asset value publication, asset management fees will be based on the lesser of (i) gross cost, as defined by the Advisory Agreement, or (ii) the aggregate value of our investment in the properties and joint ventures as established with the most recent asset-based valuation. Please refer to Note 8. ~~Related-Party Transactions and Agreements~~ ~~in the accompanying consolidated financial statements for additional details.~~

~~Depreciation increased from~~ ~~$73.8 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$88.3 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to growth in the portfolio in 2010 and the first three months of 2011. Excluding the impact of changes to the leases currently in place at our properties, depreciation is expected to continue to increase in future periods, as compared to historical periods, due to ongoing capital improvements to our properties.

~~Amortization increased from~~ ~~$85.8 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$91.3 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to growth in the portfolio in 2010 and the first three months of 2011. Excluding the impact of changes to the leases currently in place at our properties, amortization is expected to increase in future periods due to owning new properties for a full period.

~~General and administrative expenses increased from~~ ~~$18.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$19.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011, primarily due to an early lease termination at one of our properties.~~

~~Acquisition fees and expenses increased from~~ ~~$9.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$11.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~31, 2012, primarily due to the ~~acquisition~~settlement of ~~the Market Square Buildings~~litigation in ~~March~~ 2011 partially offset by the impact of closing the Third Offering effective June 30, 2010. Through July 31, 2011, acquisition fees were incurred at 2.0% of gross offering proceeds, subject to certain limitations; effective August 1, 2011, acquisition fees are incurred at 1% of the property purchase price (excluding acquisition expenses); however, in no event may acquisition fees cause total acquisition fees for the 2011 calendar year to exceed 2% of total gross offering proceeds. As a result of the change, we expect future acquisition fees and expenses to fluctuate based on future acquisition activity.

~~Interest expense increased from~~ ~~$64.3 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$81.5 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~, primarily due to debt obtained to fund the acquisition of the Market Square Buildings in March 2011 including the offering of bonds in April 2011. Future interest expense will depend largely upon changes in market interest rates and our ability to secure financings or refinancings.

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~~Interest and other income increased from~~ ~~$32.0 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ to ~~$32.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011, primarily due to settling litigation~~ related to a prospective acquisition that did not close. Interest income is expected to remain relatively consistent in future periods given that the majority of this activity consists of interest income earned on investments in development authority bonds, which had a weighted-average remaining term of approximately ~~5.9~~5.4 years as of ~~September 30, 2011~~March 31, 2012. Interest income earned on investments in development authority bonds is entirely offset by interest expense incurred on the corresponding capital leases.

~~We recognized a loss on interest rate swaps that do not qualify~~Income (loss) from discontinued operations was ($2.1 million) for ~~hedge accounting treatment of~~the three months ended March 31, 2011 as compared with $~~29.1~~16.9 million for the ~~nine~~three months ended March 31, 2012. As further explained in Note 9. ~~September 30, 2010, compared with a loss of~~ ~~$22.2 million~~Assets Held for Sale and Discontinued Operations to the accompanying consolidated financial statements, properties meeting certain criterion for ~~the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011. We anticipate that future gains and losses on interest rate swaps that do not qualify for hedge accounting treatment will fluctuate, primarily due to changes~~disposal are classified as "Discontinued Operations" in the ~~estimated fair values~~accompanying consolidated statements of ~~our interest rate swaps relative~~operations for all periods presented. For 2011 and 2012, discontinued operations includes the Manhattan Towers property (transferred to ~~then-current market conditions. Market value adjustments to swaps that qualify~~an affiliate of its lender in connection with settling a $75.0 million mortgage note through a deed in lieu of foreclosure transaction in September 2011) and 5995 Opus Parkway and Emerald Point, which sold for ~~hedge accounting treatment are recorded directly to equity, and therefore do not impact net income (loss).~~total gains of $16.9 million in January 2012.

~~We recognized net~~Net income attributable to Wells REIT II ofincreased from $~~0.3~~2.4 million ($0.00 per share) for the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011~~, as compared~~ to ~~a net income of~~ $~~3.0~~31.1 million ($~~0.01~~0.06 per share) for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012. The increase is primarily attributable to ~~growth~~gains recognized on the sales of 5995 Opus Parkway and Emerald Point in the first quarter of 2012 and non-recurring acquisition expenses incurred in connection with the acquisition of the Market Square Buildings in the first quarter of 2011. Growth in our portfolio in ~~2010 and~~ 2011 generated additional real estate operating income, which is offset by additional interest expense due to increasing the percentage of borrowings used in our capital structure during that year. Absent the impact of future acquisitions and fluctuations in the market value of certain of our interest rate swap agreements. Absent future fluctuations in the market value of our interest rate swaps that do not qualify for hedge accounting treatment,dispositions, we expect future net income to ~~remain at a level similar to the~~ ~~third~~ ~~quarter 2011 in future periods.~~fluctuate based primarily on leasing activities. Should the ~~decline in~~U.S. economic recovery remain sluggish, or the ~~U.S. economy or~~ U.S. real estate markets ~~continue~~remain depressed for a prolonged period of time, the creditworthiness of our tenants and our ability to achieve market rents comparable to the leases currently in place at our properties may suffer and could lead to a further decline in net income over the long term.

~~Discontinued Operations~~

In the third quarter of 2011, we transferred the Manhattan Towers property, an office building located in Manhattan Beach, California, to an affiliate of its lender in connection with settling a $75.0 million mortgage note through a deed in lieu of foreclosure transaction. As a result, we recognized a property impairment loss of $5.8 million and a gain on early extinguishment of debt of $13.5 million, which are included in gain (loss) on disposition of discontinued operations in the statement of operations. In the third quarter of 2010, we sold New Manchester One, an industrial property located in Douglasville, Georgia, for $15.3 million, which resulted in a loss on sale of $0.2 million. In accordance with GAAP, we have classified the results of operations related to Manhattan Towers and New Manchester One as discontinued operations for all periods presented. As a result, earnings from discontinued operations increased from a loss of ~~$2.3 million~~ ~~million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2010~~ ~~to a gain of~~ ~~$3.1 million~~ ~~million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~.

Funds From Operations and Adjusted Funds From Operations

Funds from Operations ("FFO"), as defined by NAREIT, ~~(“FFO”),~~ is a non-GAAP financial measure considered by some equity REITs in evaluating operating performance. FFO is computed as GAAP net income (loss), adjusted to exclude: extraordinary items, gains (or losses) from property sales (including deemed sales and settlements of pre-existing relationships), depreciation and amortization of real estate assets, impairment losses related to sales of real estate assets, and adjustments for earnings allocated to noncontrolling interests in consolidated partnerships. Effective December 31, 2011, we adjusted our calculation of FFO to be consistent with

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NAREIT's recent Accounting and Financial Standards Hot Topics, which clarifies that impairment losses on real estate assets should be excluded from FFO. We believe it is useful to consider GAAP net income, adjusted to exclude the above-mentioned items, when assessing our performance because excluding the above-described adjustments highlights the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be readily apparent from GAAP net income alone. We do not, however, believe that FFO is the best measure of the sustainability of our operating performance. Changes in the GAAP accounting and reporting rules that were put into effect after the establishment of NAREIT's definition of FFO in 1999 are resulting in the inclusion of a number of items in FFO that do not correlate with the sustainability of our operating performance (e.g., acquisition expenses, market value adjustments to interest rate swaps, ~~that do not qualify for hedge accounting treatment,~~ and amortization of certain in-place lease intangible assets and liabilities, among others). Therefore, in addition to FFO, we present ~~FFO, adjusted~~Adjusted Funds from Operations ("AFFO"), a non-GAAP financial measure. AFFO is calculated by adjusting FFO to exclude the income and expenses that we believe are not reflective of the sustainability of our ongoing operating performance, as further explained below:

Additional amortization of lease assets (liabilities). GAAP implicitly assumes that the value of intangible lease assets (liabilities) diminishes predictably over time and, thus, requires these charges to be recognized ratably over the respective lease terms. Such intangible lease assets (liabilities) arise from the allocation of acquisition price related to direct costs associated with obtaining a new tenant, the value of opportunity costs associated with lost rentals, the value of tenant relationships, and the value of effective rental rates of in-place leases that are above or below market rates of comparable leases at the time of acquisition. Like real estate values, market lease rates in aggregate have historically risen or fallen with local market conditions. As a result, management believes that, by excluding these charges, AFFO provides useful supplemental information that is reflective of the performance of our real estate investments, ~~that~~which is useful in assessing the sustainability of our operations.

Straight-line rental income. In accordance with GAAP, rental payments are recognized as income on a straight-line basis over the terms of the respective leases. Thus, for any given period, straight-line rental income represents the difference between the contractual rental billings for that period and the average rental billings over the lease term for the same length of time.

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This application results in income recognition that can differ significantly from the current contract terms. By adjusting for this item, we believe AFFO provides useful supplemental information reflective of the realized economic impact of our leases, ~~that~~which is useful in assessing the sustainability of our operating performance.

Loss on interest rate swaps and remeasurement of loss on foreign currency. These items relate to fair value adjustments, which are based on the impact of current market fluctuations, underlying market conditions and the performance of the specific holding, which is not attributable to our current operating performance. By adjusting for this item, we believe that AFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals (rather than anticipated gains or losses that may never be realized) ~~that~~, which is useful in assessing the sustainability of our operations.

Noncash interest expense. This item represents amortization of financing costs paid in connection with executing our debt instruments, and the accretion of premiums (and amortization of discounts) on certain of our debt instruments. GAAP requires these items to be recognized over the remaining term of the respective debt instrument, which may not correlate with the ongoing operations of our real estate portfolio. By excluding these items, management believes that AFFO provides supplemental information that allows for better comparability of reporting periods, ~~and that~~which is useful in assessing the sustainability of our operations.

~~Impairment loss on real estate assets and gain on early extinguishment of debt on discontinued operations~~. These adjustments are not related to our continuing operations as we are not in the business of trading real properties for short-term gains. Removing the impact of these items from AFFO provides a better indication of the sustainability of operating performance.

Real estate acquisition-related costs. Acquisition expenses are incurred for investment purposes (i.e., to promote portfolio appreciation and generation of future earnings over the long term) and, therefore, do not correlate with the ongoing operations of our portfolio. ~~We believe that~~By excluding these items, ~~from~~management believes that AFFO provides supplemental information ~~indicative~~that allows for better comparability of reporting periods, which is useful in assessing the sustainability of our operations. ~~This exclusion also improves comparability~~

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Table of ~~our reporting periods and of our company with other real estate operators.~~Contents

Reconciliations of net income to FFO and to AFFO (in thousands):

Three months ended Nine months ended
September 30, September 30,
2011 2010 2011 2010
Reconciliation of Net Income to Funds From Operations and Adjusted Funds From Operations:
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc. $ 5,102
$ 4,702
$ 3,032
$ 324
Adjustments:
Depreciation of real estate assets 30,622
26,643
89,538
75,350
Amortization of lease-related costs 29,468
28,928
91,395
87,251
Gain (loss) on sale of discontinued operations —
130
—
130
Total Funds From Operations adjustments 60,090
55,701
180,933
162,731
Funds From Operations 65,192
60,403
183,965
163,055

Other income (expenses) included in net income, which do not correlate with our operations:
Additional amortization of lease assets (liabilities) 349
1,462
2,452
4,512
Straight-line rental income (5,289 ) (811 ) (13,046 ) (4,261 )
Loss on interest rate swaps 12,236
7,468
14,644
21,945
Re-measurement loss on foreign currency —
461
—
(167 )
Noncash interest expense 5,631
4,701
19,619
14,009
Impairment loss on real estate assets 5,817
—
5,817
—
Gain on early extinguishment of debt on discontinued operations (13,522 ) —
(13,522 ) —
Subtotal 5,222
13,281
15,964
36,038

Real estate acquisition-related costs 29
2,081
11,249
9,749
Adjusted Funds From Operations $ 70,443
$ 75,765
$ 211,178
$ 208,842

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	Three months ended
	March 31,
	2012			2011
Reconciliation of Net Income to Funds From Operations and Adjusted Funds From Operations:
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	31,131		$	2,411
Adjustments:
Depreciation of real estate assets	30,125			28,118
Amortization of lease-related costs	27,056			30,392
Gain on sale of discontinued operations	(16,885		)	—
Total Funds From Operations adjustments	40,296			58,510
Funds From Operations	71,427			60,921

Other income (expenses) included in net income, which do not correlate with our operations:
Additional amortization of lease assets (liabilities)	(264		)	1,791
Straight-line rental income	(809		)	(1,092		)
Gain on interest rate swaps	(231		)	(2,554		)
Noncash interest expense	909			5,356
Subtotal	(395		)	3,501
Real estate acquisition-related costs	—			10,026
Adjusted Funds From Operations	$	71,032		$	74,448

Election as a REIT

We have elected to be taxed as a REIT under the Code, and have operated as such beginning with our taxable year ended December 31, 2003. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income for that year and for the four years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially ~~adversely~~ affect our net income and net cash available for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.

Wells TRS ~~and~~II, LLC ("Wells TRS"), Wells KCP TRS, LLC ("Wells KCP TRS"), and Wells Energy TRS, LLC ("Wells Energy TRS") are wholly owned subsidiaries of Wells REIT II and are organized as Delaware limited liability companies and include the operations of, among other things, a full-service hotel. We have elected to treat Wells TRS, Wells KCP TRS, and Wells ~~KCP~~Energy TRS as taxable REIT subsidiaries. We may perform certain additional, noncustomary services for tenants of our buildings through Wells TRS, Wells KCP TRS, or Wells ~~KCP~~Energy TRS; however, any earnings related to such services are subject to federal and state income taxes. In addition, for us to continue to qualify as a REIT, we must limit our investments in taxable REIT subsidiaries to 25% of the value of our total assets. Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted rates expected to be in effect when the temporary differences reverse.

No provision for federal income taxes has been made in our accompanying consolidated financial statements, other than the provision relating to Wells TRS, as we made distributions in excess of taxable income for the periods presented. We are subject to certain state and local taxes related to property operations in certain locations, which have been provided for in our accompanying consolidated financial statements.

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Inflation

We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps, 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 fully cover inflation.

Application of Critical Accounting Policies

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

Investment in Real Estate Assets

We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider 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 our assets by class are as follows:



	Buildings		40 years
	Building improvements		5-25 years
	Site improvements		15 years
	Tenant improvements		Shorter of economic life or lease term
	Intangible lease assets		Lease term

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Evaluating the Recoverability of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of both operating properties and properties under construction, in which we have an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of real estate assets and related intangible assets (liabilities) may not be recoverable, we assess the recoverability of these assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying values, we adjust the carrying value of the real estate assets and related intangible assets to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognize an impairment loss. Estimated fair values are calculated based on the following information, in order of preference, depending upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated salvage value. Certain of our assets may be carried at more than an amount that could be realized in a current disposition transaction.

During the third quarter of 2011, we evaluated the recoverability of the carrying value of the Manhattan Towers property and determined that it was not recoverable, as defined by the accounting policy outlined above. The Manhattan Towers property is located in Manhattan Beach, California, and includes two office buildings with total occupancy of 22%. In the third quarter of 2011, upon considering the economic impact of various property disposition scenarios not previously contemplated, including the likelihood of achieving the projected returns associated with each scenario, we opted to transfer the Manhattan Towers property to an affiliate of the lender in full settlement of a $75.0 million nonrecourse mortgage loan through a deed in lieu of foreclosure transaction, which closed on September 6, 2011. As a result of this transaction, Wells REIT II reduced the carrying value of the Manhattan Towers property to its fair value, estimated based on the present value of estimated future property cash flows, by recognizing a property impairment loss of approximately $5.8 million, and recognized a gain on early extinguishment of debt of $13.5 million. The gain on early extinguishment of debt, net of the property impairment loss, is reflected as gain (loss) on disposition of discontinued operations in the statement of operations.

~~The fair value measurements used in this evaluation of nonfinancial assets are considered to be Level 3 valuations within the fair value hierarchy outlined in Note 2.~~ ~~Summary of Significant Accounting Policies~~ of our accompanying consolidated financial statements, as there are significant unobservable inputs. Examples of inputs that were utilized in the fair value calculations include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, and sales prices. The table below represents the detail of the adjustments recognized quarter and year to date as of September 30, 2011 (in thousands) using Level 3 inputs.

Property Net Book Value Impairment Loss Recognized Fair Value
Manhattan Towers 65,317
(5,817 ) 59,500

Projections of expected future operating cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the ~~property’s~~property's fair value and could result in the misstatement of the carrying value of our real estate assets and related intangible assets and net income (loss).

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, we allocate the purchase price of properties to tangible assets, consisting of land and building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each case on our estimate of their fair values.

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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”~~"as-if-vacant" value is then allocated to land and building based on our determination of the relative fair value of these assets. We determine the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors we consider 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, including leasing commissions and other related costs. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market demand.

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Intangible Assets and Liabilities Arising from In-Place Leases where We are the Lessor

As further described below, in-place leases where we are the lessor may have values related to direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease, tenant relationships, and effective contractual rental rates that are above or below market rates:

Direct costs associated with obtaining a new tenant, including commissions, tenant improvements, and other direct costs, are estimated based on ~~management’s~~management's consideration of current market costs to execute a similar lease. Such direct costs are included in intangible lease origination costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

The value of opportunity costs associated with lost rentals avoided by acquiring an in-place lease is calculated based on the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Such opportunity costs are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

The value of tenant relationships is calculated based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. Values associated with tenant relationships are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

The value of effective rental rates of in-place leases that are above or below the market rates of comparable leases is calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be received pursuant to the in-place leases and (ii) ~~management’s~~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 capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and amortized as an adjustment to rental income over the remaining terms of the respective leases.

~~As of~~ ~~September 30, 2011~~ ~~and~~ ~~December 31, 2010, we had the following gross intangible in-place lease assets and liabilities (in thousands):~~

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ ~~and the year ended~~ ~~December 31, 2010, we recognized the following amortization of intangible lease assets and liabilities (in thousands):~~

Intangible Lease Assets
Intangible
Lease
Origination
Costs

Intangible
Below-Market
In-Place Lease
Liabilities
Above-Market
In-Place Lease
Assets

Absorption
Period Costs

For the nine months ended September 30, 2011 $ 11,104
$ 47,695
$ 37,922
$ 12,764
For the year ended December 31, 2010 $ 17,810
$ 61,743
$ 51,241
$ 14,472

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~~The remaining net intangible assets and liabilities as of~~ ~~September 30, 2011~~ ~~will be amortized as follows (in thousands):~~

Intangible Lease Assets
Intangible
Lease
Origination
Costs

Intangible
Below-Market
In-Place Lease
Liabilities
Above-Market
In-Place Lease
Assets

Absorption
Period Costs

For the three months ending December 31, 2011 $ 2,879
$ 15,277
$ 12,132
$ 4,447
For the years ending December 31:

2012 9,451
52,045
43,090
16,704
2013 7,867
45,930
40,040
16,061
2014 6,722
40,390
37,082
15,629
2015 6,102
34,905
33,356
13,217
2016 5,689
24,546
25,585
8,209
Thereafter 5,144
51,653
52,186
19,761
$ 43,854
$ 264,746
$ 243,471
$ 94,028

Evaluating the Recoverability of Intangible Assets and Liabilities

The values of intangible lease assets and liabilities are determined based on assumptions made at the time of acquisition and have defined useful lives, which correspond with the lease terms. There may be instances in which intangible lease assets and liabilities become impaired and we are required to write-off the remaining asset or liability immediately or over a shorter period of time. Lease restructurings, including lease terminations and lease extensions, may impact the value and useful life of in-place leases. In-place leases that are terminated, partially terminated, or modified will be evaluated for impairment if the original in-place lease terms have been modified. In the event that the discounted cash flows of the original in-place lease stream do not exceed the discounted modified in-place lease stream, we adjust the carrying value of the intangible lease assets to the discounted cash flows and recognize an impairment loss. For in-place lease extensions that are executed more than one year prior to the original in-place lease expiration date, the useful life of the in-place lease will be extended over the new lease term with the exception of those in-place lease components, such as lease commissions and tenant allowances, which have been renegotiated for the extended term. Renegotiated in-place lease components, such as lease commissions and tenant allowances, will be amortized over the shorter of the useful life of the asset or the new lease term.

Intangible Assets and Liabilities Arising from In-Place Leases where We are the Lessee

In-place ground leases where we are the lessee may have value associated with effective contractual rental rates that are above or below market rates. Such values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) ~~management’s~~management's estimate of fair market lease rates for the corresponding in-place lease, measured over a period equal to the remaining terms of the leases. The capitalized above-market and below-market in-place lease values are recorded as intangible lease liabilities or assets and amortized as an adjustment to property operating cost over the remaining term of the respective leases. Wells REIT II had gross below-market lease assets of approximately $110.7 million ~~and $110.7 million~~ as of ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, and recognized amortization of these assets of approximately ~~$1.6~~$0.5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2012 and 2011, and approximately $2.1 million for the year ended December 31, ~~2010~~2011.

~~As of~~ ~~September 30, 2011, the remaining net below-market lease asset will be amortized as follows (in thousands):~~

For the year ending December 31:
2011 $ 517
2012 2,069
2013 2,069
2014 2,069
2015 2,069
2016 2,069
Thereafter 91,416
$ 102,278

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Related Parties

Transactions and Agreements

We have entered into agreements with our advisor, WREAS II, and its affiliates, whereby we pay certain fees and reimbursements to WREAS II or its affiliates, for acquisition fees, commissions, dealer-manager fees, asset and property management fees, construction fees, reimbursement of other offering costs, and reimbursement of operating costs. See Note 88. Related Party Transactions and Agreements to our accompanying consolidated financial statements included herein for a discussion of the various related-party transactions, agreements, and fees.

Assertion of Legal Action Against Related-Parties

On March 12, 2007, a stockholder of Piedmont Office Realty Trust, Inc. (“("Piedmont ~~REIT”~~REIT") filed a putative class action and derivative complaint, presently styled In re Wells Real Estate Investment Trust, Inc. Securities Litigation, in the United States District Court for the District of Maryland against, among others, Piedmont REIT; Leo F. Wells, III, the Chairman of our Board of Directors; Wells Capital; Wells ~~Management, our property manager;~~Management; certain affiliates of WREF; the directors of Piedmont REIT; and certain individuals who formerly served as officers or directors of Piedmont REIT prior to the closing of the internalization transaction on April 16, 2007.

The complaint alleged, among other things, violations of the federal proxy rules and breaches of fiduciary duty arising from the Piedmont REIT internalization transaction and the related proxy statement filed with the SEC on February 26, 2007, as amended. The complaint sought, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization transaction.

On June 27, 2007, the plaintiff filed an amended complaint, which attempted to assert class action claims on behalf of those persons who received and were entitled to vote on the Piedmont REIT proxy statement filed with the SEC on February 26, 2007, and derivative claims on behalf of Piedmont REIT.

On March 31, 2008, the Court granted in part the ~~defendants’~~defendants' motion to dismiss the amended complaint. The Court dismissed five of the seven counts of the amended complaint in their entirety. The Court dismissed the remaining two counts with the exception of allegations regarding the failure to disclose in the Piedmont REIT proxy statement details of certain expressions of interest in acquiring Piedmont REIT. On April 21, 2008, the plaintiff filed a second amended complaint, which alleges violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for the Piedmont REIT internalization transaction omitted details of certain expressions of interest in acquiring Piedmont REIT. The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and rescind the internalization transaction, and to cancel and rescind any stock issued to the defendants as consideration for the internalization transaction. On May 12, 2008, the defendants answered and raised certain defenses to the second amended complaint. Since the filing of the second amended complaint, the plaintiff has said it intends to seek monetary damages of approximately $159 million plus prejudgment interest.

On June 23, 2008, the plaintiff filed a motion for class certification. On September 16, 2009, the Court granted the ~~plaintiff’s~~plaintiff's motion for class certification. On September 20, 2009, the defendants filed a petition for permission to appeal immediately the ~~Court’s~~Court's order granting the motion for class certification with the Eleventh Circuit Court of Appeals. The petition for permission to appeal was denied on October 30, 2009.

On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add additional defendants. The Court denied the ~~plaintiff’s~~plaintiff's motion for leave to amend on June 23, 2009.

On December 4, 2009, the parties filed motions for summary judgment. On August 2, 2010, the Court entered an order denying the ~~defendants’~~defendants' motion for summary judgment and granting, in part, the ~~plaintiff’s~~plaintiff's motion for partial summary judgment. The Court ruled that the question of whether certain expressions of interest in acquiring Piedmont REIT constituted ~~“material”~~"material" information required to be disclosed in the proxy statement to obtain approval for the Piedmont REIT internalization transaction raises questions of fact that must be determined at trial. A

On November 17, 2011, the court issued rulings granting several of the plaintiff's motions in limine to prohibit the defendants from introducing certain evidence, including evidence of the defendants' reliance on advice from their outside legal and financial advisors, and limiting the defendants' ability to relate their subjective views, considerations, and observations during the trial ~~date~~of the case. On February 23, 2012, the Court granted several of the defendants' motions, including a motion for reconsideration regarding a motion the plaintiff had filed seeking exclusion of certain evidence impacting damages, and motions seeking exclusion of certain evidence proposed to be submitted by the plaintiff. The suit has been removed from the Court's trial calendar pending resolution of a request for interlocutory appellate review of certain legal rulings made by the Court.

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On March 20, 2012, the court granted the defendants leave to file a motion for summary judgment. On April 5, 2012, the defendants filed a motion for summary judgment.On April 24, 2012, the plaintiff filed its response to the defendants' motion for summary judgment. The time for the defendants to file their reply in support of their motion for summary judgment has not ~~been set.~~yet expired.

Mr. Wells, Wells Capital, and Wells Management believe that the allegations contained in the complaint are without merit and intend to vigorously defend this action. ~~Any financial loss incurred by~~Although WREF believes that it has meritorious defenses to the claims of liability and damages in these actions, WREF is unable at this time to predict the outcome of these actions or reasonably estimate a range of damages, or how any liability and responsibility for damages might be allocated among the 17 defendants in the action, which includes 11 defendants not affiliated with Mr. Wells, Wells Capital, or Wells ~~Management,~~Management. The ultimate resolution of these matters could have a material adverse impact on WREF's financial results, financial condition, or ~~their affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.~~liquidity.

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Commitments and Contingencies

We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 6 of our accompanying consolidated financial statements for further explanation. Examples of such commitments and contingencies include:

obligations under operating leases;

obligations under capital leases;

commitments under existing lease agreements; and

litigation.

Subsequent Events

~~We evaluated subsequent events in~~In connection with the preparation of ~~its~~our consolidated financial statements and notes thereto included in this report on Form 10-Q, we have evaluated our subsequent events and ~~note the following items~~provided disclosures for such material subsequent event in, ~~addition to those disclosed elsewhere in~~among others, Note 4. Lines of Credit and Notes Payable within this ~~report:~~

~~Determination of Estimated Per-Share Value~~

~~Overview~~

On November 8, 2011, Wells REIT II announced an estimated per-share value of our common stock equal to $7.47 per share, calculated as of September 30, 2011. This estimate is being provided to assist broker/dealers in connection with their obligations under applicable Financial Industry Regulatory Authority (“FINRA”) Rules with respect to customer account statements and to assist fiduciaries in discharging their obligations under Employee Retirement Income Security Act (“ERISA”) reporting requirements.

~~Valuation Methodology~~

~~Summary:~~

In arriving at this estimate, which was determined as of September 30, 2011, we first engaged Altus Group U.S., Inc., a third-party commercial real estate valuation firm (“Altus”), to appraise our assets, both real estate and other assets, to estimate the fair value of our liabilities, and to use those estimates to calculate an estimated fair value of our shares. The engagement of Altus was approved by the asset management committee of our board of directors, which committee is composed only of directors who are not affiliated with our advisor. Altus's analyses, opinions, and conclusions were developed in conformity with the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute and in conformity with the Uniform Standards of Professional Appraisal Practice. Altus appraised each of our real estate assets individually, and the asset management committee of our board and our advisor reviewed these analyses and conclusions.

Altus worked with our advisor and the asset management committee of our board of directors to gather information regarding our assets and liabilities. On November 3, 2011, Altus delivered a final report to our advisor, who shared the report with the asset management committee of our board of directors. At a subsequent meeting of our board of directors, our advisor presented the report and recommended an estimated per-share value. Our board of directors considered all information provided in light of its own extensive familiarity with our assets and, upon the recommendation of our asset management committee, unanimously agreed upon an estimated value of $7.47 per share, which is consistent with both the advisor's recommendation and Altus's estimate.

Our estimated per-share value was calculated by aggregating the value of our real estate and other assets, subtracting the fair value of our liabilities, and dividing the total by the number of our common shares outstanding, all as of September 30, 2011. The potential dilutive effect of our common stock equivalents does not impact our estimated per-share value. Our estimated share value is the same as our net asset value. It does not reflect "enterprise value," which includes a premium for:

~~the large size of our portfolio, although it may be true that some buyers are willing to pay more for a large portfolio than they are willing to pay for each property in the portfolio separately;~~

~~our rights under our advisory agreement and our potential ability to secure the services of a management team on a long-term basis; or~~

~~the potential increase in our share value if we were to list our shares on a national securities exchange.~~

Our key objectives are to arrive at an estimated per-share value that is supported by methodologies and assumptions that are appropriate based on our current circumstances and calculated using processes and procedures that may be repeated in future

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periods. Wells REIT II believes that this approach reflects the conservative investment principles that guided the assembly of our portfolio over the past eight years, and comports with industry-standard valuation methodologies used for nontraded real estate companies.

~~Details:~~

~~As of September 30, 2011, our estimated per-share value was calculated as follows:~~

Real estate assets $ 10.13
(1)
Debt (2.65) (2)
Other (0.01) (3)
Estimated net asset value per-share value $ 7.47

Estimated enterprise value premium None assumed

Total estimated per-share value $ 7.47

⁽¹⁾report.

Our real estate assets were appraised using valuation methods that we believe are typically used by investors for properties that are similar to ours, including capitalization of the net property operating income, 10-year discounted cash flow models, and comparison with sales of similar properties. Primary emphasis was placed on the discounted cash flow analysis, with the other approaches used to confirm the reasonableness of the value conclusion. Using this methodology, the appraised value of our real estate assets reflects an overall decline from original purchase price, exclusive of acquisition costs, plus post-acquisition capital investments, of 8.1%. We believe that the assumptions employed in the valuation are within the ranges used for properties that are similar to ours and held by investors with similar expectations to our investors.

~~The following are the key assumptions (shown on a weighted-average basis) that are used in the discounted cash flow models to estimate the value of our real estate assets:~~



~~Exit capitalization rate~~	~~7.19~~	%
~~Discount rate/internal rate of return ("IRR")~~	~~8.19~~	%
~~Annual market rent growth rate~~	~~3.31~~	%
~~Annual holding period~~	~~10.3 years~~

While we believe our assumptions are reasonable, a change in these assumptions would impact the calculation of the value of our real estate assets. For example, assuming all other factors remain unchanged, a change in the weighted-average annual discount rate/IRR of 0.25% would yield a change in our total real estate asset value of 1.83%.


⁽²⁾	The fair value of our debt instruments was estimated using discounted cash flow models, which incorporate assumptions that we believe reflect the terms currently available on similar borrowing arrangements to borrowers with credit profiles similar to ours.


⁽³⁾	~~The fair value of our non-real estate assets and liabilities is estimated to materially reflect book value given their typically short-term (less than 1 year) settlement periods.~~

Our estimated per-share value as of September 30, 2011 ($7.47) has been adversely affected by volatility in real estate markets and the current tepid outlook on office sector rents and pricing expectations. Nevertheless, our portfolio is leased largely to creditworthy tenants with long-term leases and we do not foresee any short-term impact on our distribution rate caused by current pricing weakness in this economy. Throughout the economic downturn experienced over the last three years, our portfolio occupancy has remained high (above 90%) and leverage has remained low (around 25% or less).

~~We plan to update the estimated per-share value on an annual basis.~~

~~Limitations and Risks~~

As with any valuation methodology, our methodology is based upon a number of estimates and assumptions that may not be accurate or complete (see footnotes in above Valuation Methodology section). Different parties with different assumptions and estimates could derive a different estimated per-share value. Accordingly, with respect to our estimated per-share value, we can provide no assurance that:

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▪	~~a stockholder would be able to realize this estimated value per share upon attempting to resell his or her shares;~~


▪	we would be able to achieve, for our stockholders, the estimated value per share, upon a listing of our shares of common stock on a national securities exchange, selling our real estate portfolio, or merging with another company; or


▪	~~the estimated share value, or the methodologies relied upon to estimate the share value, will be found by any regulatory authority to comply with FINRA, ERISA, or any other regulatory requirements.~~

Furthermore, the estimated value of our shares was calculated as of a particular point in time. The value of our shares will fluctuate over time in response to, among other things, changes in real estate market fundamentals, capital markets activities, and attributes specific to the properties and leases within our portfolio.

~~Share Redemption Program Share Price~~

Effective November 8, 2011, the price paid for shares redeemed under the SRP in cases of death, disability, or qualification for federal assistance for confinement to a long-term care facility (i.e. a nursing home), will change from 100% of the price at which we issued the share (typically, $10.00) to 100% of the estimated per-share value ($7.47); and the price paid for all other redemptions (“Ordinary Redemptions”) will change from 60% of the price at which we issued the share (typically, $6.00) to $5.50. See Part II. Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds" for information regarding the amendment to our SRP that sets this price for Ordinary Redemptions, effective upon the filing of this Quarterly Report on Form 10-Q.

~~Dividend Reinvestment Plan Share Price~~

~~Effective beginning in the fourth quarter of 2011, the price at which investors may purchase shares under the DRP will change from $9.55 to 95.5% of the estimated per-share value (or, $7.13).~~

~~Declaration of Distributions~~

On November 4, 2011, our board of directors declared distributions for the fourth quarter of 2011 in the amount of $0.125 (12.5 cents) per share on the outstanding shares of common stock payable to stockholders of record as of December 15, 2011. The distributions will be paid in December 2011.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a result of our debt facilities, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow primarily through a low to moderate level of overall borrowings. However, we currently have a substantial amount of debt outstanding. We manage our ratio of fixed- to floating-rate debt with the objective of achieving a mix that we believe is appropriate in light of anticipated changes in interest rates. We closely monitor interest rates and will continue to consider the sources and terms of our borrowing facilities to determine whether we have appropriately guarded ourselves against the risk of increasing interest rates in future periods.

Additionally, we have entered into interest rate swaps, and may enter into other interest rate swaps, caps, or other arrangements to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes; however, certain of our derivatives may not qualify for hedge accounting treatment. All of our debt was entered into for other-than-trading purposes.

On March 7, 2011, we executed the JPMorgan Chase Bridge Loan to finance a portion of the purchase price of the Market Square Buildings. Under the JPMorgan Chase Bridge Loan, interest is incurred based on, at our option, LIBOR for one-, two-, or three-month periods, plus an applicable margin of 2.25% (the “Bridge LIBOR Rate”), or at an alternate base rate, plus an applicable margin of 1.25% (the “Bridge Base Rate”). The Bridge Base Rate for any day is the greatest of (1) the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect in its principal office in New York City for such day, (2) the federal funds rate for such day plus 0.50%, or (3) the one-month LIBOR Rate for such day plus 1.00%. The JPMorgan Bridge Loan was fully repaid on June 3, 2011.

On April 4, 2011, we sold $250.0 million aggregate principal amount of its 5.875% unsecured senior notes due in 2018 at 99.295 percent of their face value in a private placement offering. Two rating agencies have assigned investment-grade ratings to these senior notes. We received proceeds from this bond offering, net of fees, of $246.7 million, all of which were used to reduce amounts outstanding on the JPMorgan Chase Bridge Loan.

On June 30, 2011, we entered into a loan transaction (the “Market Square mortgage note”) with Pacific Life Insurance Company, in the principal amount of $325.0 million. Substantially all of the net proceeds advanced under the Market Square Loan were used to repay amounts outstanding under the $500.0 million revolving credit facility with JPMorgan Chase Bank entered into on May 7,

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2010 (the "JPMorgan Chase Credit Facility"). We used borrowings under the JPMorgan Chase Credit Facility to fund a portion of the March 7, 2011 acquisition of the Market Square Buildings. The Market Square mortgage note, which requires interest-only monthly payments matures on July 1, 2023 and bears interest at an annual rate of 5.07%. We have the right to prepay the outstanding amount in full provided that (i) 30 days' prior written notice of the intent to prepay is provided to the lender and (ii) a prepayment premium is paid to the lender. If the prepayment is made before July 1, 2013, the prepayment premium is equal to the sum of (i) the greater of (a) 1.0% of the outstanding principal or (b) the yield loss amount plus (ii) 3.0% of the outstanding principal. If the prepayment is made on or after July 1, 2013 but before April 1, 2023, the prepayment premium is equal to the greater of (i) 1.0% of the outstanding principal or (ii) the yield loss amount. No prepayment premium need be paid if the prepayment is made on or after April 1, 2023.

On July 8, 2011, we entered an amendment to the JPMorgan Chase Credit Facility (the “JPMorgan Chase Credit Facility Amendment”) with JPMorgan Chase Bank to, among other things, (i) extend the maturity date of the Facility to May 7, 2015, (ii) enable us to increase the JPMorgan Chase Credit Facility amount by an aggregate of up to $150.0 million to a total facility amount not to exceed $650.0 million on two occasions on or before December 7, 2014, upon meeting certain criteria, and (iii) reduce the interest rate and the facility fee as described below. Except as noted above and described below, the terms of the Facility remain materially unchanged by the amendment.

The JPMorgan Chase Credit Facility Amendment provides for interest costs to be incurred based on, at our option, the London Interbank Offered Rate (“LIBOR”) for one, two, three or six month periods, plus an applicable margin ranging from 1.25% to 2.05% (the “LIBOR Rate”) or at the alternate base rate, plus an applicable margin ranging from 0.25% to 1.05% (the “Base Rate”). The alternate base rate for any day is the greatest of the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect in its principal office in New York City for such day, the federal funds rate for such day plus 0.50%, and the one-month LIBOR Rate for such day plus 1.00%. The margin component of the LIBOR Rate and the Base Rate is based on our applicable credit rating (as defined in the Facility agreement). Additionally, we must pay a per annum facility fee on the aggregate revolving commitment (used or unused) ranging from 0.25% to 0.45% based on our applicable credit rating.

On September 6, 2011, Wells REIT II settled the Manhattan Towers mortgage note by transferring the Manhattan Towers property, an office building located in Manhattan Beach, California, to an affiliate of its mortgagee through a deed in lieu of foreclosure transaction. As a result of this transaction, Wells REIT II recognized a property impairment loss of $5.8 million and a gain on early extinguishment of debt of $13.5 million.

During the three months ended September 30, 2011, Wells REIT II used cash on hand and proceeds from the JPMorgan Chase Credit Facility to fully repay the Cranberry Woods Drive mortgage note ($63.4 million) and the 800 North Frederick Building mortgage note ($46.4 million) without incurring prepayment penalties. During the ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ ~~and~~ ~~2010~~, Wells REIT II also made interest payments of approximately $34.2 million and $31.8 million, respectively, including amounts capitalized of approximately $0.0 million and $0.5 million, respectively.

Our financial instruments consist of both fixed-rate and variable-rate debt. Our variable-rate borrowings consist of the JPMorgan Chase ~~Revolving~~ Credit Facility, the ~~JPMorgan Bridge~~$450 Million Term Loan, ~~the 222 E. 41st Street Building mortgage note, the 80 Park Plaza Building mortgage note,~~ and the Three Glenlake Building mortgage note. However, only the JPMorgan Chase Credit Revolving Facility ~~and the JPMorgan Chase Bridge Loan bear~~bears interest at an effectively variable rate, as the variable ~~rates~~rate on the ~~222 E. 41st Street Building mortgage note, the 80 Park Plaza Building mortgage note,~~$450 Million Term Loan and the Three Glenlake Building mortgage note have been effectively fixed through the interest rate swap agreements described below. As of ~~September 30, 2011~~March 31, 2012, we had $~~220.5~~100.0 million outstanding under the JPMorgan Chase ~~Revolving~~ Credit Facility; $~~173.0~~$375 million outstanding on the ~~222 E. 41st Street Building mortgage note;~~$450 Million Term Loan; $~~64.0 million~~ ~~outstanding on the 80 Park Plaza Building mortgage note; $25.9~~26.0 million outstanding on the Three Glenlake Building mortgage note; ~~$248.3~~$248.5 million in 5.875% bonds outstanding; and ~~$711.6~~$676.7 million outstanding on fixed-rate, term mortgage loans. The weighted-average interest rate of all of our debt instruments was ~~5.44%~~4.45% as of ~~September 30, 2011~~March 31, 2012.

On February 3, 2012, we closed on a four-year, unsecured term loan with a syndicate of banks led by JPMorgan Chase Bank N.A. (the “$450.0 Million Term Loan”). The ~~80 Park Plaza Building mortgage note was used to purchase the 80 Park Plaza Building. The note~~$450.0 Million Term Loan bears interest at ~~one-month~~ LIBOR, plus ~~130 basis points (approximately 1.52%~~an applicable base margin; however, we effectively fixed the interest rate (assuming no change in our corporate credit rating) at 2.64% per annum ~~as of~~ ~~September 30, 2011) and matures in September 2016. In connection~~ with ~~obtaining the 80 Park Plaza Building mortgage note, we entered into~~ an interest rate swap ~~agreement~~executed contemporaneously with the loan. At closing, the $450.0 Million Term Loan yielded initial gross proceeds of $375.0 million. We have the ability to ~~hedge exposure~~increase the amount of borrowings under the $450.0 Million Term Loan up to ~~changing interest rates. The interest rate swap agreement has an effective date~~a maximum amount of ~~September 22, 2006 and matures September 21, 2016. The terms~~$450.0 million on two occasions during the borrowing period in minimum increments of $25.0 million; however, none of the ~~interest rate swap agreement effectively fix our interest rate~~current banks are obligated to participate in such increases. The $450.0 Million Term Loan matures on February 3, 2016 provided that certain conditions are met prior to that date. Furthermore, provided that certain additional conditions are met prior to, and at, maturity, the ~~80 Park Plaza Building mortgage note at 6.575% per annum.~~

~~The 222 E. 41st Street Building mortgage note was used~~$450.0 Million Term Loan shall become eligible for a one-year extension upon paying an extension fee equal to ~~purchase~~0.15% of the ~~222 E. 41st Street Building. The note bears interest at one-month LIBOR plus 120 basis points (approximately 1.42% per annum as of~~ ~~September 30, 2011~~) and matures in August 2017. In connection with obtaining the 222 E. 41st Street Building mortgage note, we entered into an interest rate swap agreement to hedge exposure to changing interest rates. The interest rate swap agreement has an effective date of August 16, 2007 and matures

~~August 16, 2017. The interest rate swap effectively fixes our interest rate on the 222 E. 41st Street Building mortgage note at~~outstanding balance.

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~~6.675% per annum.~~The initial gross proceeds of $375.0 million were used to repay temporary borrowings on the JPMorgan Chase Credit Facility, which were drawn to repay mortgages in the third and fourth quarters of 2011. In April 2012, we exercised one of the options to increase borrowings under the $450.0 Million Term Loan from $375.0 million to $410.0 million, which additional proceeds were used to further reduce temporary borrowings outstanding, and thereby create additional short-term borrowing capacity, under the JPMorgan Chase Credit Facility.

~~The Three Glenlake~~During the three months ended March 31, 2012, we used cash on hand and proceeds from the JPMorgan Chase Credit Facility to fully repay the Highland Landmark Building mortgage note ~~was used to purchase~~of $33.8 million at its maturity. During the ~~Three Glenlake Building. The note bears~~three months ended March 31, 2012 and 2011, we also made interest ~~at one-month LIBOR plus 90 basis points (approximately 1.12% per annum as~~payments of ~~September 30, 2011~~),approximately $10.1 million and matures in July 2013. The interest rate swap agreement has an effective date of July 31, 2008 and matures July 31, 2013. Interest is due monthly; however, under the terms of the loan agreement, a portion of the monthly debt service amounts accrues and is added to the outstanding balance of the note over the term. The interest rate swap effectively fixes our interest rate on the Three Glenlake Building mortgage note at 5.95% per annum.$8.2 million, respectively.

Approximately ~~$1,222.9~~$1,326.2 million of our total debt outstanding as of ~~September 30, 2011~~March 31, 2012 is subject to fixed rates, either directly or when coupled with an interest rate swap agreement. As of ~~September 30, 2011~~March 31, 2012, these balances incurred interest expense at an average interest rate of ~~5.63%~~4.62% and have expirations ranging from ~~2011~~2012 through 2023. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows. The amounts outstanding on our variable-rate debt facilities in the future will largely depend upon the level of investor proceeds raised under our DRP and the rate at which we are able to employ such proceeds in acquisitions of real properties.

We do not believe there is any exposure to increases in interest rates related to the capital lease obligations of $646.0 million at ~~September 30, 2011~~March 31, 2012, as the obligations are at fixed interest rates.

Foreign Currency Risk

We are also subject to foreign exchange risk arising from our foreign operations in Russia. Foreign operations represented ~~1.9%~~2.0% and ~~2.0%~~1.9% of total assets at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011, respectively, and ~~0.6%~~1.0% and ~~0.7%~~0.5% of total revenue for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 and ~~2010~~2011, respectively. As compared to rates in effect at ~~September 30, 2011~~March 31, 2012, an increase or decrease in the U.S. dollar to Russian rouble exchange rate by 10% would not materially impact the accompanying consolidated financial statements.


ITEM 4.	CONTROLS AND PROCEDURES

~~Management’s~~Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal control over financial reporting during the quarter ended ~~September 30, 2011~~March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~PART II. OTHER INFORMATION~~


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.


ITEM 1A.	RISK FACTORS

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2010.~~

2011.

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ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	All equity securities sold by us in the ~~nine months~~quarter ended ~~September 30, 2011~~March 31, 2012 were sold in an offering registered under the Securities Act of ~~1933 with the following exception:~~1933.

Effective June 30, 2011, we issued 20,000 shares to Wells Capital, Inc. in exchange for 20,000 units of Wells OP II. As a result of the transaction, Wells OP II is now indirectly wholly owned by us. As part of the transaction, we also agreed to reimburse Wells Capital an amount equal to the state and federal income tax liability (if any) that Wells Capital incurs as a result of the exchange, with such payment to be grossed up to include any state or federal income taxes imposed upon Wells Capital as a result of its receipt of any of the reimbursement. The exchange transaction was effected without registration under the securities laws in reliance on the private offering exemption set forth at Section 4(2) of the Securities Act of 1933, as amended, as the purchaser is an accredited investor and no general solicitation was involved in connection with the transaction.


(b)	Not applicable.


(c)	During the quarter ended ~~September 30, 2011~~March 31, 2012, we redeemed shares as follows (in thousands, except per-share amounts):

Period
Total Number of
Shares
Purchased⁽¹⁾

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs⁽²⁾

Approximate Dollar
Value of Shares
Available That May
Yet Be
Redeemed Under
the Program
July 2011 722 $ 9.39
722
⁽³⁾
August 2011 620 $ 9.21
620
⁽³⁾
September 2011 751 $ 9.13
751
⁽³⁾



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2012	1,627	$	6.51	1,627	⁽³⁾
February 2012	1,145	$	6.65	1,145	⁽³⁾
March 2012	1,075	$	6.56	1,075	⁽³⁾

During the quarter ended ~~September 30, 2011~~March 31, 2012, we redeemed all of the shares eligible and properly submitted for redemption prior to the redemption payment date in ~~June.~~March 2012.


⁽¹⁾	All purchases of our equity securities by us in the three months ended ~~September 30, 2011~~March 31, 2012, were made pursuant to our SRP.


⁽²⁾	We announced the commencement of the program on December 10, 2003 and amendments to the program on April 22, 2004; March 28, 2006; May 11, 2006; August 10, 2006; August 8, 2007; November 13, 2008; March 31, 2009; August 13, 2009; February 18, 2010; July 21, 2010; September 23, 2010; July 19, 2011; August 12, 2011; November 8, 2011; and ~~August~~December 12, 2011.

⁽³⁾

We currently limit the dollar value and number of shares that may yet be redeemed under the program. First, we limit requests for redemptions other than those made within two years of a stockholder's death on a pro rata basis so that the aggregate of such redemptions during any calendar year do not exceed 5.0% of the weighted-average number of shares outstanding in the prior calendar year. Requests precluded by this test are not considered in the test below. In addition, if necessary, we limit all redemption requests, including those sought within two years of a ~~stockholder’s~~stockholder's death, on a pro rata basis so that the aggregate of such redemptions during any calendar year do not exceed the greater of 100% of the net proceeds from our DRP during the calendar year or 5.0% of weighted average number of shares outstanding in the prior calendar year.

Our board of directors recently approved an amendment to the SRP to change the price at which we effect Ordinary Redemptions (as defined in our SRP) to $5.50 per share. The amendment also provides that the effective date of an amendment may be accelerated by the board of directors to a date that is fewer than 30 days after the date of the announcement of the amendment if the amendment does not adversely affect the rights of redeeming stockholders. The board of directors set November 8, 2011 as the effective date of the amendment.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES


(a)	There have been no defaults with respect to any of our indebtedness.


(b)	Not applicable.


ITEM 4.	~~RESERVED~~MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION


(a)	During the ~~third~~first quarter of ~~2011,~~2012, there was no information that was required to be disclosed in a report of Form 8-K that was not disclosed in a report on Form 8-K.

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~~Table of Contents~~


(b)	There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our Schedule 14A.


ITEM 6.	EXHIBITS

The exhibits required to be filed with this report are set forth on the Exhibit Index to this quarterly report attached hereto.

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SIGNATURES

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



		WELLS REAL ESTATE INVESTMENT TRUST II, INC. (Registrant)

Dated:	~~November 8, 2011~~May 4, 2012	By:	/s/ DOUGLAS P. WILLIAMS
			Douglas P. Williams Executive Vice President, Treasurer and Principal Financial Officer

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EXHIBIT INDEX TO

~~THIRD~~FIRST QUARTER ~~2011~~2012 FORM 10-Q OF

WELLS REAL ESTATE INVESTMENT TRUST II, INC.

The following documents are filed as exhibits to this report. Exhibits that are not required for this report are omitted.



Ex.	Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Registration Statement on Form S-11 (No. 333-107066) filed with the Commission on November 25, 2003).
3.2	Articles of Amendment of Wells Real Estate Investment Trust II, Inc., effective as of October 1, 2008 (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K/A for the year ended December 31, 2008).
3.3	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
3.4	Amendment No. 1 to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
4.1	Form of Dividend Reinvestment Enrollment Form (incorporated by reference to Appendix A to the Prospectus included in Post-Effective Amendment No. 7 to the Registration Statement on Form S-11 on Form S-3 (No. 333-144414) and filed with the Commission on August 27, 2010 (the "DRP Registration Statement")).
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-144414) filed with the Commission on September 22, 2008).
4.3	Amended and Restated Dividend Reinvestment Plan (incorporated by reference to Appendix B to the Prospectus included in the DRP Registration Statement).
4.4	Fifth Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 4.4 to the Company's ~~Annual Report on Form 10-K filed with the Commission on March 11, 2011).~~
~~4.5~~	~~Second Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 4.1 to the Company's~~ Current Report on Form 8-K filed with the Commission on ~~July 19, 2011).~~
~~4.6~~	~~Third Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 4.6 to the Company's Quarterly Report on Form 10-Q filed with the Commission on August~~December 12, ~~2011 and effective as of September 11,~~ 2011).
10.1	Amendment No. 1 to Credit Agreement by and among Wells Operating Partnership II, L.P., as borrower, J.P. Morgan Securities LLC and PNC Capital Markets LLC, as joint lead arrangers and joint bookrunners, JP Morgan Chase Bank, N.A., as administrative agent, and PNC Bank, National Association, as syndication agent and Regions Bank, U.S. Bank National Association and BMO Capital Markets, as documentation agents, and the financial institutions party thereto, dated July 8, 2011 (incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-4 filed with the SEC on July 18, 2011).
10.2*	~~Interim~~ Advisory Agreement ~~by and between the Company and Wells Real Estate Advisory Services II, LLC effective for the month of August 2011~~
10.3*	~~Amended Advisory Agreement by and~~ between the Company and Wells Real Estate Advisory Services II, LLC effective as of ~~August~~January 1, ~~2011~~2012, incorporated by reference to the Company's Annual Report on Form 10-K filed with the Commission on February 29, 2012.
10.2*	Term Loan Agreement dated as of February 3, 2012, by and among Wells Operating Partnership II, L.P., as Borrower, J.P. Morgan Securities LLC and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A., as Administrative Agent and PNC Bank, National Association, as Syndication Agent and Regions Bank, U.S. Bank National Association, TD Bank, N.A. and Union Bank, N.A., as Documentation Agents and the Financial Institutions and their Assignees as Lenders.
10.3*	Supplemental Indenture dated as of February 3, 2012 among Wells Operating Partnership II, L.P., the Guarantors Party Hereto and U.S. Bank National Association, as Trustee.
31.1*	Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase.
101.LAB**	XBRL Taxonomy Extension Label Linkbase.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase.



*	Filed herewith.
**	Furnished with this Form 10-Q

Page 5344



Property	Net Book Value		Impairment Loss Recognized			Fair Value
Manhattan Towers	$	65,317	$	(5,817	)	$	59,500



								Intangibles
Property Name	City	State	Acquisition Date	Land		Buildings and Improvements		Intangible Lease Assets		Intangible Lease Origination		Below- Market Lease Liability			Total Purchase Price		Lease Details
Market Square Buildings	Washington, DC	N/A	3/7/2011	$	152,629	$	412,548	$	45,858	$	12,031	$	(19,680	)	$	603,386	⁽¹⁾
544 Lakeview⁽²⁾	Vernon Hills	IL	4/1/2011	3,006		3,100		—		—		—			6,106		⁽³⁾
				$	155,635	$	415,648	$	45,858	$	12,031	$	(19,680	)	$	609,492



	As of September 30, 2011
	Wells REIT II (Parent)			Wells OP II (the Issuer)			Guarantors		Non-Guarantors		Consolidating adjustments			Wells REIT II (Consolidated)
Assets
Real estate assets, at cost
Land	$	—		$	—		$	199,824	$	516,048	$	—		$	715,872
Building and improvements	—			—			1,392,591		2,126,073		—			3,518,664
Intangible lease assets	—			—			154,743		256,135		—			410,878
Construction in progress	—			—			3,105		3,544		—			6,649
Total real estate assets	—			—			1,750,263		2,901,800		—			4,652,063

Cash and cash equivalents	11,029			5,735			4,757		10,288		—			31,809
Investment in subsidiaries	3,458,442			2,950,695			—		—		(6,409,137		)	—
Tenant receivables, net of allowance	—			—			54,630		74,527		(5,988		)	123,169
Prepaid expenses and other assets	1,418			200,074			2,088		28,085		(200,741		)	30,924
Deferred financing costs	—			8,849			—		3,447		—			12,296
Intangible lease origination costs	—			—			137,230		106,241		—			243,471
Deferred lease costs	—			—			14,454		51,191		—			65,645
Investments in development authority bonds	—			—			466,000		180,000		—			646,000
Total assets	$	3,470,889		$	3,165,353		$	2,429,422	$	3,355,579	$	(6,615,866	)	$	5,805,377

Liabilities
Lines of credit and notes payable	$	—		$	220,500		$	148,150	$	1,026,966	$	(200,620	)	$	1,194,996
Bonds payable	—			248,363			—		—		—			248,363
Accounts payable, accrued expenses, and accrued capital expenditures	1,667			8,575			16,842		112,372		(5,988		)	133,468
Due to affiliates	(66		)	(210		)	1,198		824		(121		)	1,625
Deferred income	—			—			20,176		15,615		—			35,791
Intangible lease liabilities	—			—			40,562		53,466		—			94,028
Obligations under capital leases	—			—			466,000		180,000		—			646,000
Total liabilities	1,601			477,228			692,928		1,389,243		(206,729		)	2,354,271

Redeemable common stock	137,406			—			—		—		—			137,406

Stockholders’ Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity	3,331,882			2,688,125			1,736,494		1,966,011		(6,409,137		)	3,313,375

Nonredeemable noncontrolling interests	—			—			—		325		—			325

Total equity	3,331,882			2,688,125			1,736,494		1,966,336		(6,409,137		)	3,313,700

Total liabilities, redeemable common stock, and equity	$	3,470,889		$	3,165,353		$	2,429,422	$	3,355,579	$	(6,615,866	)	$	5,805,377



	As of December 31, 2010
	Wells REIT II (Parent)		Wells OP II (the Issuer)		Guarantors		Non-Guarantors		Consolidating adjustments			Wells REIT II (Consolidated)
Assets
Real estate assets, at cost
Land	$	—	$	—	$	199,825	$	371,871	$	—		$	571,696
Building and improvements	—		—		1,423,546		1,802,162		—			3,225,708
Intangible lease assets	—		—		181,085		247,055		—			428,140
Construction in progress	—		—		2,424		2,071		—			4,495
Total real estate assets	—		—		1,806,880		2,423,159		—			4,230,039

Cash and cash equivalents	8,281		11,074		8,250		11,277		—			38,882
Investment in subsidiaries	3,623,220		3,386,229		—		—		(7,009,449		)	—
Tenant receivables, net of allowance	—		—		49,495		62,487		(3,925		)	108,057
Prepaid expenses and other assets	—		196,062		988		21,205		(195,555		)	22,700
Deferred financing costs	—		5,679		—		4,148		—			9,827
Intangible lease origination costs	—		—		154,923		114,991		—			269,914
Deferred lease costs	—		—		11,218		35,048		—			46,266
Investments in development authority bonds	—		—		466,000		180,000		—			646,000
Total assets	$	3,631,501	$	3,599,044	$	2,497,754	$	2,852,315	$	(7,208,929	)	$	5,371,685

Liabilities
Lines of credit and notes payable	$	—	$	72,000	$	149,361	$	861,133	$	(195,555	)	$	886,939
Accounts payable, accrued expenses, and accrued capital expenditures	137		966		19,132		86,387		(3,925		)	102,697
Due to affiliates	—		2,614		1,217		648		—			4,479
Deferred income	—		—		10,988		15,415		—			26,403
Intangible lease liabilities	—		—		45,895		42,039		—			87,934
Obligations under capital leases	—		—		466,000		180,000		—			646,000
Total liabilities	137		75,580		692,593		1,185,622		(199,480		)	1,754,452

Redeemable common stock	161,189		—		—		—		—			161,189

Stockholders’ Equity:
Total Wells Real Estate Investment Trust II, Inc. stockholders’ equity	3,470,175		3,523,464		1,805,161		1,666,346		(7,009,449		)	3,455,697

Nonredeemable noncontrolling interests	—		—		—		347		—			347

Total equity	3,470,175		3,523,464		1,805,161		1,666,693		(7,009,449		)	3,456,044

Total liabilities, redeemable common stock, and equity	$	3,631,501	$	3,599,044	$	2,497,754	$	2,852,315	$	(7,208,929	)	$	5,371,685



	Three months ended						Nine months ended
	September 30,						September 30,
	2011			2010			2011			2010
Reconciliation of Net Income to Funds From Operations and Adjusted Funds From Operations:
Net income attributable to the common stockholders of Wells Real Estate Investment Trust II, Inc.	$	5,102		$	4,702		$	3,032		$	324
Adjustments:
Depreciation of real estate assets	30,622			26,643			89,538			75,350
Amortization of lease-related costs	29,468			28,928			91,395			87,251
Gain (loss) on sale of discontinued operations	—			130			—			130
Total Funds From Operations adjustments	60,090			55,701			180,933			162,731
Funds From Operations	65,192			60,403			183,965			163,055

Other income (expenses) included in net income, which do not correlate with our operations:
Additional amortization of lease assets (liabilities)	349			1,462			2,452			4,512
Straight-line rental income	(5,289		)	(811		)	(13,046		)	(4,261		)
Loss on interest rate swaps	12,236			7,468			14,644			21,945
Re-measurement loss on foreign currency	—			461			—			(167		)
Noncash interest expense	5,631			4,701			19,619			14,009
Impairment loss on real estate assets	5,817			—			5,817			—
Gain on early extinguishment of debt on discontinued operations	(13,522		)	—			(13,522		)	—
Subtotal	5,222			13,281			15,964			36,038

Real estate acquisition-related costs	29			2,081			11,249			9,749
Adjusted Funds From Operations	$	70,443		$	75,765		$	211,178		$	208,842



Real estate assets	$	10.13	(1)
Debt	(2.65)		(2)
Other	(0.01)		(3)
Estimated net asset value per-share value	$	7.47
Estimated enterprise value premium	None assumed
Total estimated per-share value	$	7.47



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
July 2011	722	$	9.39	722	⁽³⁾
August 2011	620	$	9.21	620	⁽³⁾
September 2011	751	$	9.13	751	⁽³⁾