<PAGE>
 
                      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             March 31, 1998     or
                              --------------------------------

[ ] 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             0-25606
                       ---------------------------------------------------------

                        Wells Real Estate Fund VII, L.P.
         ------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

             Georgia                                 58-2022629
--------------------------------------           -------------------
(State of other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                   Identification no.)

 3885 Holcomb Bridge Road, Norcross, Georgia                30092
------------------------------------------------------------------------
(Address of principal executive offices)                  (Zip Code)

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


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

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes    X      No
    --------     ---------
<PAGE>
 
                                   Form 10-Q
                                   ---------

                        Wells Real Estate Fund VII, L.P.
                        --------------------------------

                                     INDEX
                                     -----
                                        
                                                                     Page No.

PART I.  FINANCIAL INFORMATION
 
       Item 1. Financial Statements
 
               Balance Sheets - March 31, 1998
                and December 31, 1997..............................    3
 
               Statements of Income for the Three Months
                Ended March 31, 1998 and 1997......................    4
 
               Statements of Partners' Capital for the Year Ended
                December 31, 1997 and the Three Months Ended
                March 31, 1998.....................................    5
 
               Statements of Cash Flows for the Three
                Months Ended March 31, 1998 and 1997...............    6
 
               Condensed Notes to Financial Statements.............    7
 
       Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of
               Operations..........................................    9
 
PART II. OTHER INFORMATION.........................................    20

                                       2
<PAGE>
 
                       WELLS REAL ESTATE FUND VII,  L.P.
                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
 
 
                Assets                          March 31, 1998  December 31, 1997
                ------                          --------------  -----------------
<S>                                             <C>             <C>
Investment in joint ventures (Note 2)               18,856,817         19,039,835
Due from affiliates                                    388,593            416,360
Cash and cash equivalents                              189,048            194,420
Deferred project costs                                   3,654              4,070
Organizational costs,
 less accumulated amortization of $25,000
 in 1998 and $18,750 in 1997                             6,250              7,812
Prepaid expenses and other assets                        3,546              3,797
                                                   -----------        -----------
 
     Total assets                                  $19,447,908        $19,666,294
                                                   ===========        ===========
 
          Liabilities And Partners' Capital
          ---------------------------------   
 
Liabilities:
 Accounts payable                                  $     2,094        $         0
 Partnership distributions payable                     407,411            404,129
                                                   -----------        -----------
 
  Total liabilities                                    409,505            404,129
                                                   -----------        -----------
 
Partners' capital:
 Limited Partners
  Class A - 1,972,498 units outstanding             16,731,971         16,701,193
  Class B - 445,519 units outstanding                2,306,432          2,560,972
                                                   -----------        -----------
 
     Total partners' capital                        19,038,403         19,262,165
                                                   -----------        -----------
 
     Total liabilities and partners' capital       $19,447,908        $19,666,294
                                                   ===========        ===========
</TABLE>
           See accompanying condensed notes to financial statements.

                                       3
<PAGE>
 
                        WELLS REAL ESTATE FUND VII, L.P.
                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
 
 
                                                        Three Months Ended
                                                  -------------------------------
                                                  March 31, 1998   March 31, 1997
                                                  --------------   --------------
<S>                                               <C>              <C>  
Revenues:
  Equity in  income of joint ventures (Note 2)         $ 197,900        $ 181,063
  Interest income                                          3,283           10,713
                                                       ---------        ---------
                                                       $ 201,183        $ 191,776
                                                       ---------        ---------
 
Expenses:
  Legal and accounting                                 $   4,771        $  10,594
  Partnership administration                              11,201           14,405
  Amortization of organization costs                       1,562            1,562
                                                       ---------        ---------
                                                          17,534           26,561
                                                       ---------        ---------
  Net income                                           $ 183,649        $ 165,215
                                                       =========        =========
 
Net income allocated to
  Class A Limited Partners                             $ 431,890        $ 363,044
 
Net loss allocated to
  Class B Limited Partners                             $(248,241)       $(197,829)
 
Net income per weighted average
  Class A Limited Partner Unit                         $     .22        $     .20
 
Net loss per weighted average
  Class B Limited Partner Unit                         $    (.56)       $    (.34)
 
Cash distribution per weighted average
  Class A Limited Partner Unit                         $     .21        $     .19
 
</TABLE>
           See accompanying condensed notes to financial statements.

                                       4
<PAGE>
 
                        WELLS REAL ESTATE FUND VII, L.P.
                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)

                        STATEMENTS OF PARTNERS' CAPITAL
      FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE THREE MONTHS ENDED
                                 MARCH 31, 1998
                                        
                                        
<TABLE>
<CAPTION>
 
 
                                            LIMITED PARTNERS                                          
                                            -----------------
                                          CLASS A                     CLASS B                        TOTAL 
                                 ---------------------------   ----------------------   GENERAL     PARTNERS' 
                                  UNITS            AMOUNTS       UNITS      AMOUNTS     PARTNERS     CAPITAL
                                 ---------       -----------   ---------  -----------  ----------  ------------
<S>                              <C>             <C>           <C>         <C>          <C>         <C>           
 
BALANCE,
 DECEMBER 31, 1996               1,826,830       $15,698,900    591,187   $4,317,124   $       0   $20,016,024
 
 Net income (loss)                       0         1,615,965          0     (882,816)          0       733,149
 Partnership distributions               0        (1,487,008)         0            0           0    (1,487,008)
 Class B conversion elections      144,569           873,336   (144,569)    (873,336)          0             0
                               -----------       -----------   --------   ----------   ---------  ------------  
BALANCE,
 DECEMBER 31, 1997               1,971,399       $16,701,193    446,618   $2,560,972   $       0   $19,262,165
 
 Net income (loss)                       0           431,890          0     (248,241)          0       183,649  
 Partnership distributions               0          (407,411)         0            0           0      (407,411)
 Class B conversion elections        1,099             6,299     (1,099)      (6,299)          0             0
                               -----------       -----------   --------   ----------   ---------  ------------  
BALANCE,
 MARCH 31, 1998                  1,972,498       $16,731,971    445,519   $2,306,432   $       0   $19,038,403
                               ===========       ===========   ========   ==========   =========   ===========
 
</TABLE>
           See accompanying condensed notes to financial statements.

                                       5
<PAGE>
 
                         WELLS REAL ESTATE FUND VII, L.P.
                     (A GEORGIA PUBLIC LIMITED PARTNERSHIP)
                                        
                            STATEMENTS OF CASH FLOWS
                                        
<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                             ---------------------------------------
                                                             March 31, 1998           March 31, 1997
                                                             --------------           --------------
 
Cash flows from operating activities:
<S>                                                          <C>                      <C>
 Net income                                                      $ 183,649                $ 165,215
 Adjustments to reconcile net income to net cash
  used in operating activities:
   Equity in income of joint ventures                             (197,900)                (181,063)
   Amortization of organization costs                                1,562                    1,562
   Changes in assets and liabilities:
     Prepaids and other assets                                         251                    1,500
     Accounts payable                                                2,095                        0
                                                                 ---------                ---------
     Total adjustments                                            (193,992)                (178,001)
                                                                 ---------                ---------
      Net cash used in operating activities                        (10,343)                 (12,786)
                                                                 ---------                ---------
 
Cash flow from investing activities:
 Investment in joint ventures                                       (7,258)                       0
 Distributions received from joint ventures                        416,360                  291,778
                                                                 ---------                ---------
      Net cash provided by
       investing activities                                        409,102                  291,778
 
Cash flow from financing activities:
 Partnership distributions paid                                   (404,131)                (297,505)
                                                                 ---------                ---------
 
Net increase (decrease) in cash and cash
 equivalents                                                        (5,372)                 (18,513)
 
 
Cash and cash equivalents, beginning of year                       194,420                  366,301
                                                                 ---------                ---------
 
Cash and cash equivalents, end of period                         $ 189,048                $ 347,788
                                                                 =========                =========
 
Supplemental disclosure of noncash investing
 activities:
  Deferred project costs applied to real estate
  and joint venture property                                     $     416                $       0
                                                                 =========                =========
 
</TABLE>

           See accompanying condensed notes to financial statements.

                                       6
<PAGE>
 
                        WELLS REAL ESTATE FUND VII, L.P.
                    (A Georgia  Public Limited Partnership)

                    Condensed Notes to Financial Statements

                                 March 31, 1998

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

     (a)  General
     ------------

     Wells Real Estate Fund VII, L.P. (the "Partnership") is a Georgia public
     limited partnership, having Leo F. Wells, III and Wells Partners, L.P., a
     Georgia non-public partnership, as general partners.  The Partnership was
     formed on December 1, 1992, for the purpose of acquiring, developing,
     owning, operating, improving, leasing, and otherwise managing for
     investment purposes income-producing commercial properties.

     On April 5, 1994, the Partnership commenced an offering of up to
     $25,000,000 of Class A or Class B limited partnership units ($10.00 per
     unit) pursuant to a Registration Statement on Form S-11 filed under the
     Securities Act of 1933.  The Partnership commenced active operations when
     it received and accepted subscriptions for a minimum of 125,000 units on
     April 26, 1994.  The Partnership terminated its offering on January 5,
     1995, and received gross proceeds of $24,180,174 representing subscriptions
     from 1910 Limited Partners.

     The Partnership owns equity interests in properties through ownership in
     the following joint ventures:  (i) Fund V, Fund VI, Fund VII Associates, a
     joint venture among the Partnership, Wells Real Estate Fund V, L.P., and
     Wells Real Estate Fund VI, L.P., ("Fund V-VI-VII Joint Venture"); (ii) Fund
     VI and Fund VII Associates a joint venture between the Partnership and
     Wells Real Estate Fund VI L.P., ("Fund VI-Fund VII Joint Venture"); (iii)
     Fund II, III, VI and VII Associates, a joint venture among the Partnership,
     Wells Fund II-III Joint Venture, Wells Real Estate Fund VI, L.P., and Wells
     Real Estate Fund VII, L.P., (the "Fund II-III-VI-VII Joint Venture"); (iv)
     Fund VII and Fund VIII Associates, a joint venture between the Partnership
     and Wells Real Estate Fund VIII, L.P. ("Fund VII-Fund VIII Joint Venture");
     (v) Fund VI, Fund VII and Fund VIII Associates, a joint venture among the
     Partnership, Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund
     VIII, L.P. (the "Fund VI-VII-VIII Joint Venture"); and (vi) Fund I, II, II-
     OW, VI, VII Associates, a joint venture among the Partnership, Wells Real
     Estate Fund I, the Fund II and Fund II-OW Joint Venture and Wells Real
     Estate Fund VI, L.P. (the "Fund I, II, II-OW, VI, VII Joint Venture").

     As of March 31, 1998, the Partnership owned interest in the following
     properties through its ownership of the foregoing joint ventures:  (i) a
     three-story office building located in Appleton, Wisconsin (the "Marathon
     Building"); (ii) two retail buildings located in Stockbridge, Georgia
     ("Stockbridge Village III"), (iii) a retail shopping center expansion

                                       7
<PAGE>
 
     in Stockbridge, Georgia ("Stockbridge Village I Expansion"), (iv) an
     office/retail center located in Roswell, Georgia ("Holcomb Bridge Road
     Property"); (v) a retail center located in Stockbridge, Georgia (the
     "Hannover Center"); (vi) a four-story office building located in
     Jacksonville, Florida (the "BellSouth Property"); (vii) an office building
     located in Gainesville, Florida (the "CH2M Hill at Gainesville Property");
     (viii) a retail center located in Clemmons, North Carolina ("Tanglewood
     Commons"); and (ix) a retail center located in Cherokee County, Georgia
     ("Cherokee Commons").

     (b)  Basis of  Presentation
     ---------------------------

     The consolidated financial statements of Wells Real Estate Fund VII, L.P.
     (the "Partnership") have been prepared in accordance with instructions to
     Form 10-Q and do not include all of the information and footnotes required
     by generally accepted accounting principles for complete financial
     statements.  These quarterly statements have not been examined by
     independent accountants, but in the opinion of the General Partners, the
     statements for the unaudited interim periods presented include all
     adjustments, which are of a normal and recurring nature, necessary to
     present a fair presentation of the results for such periods.  For further
     information, refer to the financial statements and footnotes included in
     the Partnership's Form 10-K for the year ended December 31, 1997.

 (2) Investments in Joint Ventures
     -----------------------------

     The Partnership owns interests in nine properties through its ownership in
     joint ventures of which three are office buildings and six are retail
     centers.  The Partnership does not have control over the operations of the
     joint ventures; however, it does exercise significant influence.
     Accordingly, investment in joint ventures is recorded on the equity method.
     For a description of the joint ventures and properties owned by the
     Partnership, please refer to the Partnership's Form 10-K for the year ended
     December 31, 1997.

     The following is additional information about the properties in which the
     Partnership owned an interest as of March 31, 1998:

     FUND VII-FUND VIII JOINT VENTURE
     --------------------------------

     Gainesville Property
     --------------------

     As of March 31, 1998, a lease has been signed with Affiliated Engineers
     S.E. Inc. for a term of five years for 4,882 square feet, the remaining
     space at the CH2M Hill at Gainesville Property.  The tenant moved into the
     space as of March 27, 1998, and, after paying a pro-rated amount for the
     five days in March, the lease provides for a rental rate of $3,763.21 per
     month for thirty-six months and $3,877.12 for the remaining twenty-four
     months of the lease term.  The lease provides an option to renew the lease
     through November 30, 2005, at a rate of $12.50 per square foot.  The option
     to renew must be exercised twenty-two months prior to the expiration of the
     original lease term, March 31, 2003.

                                       8
<PAGE>
 
     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     ------------------------------------------------------------------------
     RESULTS OF OPERATIONS.
     --------------------- 

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

     Results of Operations and Changes in Financial Conditions
     ---------------------------------------------------------

     General
     -------

     As of March 31, 1998, the developed properties owned by the Partnership
     were 93% occupied. Gross revenues of the Partnership were $201,183 and
     $191,776 for the three months ended March 31, 1998 and March 31, 1997,
     respectively.  The revenues increased in 1998 compared to 1997 due to the
     increase in income from the joint ventures.  Expenses of the Partnership
     decreased primarily due to decreases in legal and accounting fees and
     administrative costs.

     Net income per weighted average Unit for Class A Limited Partners was $0.22
     for the three months ended March 31, 1998.  Net loss per weighted average
     Unit for Class B and converted Class A Limited Partners was $0.56 for the
     three months ended March 31, 1998.

     Cash distributions of $0.21 per weighted average Unit were made to Class A
     Limited Partners for the three months ended March 31, 1998, as compared to
     distributions of $0.19 per Class A Unit for the same period in 1997.  The
     Partnership anticipates that distributions will continue to be paid on a
     quarterly basis on a level at least consistent with 1997.

     The Partnership's net cash used in operating activities decreased from
     $12,786 in 1997 to $10,343 in 1998 due to the decrease in prepaid and other
     expenses.  Net cash provided by investing activities increased from
     $291,778 in 1997 to $409,102 in 1998 due primarily to the increase in
     distributions from joint ventures.

                                       9
<PAGE>
 
     The Partnership expects to continue to meet its short-term liquidity
     requirements and budget demands generally through net cash provided by
     operations which the Partnership believes will continue to be adequate to
     meet both operating requirements and distributions to limited partners.  At
     this time, given the nature of the joint ventures in which the Partnership
     has invested, there are no known improvements and renovations to the
     properties expected to be funded from cash flow from operations.

     The Partnership expects to make future real estate investments, directly or
     through investments in joint ventures from limited partners' contributions.
     It is anticipated that the Partnership will contribute approximately
     $83,000 to the Fund II-III-VI-VII Joint Venture for the completion of the
     Holcomb Bridge Road Property, which the Partnership has reserved out of
     remaining Limited Partners' capital contributions.

     Since properties are acquired on all-cash basis, the Partnership has no
     permanent long-term liquidity requirements.

     The General Partners have verified that all operational computer systems
     are year 2000 compliant.  This includes systems supporting accounting,
     property management and investor services.  Also, as part of this review,
     all building control systems have been verified as compliant.  The current
     line of business applications are based on compliant operating systems and
     database servers.  All of these products are scheduled for additional
     upgrades before the year 2000.  Therefore, it is not anticipated that the
     year 2000 will have significant impact on operations.

     Recent Accounting Pronouncements
     --------------------------------

     Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
     Comprehensive Income", requires certain transactions (e.g., unrealized
     gains/losses on available for sale securities) that are not reflected in
     net income to be displayed as other comprehensive income.  The Statement
     also requires an entity to report total comprehensive income (i.e., net
     income plus other comprehensive income) for every period in which an income
     statement is presented.  SFAS No. 130 is effective for annual and interim
     periods beginning after December 15, 1997.  None of the transactions
     required to be reported in other comprehensive income pertain to the
     Partnership; consequently, adoption of this Statement had no impact on the
     partnership's disclosures.

     Effective April 3, 1998, the American Institute of Certified Public
     Accountants issued Statement of Position (SOP) 98-5, "Reporting on the
     Costs of Start-Up Activities".  SOP 98-5 is effective for fiscal years
     beginning after December 15, 1998, and initial application is required to
     be reported as a cumulative effect of change in accounting principle.  This
     SOP provides guidance on the financial reporting of start-up costs and
     organization costs.  It requires costs of start-up activities and
     organization costs to be expensed as incurred.  Adoption of this Statement
     by the Partnership in the first quarter of 1999 may result in the write-off
     of certain capitalized organization costs.  Adoption of

                                       10
<PAGE>
 
     this Statement is not expected to have a material impact on the
     Partnership's results of operations and financial condition.

PROPERTY OPERATIONS
-------------------

As of March 31, 1998, the Partnership owned interest in the following
operational properties:

Marathon /Fund V-VI-VII Joint Venture
-------------------------------------
<TABLE>
<CAPTION>
 
                                                  Three Months Ended
                                           -------------------------------
                                           March 31, 1998   March 31, 1997
                                           --------------   --------------
<S>                                        <C>              <C>  
Revenues:
 Rental Income                                   $242,754         $239,956
 
Expenses:
 Depreciation                                      87,646           87,646
 Management and leasing expenses                    9,890           10,002
 Other operating expenses                           3,642            1,128
                                                 --------         --------
                                                  101,178           98,776
                                                 --------         --------
 
Net income                                       $141,576         $141,180
                                                 ========         ========
 
Occupied %                                            100%             100%
Partnership Ownership %                              41.7%            41.7%
 
Cash distributed to the Partnership              $ 96,583         $ 97,631
 
Net income allocated to the Partnership          $ 59,051         $ 58,886
</TABLE>

Rental income increased for the three months ended March 31, 1998, compared to
the same period of 1997, due to a correction of straight-line rent in the first
quarter of 1997.  A small decrease in management and leasing fees in first
quarter 1998 over the first quarter 1997 was offset by an increase in operating
expenses, primarily accounting and administrative fees.

Cash distributed to the Partnership and net income allocated to the Partnership
remained relatively stable for the three months ended March 31, 1998 and 1997.

                                       11
<PAGE>
 
Stockbridge Village III/Fund VI-Fund VII Joint Venture
----------------------------------------------------------
<TABLE>  
<CAPTION> 
                                                  Three Months Ended       
                                           ------------------------------- 
                                           March 31, 1998   March 31, 1997 
                                           --------------   -------------- 
<S>                                            <C>            <C>           
Revenues:
 Rental Income                                    $59,244          $68,573
 
Expenses:
 Depreciation                                      22,714           21,452
 Management and leasing expenses                    8,231            7,483
 Other operating expenses                          33,217           13,473
                                                  -------          -------
                                                   64,162           42,408
                                                  -------          -------
 
Net (loss) income                                 $(4,918)         $26,165
                                                  =======          =======
 
Occupied %                                           82.4%            87.0%
Partnership's Ownership % in the
 Fund VI-Fund VII Joint Venture                      57.0%            57.2%
 
Cash distributed to the Partnership               $10,873          $26,877
 
Net (loss) income allocated to the Partnership    $(2,795)         $14,975
</TABLE>

A net loss is reflected for the first quarter of 1998, as compared to net income
of $26,165, for the same period in 1997. The loss was due to a decrease in
rental income and an increase in expenses which were the result of Kenny Rogers
Roasters, a restaurant, vacating its leased space in the first quarter of 1998.
A bad debt reserve is being recorded, and the receivable due from this tenant
has been turned over to lawyers for collection. Efforts are being made to re-
lease the space.

The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 57.0% for 1998, as compared to 57.2% in 1997, due to additional
fundings by Wells Real Estate Fund VI which resulted in a decrease in the
Partnership's ownership in the Fund VI-Fund VII Joint Venture.

                                       12
<PAGE>
 
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
--------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  Three Months Ended       
                                           ------------------------------- 
                                           March 31, 1998   March 31, 1997 
                                           --------------   -------------- 
<S>                                            <C>            <C>           
Revenues:
 Rental Income                                    $71,087          $31,910
 
Expenses:
 Depreciation                                      34,652           22,374
 Management and leasing expenses                    9,508            3,409
 Other operating expenses                           9,521            8,522
                                                  -------          -------
                                                   53,681           34,305
                                                  -------          -------
 
Net income (loss) income                          $17,406          $(2,395)
                                                  =======          =======
 
Occupied %                                           79.0%            41.0%
Partnership's Ownership % in the
 Fund VI-Fund VII Joint Venture                      57.0%            57.2%
 
Cash distributed to the Partnership               $28,606          $ 6,062
 
Net income (loss) allocated to the Partnership    $ 9,940          $(1,371)
</TABLE>

Rental income, expenses and net income increased for the first quarter of 1998,
as compared to the same period in 1997, due primarily to lease-up efforts and
increased occupancy at this property.  Negotiations are being conducted to lease
the remaining space.

The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 57.0% for 1998, as compared to 57.2% in 1997, due to additional
fundings by Wells Fund VI which decreased the Partnership's ownership in the
Fund VI-Fund VII Joint Venture.

                                       13
<PAGE>
 
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
-------------------------------------------------------------
<TABLE>
<CAPTION>
                                             Three Months Ended       
                                       ------------------------------- 
                                       March 31, 1998   March 31, 1997 
                                       --------------   -------------- 
<S>                                    <C>              <C>           
Revenues:
 Rental Income                               $213,235         $160,185
 
Expenses:
 Depreciation                                  93,904           66,130
 Management and leasing expenses               29,364           20,580
 Other operating expenses                      23,033           30,307
                                             --------         --------
                                              146,301          117,017
                                             --------         --------
 
Net income                                   $ 66,934         $ 43,168
                                             ========         ========
 
Occupied %                                       94.1%            63.0%
Partnership's Ownership % in the
 Fund II-III-VI-VII Joint Venture                49.1%            48.9%
 
Cash distributed to the Partnership          $ 83,737         $ 53,385
 
Net income allocated to the
 Partnership                                 $ 32,806         $ 21,079
</TABLE>

In January 1995, the Fund II-Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road to the Fund II-III-VI-VII
Joint Venture.  Development is being completed on two buildings with a total of
approximately 49,500 square feet.

As of March 31, 1998, fourteen tenants are occupying approximately 46,600 square
feet of space in the retail and office building under leases of varying lengths.
Increases in revenues, expenses and net income for the quarter ended March 31,
1998, compared to the same quarter of 1997, are due to the five additional
tenants occupying the property in 1998, as compared to the first quarter of
1997.

The Partnership's ownership percentage in the Fund II-III-VI-VII Joint Venture
increased to 49.07% in 1998, as compared to 48.9% in 1997, due to additional
funding by the Partnership.

                                       14
<PAGE>
 
The Hannover Center/Fund VII-Fund VIII  Joint Venture
-----------------------------------------------------

<TABLE>
<CAPTION>
                                                 Three Months Ended       
                                          ------------------------------- 
                                          March 31, 1998   March 31, 1997 
                                          --------------   -------------- 
<S>                                        <C>              <C>           
Revenues:
  Rental income                                  $26,061          $29,196
                                                                 
Expenses:                                                        
  Depreciation                                    10,981           10,981
  Management & leasing expenses                    2,661            2,570
  Other operating expenses                         8,116            8,681
                                                 -------          -------
                                                  21,758           22,232
                                                 -------          -------
                                                                 
Net income                                       $ 4,303          $ 6,964
                                                 =======          =======
                                                                 
Occupied %                                            50%              50%
                                                                 
Partnership's Ownership % in the                                 
   Fund VII-Fund VIII Joint Venture                37.39%           37.95%
                                                                 
Cash distribution to Partnership                 $ 5,121          $ 4,963
                                                                 
Net income allocated to the Partnership          $ 1,617          $ 2,643
</TABLE>
 
On April 1, 1996, Fund VII-Fund VIII Joint Venture acquired a 1.01 acre tract of
land and a 12,000 square foot combination retail/office building known as the
Hannover Retail Center (the "Hannover Center").

Moovies, Inc., a video sales and rental store, signed a nine year, eleven month
lease for 6,020 square feet and occupied the space and opened for business on
June 22, 1996. Efforts are being made to lease the remaining space at the
Hannover Center.

Rental income decreased for the three months ended March 31, 1998, compared to
the same period of 1997, due to a correction in straight line rent made in the
first quarter of 1997.  Expenses remained relatively stable and the decrease in
net income was primarily the result of the aforementioned straight line
adjustment.

                                       15
<PAGE>
 
CH2M Hill at Gainesville/Fund VII - Fund VIII Joint Venture
-----------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                        ------------------------------------------
                                                        March 31, 1998              March 31, 1997
                                                        --------------              --------------
<S>                                                     <C>                        <C>
Revenues:
  Rental income                                              $132,578                     $132,578
 
Expenses:
  Depreciation                                                 54,545                       51,584
  Management & leasing expenses                                28,121                       21,309
  Other operating expenses                                     15,481                      (19,624)
                                                             --------                     --------
                                                               98,147                       53,269
                                                             --------                     --------
 
Net income                                                   $ 34,431                     $ 79,309
                                                             ========                     ========
 
Occupied %                                                      100.0%                        93.6%
 
Partnership's Ownership % in the
   Fund VII - VIII Joint Venture                                 37.4%                        38.0%
 
Cash distribution to Partnership                             $ 31,830                     $ 50,104
 
Net income allocated to the Partnership                      $ 13,006                     $ 30,103
</TABLE>

Rental income remained the same for the three months ended March 31, 1997 and
1998 even though occupancy level increased from ninety-three per cent to one
hundred per cent, due to the fact that the new tenant did not occupy the
property until the last five days of March 1998.  For details regarding the new
tenant, see Item (2) Investments in Joint Ventures in the section entitled,
"Condensed Notes to Financial Statements."  Depreciation expenses for the first
quarter of 1998 increased, compared to the same quarter of 1997, due primarily
to an understatement in the first quarter depreciation expense in 1997, which
was adjusted in subsequent quarters.  Management and leasing fees increased for
the three months ended March 31, 1998, as compared to the same period of 1997,
due to the accrual of fees for December 1997 in the first quarter of 1998.
Other operating expenses increased for the three months ended March 31, 1998, as
compared to the same period of 1997, due primarily to a decrease in CAM
reimbursements, which is the result of a refund to the tenant of property taxes
overpaid in 1997, which was identified during a CAM reconciliation process
performed after year end.  Income and distribution to the Partnership have
decreased primarily due to refund of taxes to the tenant as noted above.

                                       16
<PAGE>
 
BellSouth Property/Fund VI-VII-VIII Joint Venture
-------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                        -------------------------------------------
                                                        March 31, 1998               March 31, 1997
                                                        --------------               --------------
<S>                                                         <C>                        <C>
Revenues:
  Rental income                                              $380,277                     $379,050
  Interest income                                               2,074                        1,976
                                                             --------                     --------
                                                              382,351                      381,026
                                                             --------                     --------
Expenses:
  Depreciation                                                110,889                      110,889
  Management & leasing expenses                                47,815                       45,173
  Other operating expenses                                     87,410                       83,967
                                                             --------                     --------
                                                              246,114                      240,029
                                                             --------                     --------
 
Net income                                                   $136,237                     $140,997
                                                             ========                     ========
 
Occupied %                                                        100%                         100%
 
Partnership's Ownership % in the
   Fund VI-VII-VIII Joint Venture                                33.4%                        35.5%
 
Cash distribution to Partnership                             $ 85,314                     $ 91,348
 
Net income allocated to the Partnership                      $ 45,497                     $ 50,016
</TABLE>

Net income has decreased slightly due primarily to differences in the annual
adjustment for prior year common area maintenance billings to tenants.  Cash
distributions and net income allocated to the Partnership decreased in 1998, as
compared to 1997, due primarily to additional funding by Wells Fund VIII which
decreased the Partnership's ownership interest in the Fund VI-VII-VIII Joint
Venture.

                                       17
<PAGE>
 
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
-------------------------------------------------

<TABLE>
<CAPTION>
                                                           Three Months Ended            Two Months Ended
                                                               March 31, 1998              March 31, 1997
                                                           ------------------            ----------------
Revenues:
<S>                                                                        <C>                       <C>
  Rental income                                                      $182,613                     $49,534
  Interest income                                                       5,138                       3,600
                                                                     --------                     -------
                                                                      187,751                      53,134
                                                                     --------                     -------
                                                                     
Expenses:                                                            
  Depreciation                                                         60,427                      31,106
  Management & leasing expense                                         14,819                       3,164
  Other operating expenses                                             25,102                      21,906
                                                                     --------                     -------
                                                                      100,348                      56,176
                                                                     --------                     -------
  Net income (loss)                                                  $ 87,403                     $(3,042)
                                                                     ========                     =======
                                                                     
Occupied %                                                                 87%                         70%
                                                                     
Partnership's Ownership % in the                                     
  Fund VI-VII-VIII Joint Venture                                         33.4%                       35.5%
                                                                     
Cash distribution to Partnership                                     $ 48,881                     $ 9,955
                                                                     
Net income (loss) allocated to Partnership                           $ 29,188                     $(1,079)
</TABLE>
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased a 14.683 acre
tract of real property located in Clemmons, Forsyth County, North Carolina.
Total cost and expenses to be incurred by the Fund VI-VII-VIII Joint Venture for
the acquisition, development, construction and completion of the shopping center
are anticipated to be approximately $8,700,000 when all tenant improvements are
completed.

The Fund VI-VII-VIII Joint Venture developed a large strip shopping center
building containing approximately 67,320 gross square feet which opened on
February 26, 1997, on a 12.48 acre tract.   The remaining 2.2 acre portion of
the property will remain in a vegetative or natural state.

In February 1997, Harris Teeter, Inc., a regional supermarket chain, occupied
its leased space of 46,120 square feet with an initial term of 20 years.  The
annual base rent during the initial term is $488,250.  In addition, Harris
Teeter has agreed to pay percentage rents equal to one percent of the amount by
which Harris Teeter's gross sales exceed $35,000,000 for any lease year.  Since
this property commenced operations in February 1997, comparable income and
expense figures for the complete prior year's period are not available.

Interest income was generated from construction dollars, not as yet funded on
construction, being invested in interest bearing accounts.

                                       18
<PAGE>
 
Cherokee Commons /Fund I, II, II-OW, VI, VII Joint Venture
----------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                   -------------------------------------------------
                                                                   March 31, 1998                     March 31, 1997
                                                                   ---------------                    --------------
<S>                                                                  <C>                              <C>
Revenues:
  Rental income                                                          $228,977                          $217,439
  Interest income                                                              22                                18
                                                                         --------                          --------
                                                                          228,999                           217,457
                                                                         --------                          --------
Expenses:
  Depreciation                                                            110,563                           107,525
  Management & leasing expenses                                            25,751                            31,541
  Other operating expenses                                                  3,131                            24,119
                                                                         --------                          --------
                                                                          139,445                           163,185
                                                                         --------                          --------
 
Net income                                                               $ 89,554                          $ 54,272
                                                                         ========                          ========
 
Occupied %                                                                     91%                               91%
 
Partnership's Ownership % in the
 Fund I, II, II-OW, VI, VII Joint Venture                                    10.7%                             10.7%
 
Cash distribution to Partnership                                         $ 20,156                          $ 19,571
 
Net income allocated to the Partnership                                  $  9,589                          $  5,811
</TABLE>

Rental income increased in 1998 over 1997, due primarily to a one time
adjustment made to the straight line rent schedule.  Management and leasing
expenses decreased in 1998, as compared to 1997, due to decreased leasing
commissions.  The decrease in operating expenses in 1998, as compared to 1997,
are due to decreased expenditures for tenant improvements, common area expenses
and legal fees.

                                       19
<PAGE>
 
                          PART  II - OTHER INFORMATION
                          ----------------------------
                                        
Item 6(b).  No reports on Form 8-K were filed during the first quarter of 1998.

                                   SIGNATURES

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

                                            WELLS REAL ESTATE FUND VII, L.P.
                                            (Registrant)
Dated:  May 11, 1998                    By: /s/ Leo F. Wells, III
                                            ------------------------------------
                                            Leo F. Wells, III, as Individual
                                            General Partner and as President,
                                            and Chief Financial Officer of
                                            Wells Capital, Inc.,the General
                                            Partner of Wells Partners, L.P.

                                       20