<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, 1999 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 or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)                            

 
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
<TABLE>
<CAPTION>
 
        Item 1. Financial Statements
<S>                                                                      <C>
               Balance Sheets - March 31, 1999
                and December 31, 1998...............................      3
 
               Statements of Income for the Three Months
                Ended March 31, 1999 and 1998.......................      4
 
               Statements of Partners' Capital for the Year Ended
                December 31, 1998 and the Three Months Ended
                March 31, 1999......................................      5
 
               Statements of Cash Flows for the Three
                Months Ended March 31, 1999 and 1998................      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
</TABLE>

                                       2
<PAGE>
 
                       WELLS REAL ESTATE FUND VII,  L.P.
                     (A Georgia Public Limited Partnership)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
 
 
                    Assets                        March 31, 1999   December 31, 1998
                    ------                        --------------   -----------------
<S>                                               <C>              <C>
Investment in joint ventures (Note 2)                 18,158,819          18,368,726
Due from affiliates                                      375,350             339,387
Cash and cash equivalents                                 58,726              75,740
Organizational costs, less accumulated 
 amortization of $32,500
 in 1999 and $29,688 in 1998                                   0               1,562
Prepaid expenses and other assets                          2,746               4,263
                                                     -----------         -----------
 
     Total assets                                    $18,595,641         $18,789,678
                                                     ===========         ===========
 
          Liabilities And Partners' Capital
          ---------------------------------
 
Liabilities:
 Accounts payable                                    $     1,345         $     5,208
 Partnership distributions payable                       407,801             396,500
                                                     -----------         -----------
 
  Total liabilities                                      409,146             401,708
                                                     -----------         -----------
 
Partners' capital:
 Limited Partners
  Class A  2,013,506 units outstanding                16,988,188          16,935,935
  Class B  404,511 units outstanding                   1,198,307           1,452,035
                                                     -----------         -----------
 
     Total partners' capital                          18,186,495          18,387,970
                                                     -----------         -----------
 
     Total liabilities and partners' capital         $18,595,641         $18,789,678
                                                     ===========         ===========
</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, 1999      March 31, 1998
                                                       --------------      --------------
<S>                                                      <C>                  <C>

Revenues:
  Equity in  income of joint ventures (Note 2)           $ 240,775            $ 197,900
  Interest income                                            1,639                3,283
                                                         ---------            ---------
                                                         $ 242,414            $ 201,183
                                                         ---------            ---------
                                                                                       
Expenses:                                                                              
  Legal and accounting                                   $   5,740            $   4,771
  Partnership administration                                21,454               11,201
  Amortization of organization costs                         1,562                1,562
                                                         ---------            ---------
                                                            28,756               17,534
                                                         ---------            ---------
  Net income                                             $ 213,658            $ 183,649
                                                         =========            =========
                                                                                       
Net income allocated to                                                                
  Class A Limited Partners                               $ 454,393            $ 431,890
                                                                                       
Net loss allocated to                                                                  
  Class B Limited Partners                               $(240,735)           $(248,241)
                                                                                       
Net income per weighted average                                                        
  Class A Limited Partner Unit                           $     .23            $     .22
                                                                                       
Net loss per weighted average                                                          
  Class B Limited Partner Unit                           $    (.60)           $    (.56)
                                                                                       
Cash distribution per weighted average                                                 
  Class A Limited Partner Unit                           $     .21            $     .21 
 
</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, 1997                 1,971,399    $16,701,193      446,618     $2,560,972         $0        $19,262,165
 
 Net income (loss)                         0      1,704,213            0       (949,879)         0            754,334
 Partnership distributions                 0     (1,628,529)           0              0          0         (1,628,529)
 Class B conversion elections         38,118        159,058      (38,118)      (159,058)         0                  0
                                   ---------    -----------      -------     ----------         --        -----------
BALANCE,
 December 31, 1998                 2,009,517     16,935,935      408,500      1,452,035          0         18,387,970
 
 
 Net income (loss)                         0        454,393            0       (240,735)         0            213,658
 Partnership distributions                 0       (415,133)           0              0          0           (415,133)
 Class B conversion elections          3,989         12,993       (3,989)       (12,993)         0                  0
                                   ---------    -----------      -------     ----------         --        -----------
BALANCE,
 March 31, 1999                    2,013,506    $16,988,188      404,511     $1,198,307         $0        $18,186,495
                                   =========    ===========      =======     ==========         ==        ===========
 
</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, 1999                March 31, 1998
                                                                     --------------                --------------
<S>                                                                   <C>                           <C>
Cash flows from operating activities:
 Net income                                                            $ 213,658                     $ 183,649          
 Adjustments to reconcile net income to net cash                                                                        
  used in operating activities:                                                                                         
   Equity in income of joint ventures                                   (240,775)                     (197,900)         
   Amortization of organization costs                                      1,562                         1,562          
   Changes in assets and liabilities:                                                                                   
     Prepaids and other assets                                             1,517                           251          
     Accounts payable                                                     (3,863)                        2,095          
                                                                       ---------                     ---------          
     Total adjustments                                                  (241,559)                     (193,992)         
                                                                       ---------                     ---------          
      Net cash used in operating activities                              (27,901)                      (10,343)         
                                                                       ---------                     ---------          
                                                                                                                        
Cash flow from investing activities:                                                                                    
 Investment in joint ventures                                                  0                        (7,258)         
 Distributions received from joint ventures                              414,719                       416,360          
                                                                       ---------                     ---------          
      Net cash provided by                                                                                              
       investing activities                                              414,719                       409,102          
                                                                                                                        
Cash flow from financing activities:                                                                                    
 Partnership distributions paid                                         (403,832)                     (404,131)         
                                                                       ---------                     ---------          
                                                                                                                        
Net decrease in cash and cash equivalents                                (17,014)                       (5,372)         
                                                                                                                        
Cash and cash equivalents, beginning of year                              75,740                       194,420          
                                                                       ---------                     ---------          
                                                                                                                        
Cash and cash equivalents, end of period                               $  58,726                     $ 189,048          
                                                                       =========                     =========          
                                                                                                                        
Supplemental disclosure of noncash investing                                                                            
 activities:                                                                                                            
  Deferred project costs applied to real estate                                                                         
  and joint venture property                                           $       0                     $     416          
                                                                       =========                     =========          
 
</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, 1999

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

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

     Wells Real Estate Fund IV, L.P. (the "Partnership") is a Georgia public
     limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
     General Partners.  The partnership was formed on October 25, 1990, for the
     purpose of acquiring, developing, constructing, 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, and Wells Real Estate Fund VI, 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, 1999, 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 in
     Stockbridge, Georgia ("Stockbridge Village I Expansion"), (iv) an
     office/retail center 

                                       7
<PAGE>
 
     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, 1998.

(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, 1998.

     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.

                                       8
<PAGE>
 
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------

General
-------

As of March 31, 1999, the developed properties owned by the Partnership were 96%
occupied. Gross revenues of the Partnership were $242,414 and $201,183 for the
three months ended March 31, 1999 and March 31, 1998, respectively.  The
revenues increased in 1999 compared to 1998 due to the increase in income from
the joint ventures.  Expenses of the Partnership increased primarily due to
increases in administrative costs.

Net income per weighted average Unit for Class A Limited Partners was $0.23 for
the three months ended March 31, 1999.  Net loss per weighted average Unit for
Class B and converted Class A Limited Partners was $0.60 for the three months
ended March 31, 1999.

Cash distributions of $0.21 per weighted average Unit were made to Class A
Limited Partners for the three months ended March 31, 1999 and 1998. The
Partnership anticipates that distributions will continue to be paid on a
quarterly basis on a level at least consistent with 1998.

The Partnership's net cash used in operating activities increased from $10,343
in 1998 to $27,901 in 1999 due to the decrease in accounts payable and an
increase in administrative expenses.  Net cash provided by investing activities
increased from $409,102 in 1998 to $414,719 in 1999 due primarily to the
decrease in investments in joint ventures.

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.

Year 2000
---------

The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations.  A full
assessment of Year 2000 compliance issues was begun in late 1997 and was
completed by March 31, 1999.  Renovations and replacements of equipment have
been and are being made as warranted. The costs incurred by the Partnership and
its affiliates thus far for renovations and replacements have been immaterial.
Some testing of systems has begun and all testing is expected to be complete by
June 30, 1999.

As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant.  The Partnership's affiliated entities are purchasing the upgrade for
the accounting and property management package system; however, it is not slated
to be available until the end of the second quarter of 1999.  At the present
time, it is believed that all major non-information technology systems are Year
2000 compliant.  The cost to upgrade any non-compliant systems is believed to be
immaterial.

                                       9
<PAGE>
 
The Partnership is in the process of confirming with the Partnership's vendors,
including third-party service providers such as banks, that their systems will
be Year 2000 compliant.  Based on the information received thus far, the primary
third-party service providers with which the Partnership has relationships have
confirmed their Year 2000 readiness.

The Partnership relies on computers and operating systems provided by equipment
manufacturers, and also on application software designed for use with its
accounting, property management and investment portfolio tracking.  The
Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on the future operations or financial
condition of the Partnership.  The Partnership will perform due diligence as to
the Year 2000 readiness of each property owned by the Partnership and each
property contemplated for purchase by the Partnership.

The Partnership's reliance on embedded computer systems (i.e., microcontrollers)
is limited to facilities related matters, such as office security systems and
environmental control systems.

The Partnership is currently formulating contingency plans to cover any areas of
concern.  Alternate means of operating the business are being developed in the
unlikely circumstance that the computer and phone systems are rendered
inoperable.  An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors.  A written plan is being developed for testing and dispensation to each
staff member of the General Partner of the Partnership.

Management believes that the Partnership's risk of Year 2000 problems is
minimal.  In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down, the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed.  In the event that the security system shuts down, the Partnership
has devised a plan for each building to hire temporary on-site security guards.
In the event that a third-party vendor has Year 2000 problems relating to
investor information, the Partnership intends to perform a full system back-up
of all investor information as of December 31, 1999 so that the Partnership will
have accurate hard-copy investor information.

                                       10
<PAGE>
 
Property Operations
-------------------

As of March 31, 1999, the Partnership owned interest in the following
operational properties:

The Marathon Building / Fund V-VI-VII Joint Venture
---------------------------------------------------

<TABLE>
<CAPTION>
 
                                                    Three Months Ended
                                             --------------------------------
                                             March 31, 1999    March 31, 1998
                                             --------------    --------------
<S>                                          <C>               <C> 
Revenues:
 Rental Income                                     $242,754          $242,754
                                                   --------          --------
 
Expenses:
 Depreciation                                        87,646            87,646
 Management and leasing expenses                     16,244             9,890
 Other operating expenses                             7,546             3,642
                                                   --------          --------
                                                    111,436           101,178
                                                   --------          --------
 
Net income                                         $131,318          $141,576
                                                   ========          ========
 
Occupied %                                              100%              100%
 
Partnership Ownership %                                41.7%             41.7%
 
Cash distributed to the Partnership                $ 92,229          $ 96,583
 
Net income allocated to the Partnership            $ 54,773          $ 59,051
</TABLE>

The increase in management and leasing fees in first quarter 1999 over the first
quarter 1998 was due to a under accrual of fees in 1998.  The increase in
operating expenses was due primarily to increases in accounting and
administrative fees.

Cash distributions allocated to the Partnership and net income allocated to the
Partnership remained relatively stable for the three months ended March 31, 1999
and 1998.

                                       11
<PAGE>
 
Stockbridge Village III/Fund VI-Fund VII Joint Venture Three Months Ended
-------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                                       Three Months Ended
                                                                --------------------------------
                                                                March 31, 1999    March 31, 1998
                                                                --------------    --------------
<S>                                                             <C>               <C>
Revenues:
 Rental Income                                                     $80,601           $59,244
 
Expenses:
 Depreciation                                                       22,586            22,714
 Management and leasing expenses                                     5,556             8,231
 Other operating expenses                                            2,967            33,217
                                                                   -------           -------
                                                                    31,109            64,162
                                                                   -------           -------
 
Net (loss) income                                                  $49,492           $(4,918)
                                                                   =======           =======
 
Occupied %                                                             100%               82%
Partnership's Ownership % in the
 Fund VI-Fund VII Joint Venture                                       56.3%             57.0%
 
Cash distributed to the Partnership                                $37,472           $10,873
 
Net (loss) income allocated to the Partnership                     $27,863           $(2,795)
</TABLE>

A net loss is reflected for the first quarter of 1998, as compared to net income
of $49,492, for the same period in 1999.  The loss in 1998 was due to a decrease
in rental income and an increase in expenses, which were the result of a bad
debt reserve and the receivable due from this tenant has been turned over to
lawyers for collection.  The space is now being leased by RMS/Fazoli's which
signed a 13 year lease that commenced in December, 1998.

The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 56.3% for 1999, as compared to 57.0% in 1998, due to additional
fundings by Wells Fund VI.

                                       12
<PAGE>
 
Stockbridge Village I Expansion/Fund VI-Fund VII Joint Venture
--------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                  --------------------------------
                                                  March 31, 1999    March 31, 1998
                                                  --------------    --------------
<S>                                               <C>               <C>
Revenues:
 Rental Income                                      $78,146           $71,087
                                                    -------           -------
 
Expenses:
 Depreciation                                        41,555            34,652
 Management and leasing expenses                      9,290             9,508
 Other operating expenses                             4,791             9,521
                                                    -------           -------
                                                     55,636            53,681
                                                    -------           -------
 
Net income                                          $22,510           $17,406
                                                    =======           =======
 
Occupied %                                               86%               79%
 
Partnership's Ownership % in the                       56.3%             57.0%
 
Cash distributed to the Partnership                 $40,124           $28,606
 
Net income allocated to the Partnership             $12,673           $ 9,940
</TABLE>

Rental income, expenses and net income increased for the first quarter of 1999,
as compared to the same period in 1998, 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 56.3% for 1999, as compared to 57.0% in 1998, due to additional
fundings by Wells Fund VI.

                                       13
<PAGE>
 
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
-------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                            --------------------------------
                                            March 31, 1999    March 31, 1998
                                            --------------    --------------
<S>                                         <C>               <C>
 
Revenues:
 Rental Income                                 $230,063          $213,235
                                               --------          --------
 
Expenses:
 Depreciation                                    94,129            93,904
 Management and leasing expenses                 38,874            29,364
 Other operating expenses                        24,394            23,033
                                               --------          --------
                                                157,397           146,301
                                               --------          --------
 
Net income                                     $ 72,666          $ 66,934
                                               ========          ========
 
Occupied %                                           94%             94.1%
Partnership's Ownership % in the
 Fund II-III-VI-VII Joint Venture                  49.1%             49.1%
 
Cash distributed to the Partnership            $ 72,205          $ 87,737
 
Net income allocated to the
 Partnership                                   $ 35,657          $ 32,806
 
</TABLE>

While occupancy remained the same at March 31, 1999 and March 31, 1998, rental
income, management and leasing fees and net income have increased as compared to
1998 due primarily to two tenants occupying space at the property late in the
first quarter of 1998.

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

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                             --------------------------------------
                                                             March 31, 1999          March 31, 1998
                                                             --------------          --------------            
<S>                                                          <C>                    <C>
Revenues:
  Rental income                                                  $56,147                 $26,061
                                                                 -------                 -------
 
Expenses:
  Depreciation                                                    10,981                  10,981
  Management & leasing expenses                                    7,459                   2,661
  Other operating expenses                                         3,417                   8,116
                                                                 -------                 -------
                                                                  21,857                  21,758
                                                                 -------                 -------
 
Net income                                                       $34,290                 $ 4,303
                                                                 =======                 =======
 
Occupied %                                                           100%                     50%
 
Partnership's Ownership % in the
   Fund VII-Fund VIII Joint Venture                                 36.6%                   37.4%
 
Cash distribution to Partnership                                 $14,876                 $ 5,121
 
Net income allocated to the Partnership                          $12,567                 $ 1,617
</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.  Prudential and Norwest Financial occupied the remaining space in
November 1998 and signed a five year lease.

Rental income, net income and cash distributions increased for the three months
ended March 31, 1999, compared to the same period of 1998, due to increased
occupancy at the property. Expenses remained relatively stable.

The Partnership ownership in the Fund VII-Fund VIII Joint Venture decreased due
to construction funding by Wells Fund VIII, which decreased to Partnership's
ownership in the Fund VII-Fund VIII Joint Venture.

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

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                         ------------------
                                                             March 31, 1999             March 31, 1998
                                                             --------------             --------------
<S>                                                             <C>                       <C>
Revenues:
  Rental income                                                 $143,856                  $132,578                     
                                                                --------                  --------                     
Expenses:                                                                                                              
  Depreciation                                                    68,946                    54,545                     
  Management & leasing expenses                                   26,881                    28,121                     
  Other operating expenses                                        17,352                    15,481                     
                                                                --------                  --------                     
                                                                 113,179                    98,147                     
                                                                --------                  --------                     
                                                                                                                       
Net income                                                      $ 30,677                  $ 34,431                     
                                                                ========                  ========                     
                                                                                                                       
Occupied %                                                           100%                    100.0%                    
                                                                                                                       
Partnership's Ownership % in the                                                                                       
   Fund VII - VIII Joint Venture                                    36.6%                     37.4%                    
                                                                                                                       
Cash distribution to Partnership                                $ 35,587                  $ 31,830                     
                                                                                                                       
Net income allocated to the Partnership                         $ 11,243                  $ 13,006                     
</TABLE>

Rental income increased from 93% to 100% , due primarily to Affiliated Engineers
signing a five-year lease beginning March 27, 1998, which occupied the remaining
space.  Depreciation, management and leasing expenses increased for the first
quarter of 1999 due primarily to increased occupancy.  The Partnership ownership
in the Fund VII-VIII Joint Venture decreased due to construction fundings by
Wells Fund VIII.

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

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                     ------------------
                                                             March 31, 1999      March 31, 1998
                                                             --------------      --------------
<S>                                                           <C>                   <C>
Revenues:
  Rental income                                                $380,277             $380,277                           
  Interest income                                                 1,142                2,074                           
                                                               --------             --------                           
                                                                381,419              382,351                           
                                                               --------             --------                           
Expenses:                                                                                                              
  Depreciation                                                  111,606              110,889                           
  Management & leasing expenses                                  47,892               47,815                           
  Other operating expenses                                      103,784               87,410                           
                                                               --------             --------                           
                                                                263,282              246,114                           
                                                               --------             --------                           
                                                                                                                       
Net income                                                     $118,137             $136,237                           
                                                               ========             ========                           
                                                                                                                       
Occupied %                                                          100%                 100%                          
                                                                                                                       
Partnership's Ownership % in the                                                                                       
   Fund VI-VII-VIII Joint Venture                                  33.4%                33.4%                          
                                                                                                                       
Cash distribution to Partnership                               $ 79,509             $ 85,314                           
                                                                                                                       
Net income allocated to the Partnership                        $ 39,452             $ 45,497                           
</TABLE>

Net income has decreased slightly due primarily to  increased expenditures in
electricity , HVAC repairs, lighting replacements and various other operating
expenses.

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

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                              ------------------
                                                                    March 31, 1999          March 31, 1998
                                                                    --------------          --------------
Revenues:
<S>                                                                   <C>                     <C>
  Rental income                                                       $193,031                $182,613                            
  Interest income                                                        2,936                   5,138                            
                                                                      --------                --------                            
                                                                       195,967                 187,751                            
                                                                      --------                --------                            
                                                                                                                                  
Expenses:                                                                                                                         
  Depreciation                                                          61,425                  60,427                            
  Management & leasing expense                                          15,105                  14,819                            
  Other operating expenses                                              19,081                  25,102                            
                                                                      --------                --------                            
                                                                        95,611                 100,348                            
                                                                      --------                --------                            
  Net income                                                          $100,356                $ 87,403                            
                                                                      ========                ========                            
                                                                                                                                  
Occupied %                                                                  91%                     87%                           
                                                                                                                                  
Partnership's Ownership % in the                                                                                                  
  Fund VI-VII-VIII Joint Venture                                          33.4%                   33.4%                           
                                                                                                                                  
Cash distribution to Partnership                                      $ 54,324                $ 48,881                            
                                                                                                                                  
Net income allocated to Partnership                                   $ 33,514                $ 29,188                            

</TABLE>

Rental income, net income and cash distributions to the Partnership are greater
in 1999 as compared to 1998 primarily to the increased occupancy at the
property.

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

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                             ------------------------------------
                                                             March 31, 1999        March 31, 1998
                                                             --------------        --------------
<S>                                                          <C>                   <C>
Revenues:
  Rental income                                                 $227,383              $228,977                         
  Interest income                                                     20                    22                         
                                                                --------              --------                         
                                                                 227,403               228,999                         
                                                                --------              --------                         
Expenses:                                                                                                              
  Depreciation                                                   110,112               110,563                         
  Management & leasing expenses                                   26,135                25,751                         
  Other operating expenses                                       (30,556)                3,131                         
                                                                --------              --------                         
                                                                 105,691               139,445                         
                                                                --------              --------                         
                                                                                                                       
Net income                                                      $121,712              $ 89,554                         
                                                                ========              ========                         
                                                                                                                       
Occupied %                                                            96%                   91%                        
                                                                                                                       
Partnership's Ownership % in the                                                                                       
 Fund I, II, II-OW, VI, VII Joint Venture                           10.7%                 10.7%                        
                                                                                                                       
Cash distribution to Partnership                                $ 24,360              $ 20,156                         
                                                                                                                       
Net income allocated to the Partnership                         $ 13,033              $  9,589                         
</TABLE>

Rental income remained relatively stable in 1999 as compared to 1998.  The
decrease in operating expenses in 1999, as compared to 1998 are due to increased
CAM billings to tenants that were under accrued in 1998.

                                       19
<PAGE>
 
                          PART  II - OTHER INFORMATION
                          ----------------------------
                                        
Item 6(b).  No reports on Form 8-K were filed during the first quarter of 1999.


                                  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, 1999      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