UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C.  20549
                    ----------------------------------

                                 FORM 10-Q

         |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 (NO FEE REQUIRED)

                    For the transition period from_______ to ______.

                     Commission File Number : 0-15037

            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                        04-2870345
             --------                                        ----------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

265 Franklin Street, Boston, Massachusetts                           02110
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code  (617) 439-8118
                                                    --------------

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>

         PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                        CONSOLIDATED BALANCE SHEETS
             March 31, 1998 and September 30, 1997 (Unaudited)
                              (In thousands)

                                  ASSETS
 
                                                    March 31   September 30
                                                    --------   ------------

Operating investment property:
   Land                                            $     486   $     486
   Buildings and improvements                          2,990       2,990
   Equipment and fixtures                                 75          75
                                                   ---------   ---------
                                                       3,551       3,551
Less accumulated depreciation                         (1,302)     (1,257)
                                                   ---------   ---------
                                                       2,249       2,294

Investments in unconsolidated ventures, 
   at equity                                           1,584       1,406
Cash and cash equivalents                              1,402       2,856
Escrowed funds                                            34          72
Accounts receivable, net                                  48          26
Deferred expenses, net                                    94         103
Other assets                                              29          32
                                                   ---------   ---------
                                                   $   5,440   $   6,789
                                                   =========   =========

                     LIABILITIES AND PARTNERS' CAPITAL

Mortgage note payable                              $   1,583   $   1,614
Accounts payable and accrued expenses                     75          84
Accounts payable - affiliates                              6           7
Accrued interest payable                                  15          15
Accrued real estate taxes                                 20          58
Other liabilities                                          9           9
Partners' capital                                      3,732       5,002
                                                   ---------   ---------
                                                   $   5,440   $   6,789
                                                   =========   =========




                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For the three and six months ended March 31, 1998 and 1997 (Unaudited)
                      (In thousands, except per Unit data)

                                    Three Months Ended    Six Months Ended
                                         March 31,           March 31,
                                    ------------------   -----------------
                                      1998      1997       1998      1997
                                      ----      ----       ----      ----

Revenues:
   Rental income and expense
     recoveries                     $  135    $  123     $   260    $   242
   Interest and other income           324        70         386        150
                                    ------   -------     -------    -------
                                       459       193         646        392

Expenses:
   Mortgage interest                   46         47          92         95
   Property operating expenses         29         25          65         63
   Depreciation and amortization       30         37          51         73
   Real estate taxes                   20         19          41         41
   Management fees                     16         17          33         17
   General and administrative          37         60         111         99
                                   ------    -------     -------    -------
                                      178        205         393        388
                                   ------    -------     -------    -------

Operating income (loss)               281        (12)        253          4
Partnership's share of 
   unconsolidated ventures' 
   income (losses)                    480         (8)        731       (118)
Partnership's share of gain 
   on sale of operating 
   investment property                  -          -       4,474          -
                                   ------    -------     -------    -------

Net income (loss)                  $  761    $   (20)    $ 5,458    $  (114)
                                   ======    =======     =======    =======

Net income (loss) per Limited
  Partnership Unit                 $19.83    $ (0.52)    $142.22    $ (2.99)
                                   ======    =======     =======    =======

Cash distributions per Limited
  Partnership Unit                $171.03    $ 46.25     $177.06    $ 46.25
                                  =======    =======     =======    =======

   The above net income (loss) and cash  distributions  per Limited  Partnership
Unit are based upon the 37,969 Limited Partnership Units outstanding during each
period.

                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

        CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
          For the six months ended March 31, 1998 and 1997 (Unaudited)
                                 (In thousands)


                                                  General      Limited
                                                  Partners     Partners
                                                  --------     --------

Balance at September 30, 1996                     $   (756)    $    (621)
Cash distributions                                      (3)       (1,756)
Net loss                                                (1)         (113)
                                                  --------     ---------
Balance at March 31, 1997                         $   (760)    $  (2,490)
                                                  ========     =========

Balance at September 30, 1997                     $   (653)    $   5,655
Cash distributions                                      (5)       (6,723)
Net income                                              58         5,400
                                                  --------     ---------
Balance at March 31, 1998                         $   (600)    $   4,332
                                                  ========     =========





















                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          For the six months ended March 31, 1998 and 1997 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
                                                           1998     1997
                                                           ----     ----
Cash flows from operating activities:
  Net income (loss)                                    $  5,458  $  (114)
  Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
    Depreciation and amortization                            51       73
    Amortization of deferred financing costs                  3        3
    Partnership's share of unconsolidated ventures'
      income (losses)                                      (731)     118
    Partnership's share of gain on sale of 
      operating investment property                      (4,474)       -
    Changes in assets and liabilities:
      Escrow deposits                                        38       39
      Accounts receivable                                   (22)       9
      Accounts receivable - affiliates                        -        2
      Other assets                                            3        2
      Accounts payable and accrued expenses                  (9)     (12)
      Accounts payable - affiliates                          (1)       -
      Accrued real estate taxes                             (38)     (39)
      Other liabilities                                       -       (1)
                                                       --------  -------
        Total adjustments                                (5,180)     194
                                                       --------  -------
        Net cash provided by operating activities           278       80

Cash flows from investing activities:
   Distributions from unconsolidated joint ventures       5,027      712

Cash flows from financing activities:
   Distributions to partners                             (6,728)  (1,759)
   Principal payments on long-term debt                     (31)     (28)
                                                       --------  -------
        Net cash used in financing activities            (6,759)  (1,787)
                                                       --------  -------

Net decrease in cash and cash equivalents                (1,454)    (995)

Cash and cash equivalents, beginning of period            2,856    5,067
                                                       --------  -------
Cash and cash equivalents, end of period               $  1,402  $ 4,072
                                                       ========  =======

Cash paid during the period for interest               $     89  $    92
                                                       ========  =======
                          

                            See accompanying notes.


<PAGE>
                         PAINE WEBBER INCOME PROPERTIES
                            SEVEN LIMITED PARTNERSHIP
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.  General
    -------

      The accompanying financial statements,  footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in the
Partnership's  Annual  Report  for the year ended  September  30,  1997.  In the
opinion of management, the accompanying consolidated financial statements, which
have not been audited,  reflect all adjustments  necessary to present fairly the
results for the interim period. All of the accounting  adjustments  reflected in
the accompanying interim financial statements are of a normal recurring nature.

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which require  management  to make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities  as of March 31, 1998 and  September  30, 1997 and revenues and
expenses  for the three and six months  ended  March 31,  1998 and 1997.  Actual
results could differ from the estimates and assumptions used.

2.  Related Party Transactions
    --------------------------

      The Adviser  earned total  management  fees of $33,000 and $17,000 for the
six-month periods ended March 31, 1998 and 1997, respectively.  Accounts payable
- affiliates at March 31, 1998 and September 30, 1997 consist of management fees
of $6,000 and $7,000, respectively, payable to the Adviser.

      Included in general and  administrative  expenses for the six months ended
March 31,  1998 and 1997 is  $44,000  and  $43,000,  respectively,  representing
reimbursements  to an affiliate of the Managing  General  Partner for  providing
certain  financial,  accounting  and  investor  communication  services  to  the
Partnership.

      Also  included  in general  and  administrative  expenses  for both of the
six-month  periods  ended March 31, 1998 and 1997 is $6,000,  representing  fees
earned by an affiliate,  Mitchell Hutchins  Institutional  Investors,  Inc., for
managing the Partnership's cash assets.

3.  Investments in Unconsolidated Joint Venture Partnerships
    --------------------------------------------------------

      As  of  March  31,  1998,   the   Partnership   had   investments  in  two
unconsolidated  joint  ventures (four at March 31, 1997) which own two operating
properties (six at March 31, 1997), as more fully described in the Partnership's
Annual  Report.  The  remaining  unconsolidated  ventures  are the owners of the
Colony  Apartments and the Colony Square Shopping Center,  both located in Mount
Prospect,  Illinois. On June 27, 1997, HMF Associates,  a joint venture in which
the  Partnership  had an interest,  sold the  properties  known as The Hunt Club
Apartments  and The Marina  Club  Apartments  to an  unrelated  third  party for
approximately  $5.3  million and $3.1  million,  respectively.  The  Partnership
received net proceeds of  approximately  $288,000 in connection with the sale of
these two assets in accordance with a discounted  mortgage loan payoff agreement
reached  with  the  lender  in  April  1997.  The  third  property  owned by HMF
Associates, the Enchanted Woods Apartments,  located in Federal Way, Washington,
had been under  contract for sale to the same buyer that purchased The Hunt Club
and Marina Club properties,  however, the buyer subsequently  withdrew the offer
to purchase Enchanted Woods. The Partnership made a special capital distribution
of  $1,898,450,  or $50 per original  $1,000  investment,  on August 15, 1997 to
unitholders  of record as of June 27, 1997.  Of this amount,  $7.60 per original
$1,000 investment represented net sale proceeds from the disposition of The Hunt
Club  Apartments  and The Marina Club  Apartments,  $41.48 per  original  $1,000
investment  represented  proceeds from the  settlements  of litigation  covering
construction-related  defects at the Hunt Club,  Marina Club and Enchanted Woods
properties  as discussed  further in the Annual  Report,  and $0.92 per original
$1,000 investment represented Partnership reserves that exceeded expected future
requirements.  On September 9, 1997,  HMF  Associates  sold The Enchanted  Woods
Apartments  to an unrelated  third party for  approximately  $9.2  million.  The
Partnership  received net proceeds of approximately  $261,000 in connection with
the sale in  accordance  with the  discounted  mortgage  loan  payoff  agreement
referred to above.

      On December 18, 1997, Daniel Meadows Partnership, a joint venture in which
the Partnership had an interest,  sold its operating  investment  property,  The
Meadows on the Lake Apartments, located in Birmingham,  Alabama, to an unrelated
third party for $9.525 million. The sale generated net proceeds of approximately
$4.4  million,  after  repayment  of the  outstanding  first  mortgage  loan  of
approximately  $4.7 million and closing  costs of  approximately  $400,000.  The
Partnership  received 100% of the net proceeds in  accordance  with the terms of
the joint venture agreement.  The Partnership made a special distribution to the
Limited Partners totalling approximately $6,265,000, or $165 per original $1,000
investment,  on February 13, 1998. Of this amount,  $116.39 per original  $1,000
investment represented the net proceeds from the sale of The Meadows on the Lake
Apartments,  $13.52 per original $1,000 investment represented net proceeds from
the  disposition  of the  Enchanted  Woods  Apartments,  and $35.09 per original
$1,000 investment represented Partnership reserves that exceeded expected future
requirements.

      The unconsolidated  joint venture  investments are accounted for using the
equity method because the Partnership does not have a voting control interest in
the ventures.  Under the equity method,  the assets,  liabilities,  revenues and
expenses  of the joint  ventures  do not appear in the  Partnership's  financial
statements.  Instead,  the  investments  are  carried at cost  adjusted  for the
Partnership's  share of the  ventures'  earnings  and losses and  distributions.
Summarized operations of the unconsolidated joint ventures for the three and six
months ended March 31, 1998 and 1997 are as follows:

                    Condensed Combined Summary of Operations
           For the three and six months ended March 31, 1998 and 1997
                                 (in thousands)

                                     Three Months Ended    Six Months Ended
                                          March 31,            March 31,
                                     ------------------   -----------------
                                        1998    1997        1998     1997
                                        ----    ----        ----     ----

   Rental revenues and
     expense recoveries              $ 1,774  $2,705      $3,773   $5,349
   Interest and other income              56     126         151      226
                                     -------  ------      ------   ------
                                       1,830   2,831       3,924    5,575

   Property operating expenses           403     982       1,063    1,933
   Interest expense                      353     983         792    1,982
   Real estate taxes                     397     463         821      939
   Depreciation and amortization         197     412         515      842
                                     -------  ------      ------   ------
                                       1,350   2,840       3,191    5,696
                                     -------  ------      ------   ------
   Operating income (loss)               480      (9)        733     (121)

   Gain on sale of operating 
     investment property                   -       -       4,869        -
                                     -------  ------      ------   ------
   Net income (loss)                 $   480  $   (9)     $5,602   $ (121)
                                     =======  ======      ======   ======

   Net income (loss):
     Partnership's share of
       combined income (losses)      $   480  $   (7)     $5,334   $ (115)
     Co-venturers' share of
       combined income (losses)            -      (2)        268       (6)
                                     -------  ------      ------   ------
                                     $   480  $   (9)     $5,602   $ (121)
                                     =======  ======      ======   ======

               Reconciliation of Partnership's Share of Operations
           For the three and six months ended March 31, 1998 and 1997
                                 (in thousands)

                                      Three Months Ended    Six Months Ended
                                           March 31,            March 31,
                                      ------------------    ----------------
                                        1998     1997        1998     1997
                                        ----     ----        ----     ----
   Partnership's share of combined
      income (losses), as 
      shown above                    $   480    $  (7)     $5,334   $ (115)
   Amortization of excess basis            -       (1)       (129)      (3)
                                     -------    -----      ------   -------
   Partnership's share of 
      unconsolidated ventures' 
      net income (loss)              $   480    $  (8)     $5,205   $ (118)
                                     =======    =====      ======   ======
<PAGE>

      The Partnership's share of the unconsolidated  ventures' net income (loss)
is  presented  as follows  in the  consolidated  statements  of  operations  (in
thousands):
                                     Three Months Ended    Six Months Ended
                                           March 31,            March 31,
                                      ------------------    ----------------
                                        1998     1997        1998     1997
                                        ----     ----        ----     ----
   Partnership's share of
     unconsolidated ventures' 
     income (losses)                  $   480   $  (8)    $   731   $ (118)
   Partnership's share of gain on
     sale of operating investment 
     property                               -       -       4,474        -
                                      -------   -----     -------   ------
   Partnership's share of 
     unconsolidated ventures' net 
     income (loss)                    $   480   $  (8)    $ 5,205   $ (118)
                                      =======   =====     =======   ======

4.  Operating Investment Property
    -----------------------------

      The Partnership has a controlling interest in one joint venture, West Palm
Beach Concourse  Associates,  which owns the Concourse  Retail Plaza. The Retail
Plaza  consists of 30,473 net  rentable  square feet  located in West Palm Beach
Florida.  Subsequent to a settlement and assignment agreement executed in fiscal
1990, the  Partnership's  co-venture  partner is Seventh Income Properties Fund,
Inc., the Managing General Partner of the Partnership.  The amended and restated
terms  of  the  joint  venture   agreement  are  more  fully  described  in  the
Partnership's  Annual Report.  The  Partnership  employs the services of a local
unaffiliated property management company to administer the day-to-day operations
of the investment property.

      The  following is a summary of property  operating  expenses for the three
and six-month periods ended March 31, 1998 and 1997 (in thousands):

                                    Three Months Ended   Six Months Ended
                                          March 31,           March 31,
                                    ------------------  -----------------
                                      1998    1997        1998     1997
                                      ----    ----        ----     ----

     Repairs and maintenance       $     7   $    7      $   11   $   14
     Utilities                           1        1           2        2
     Insurance                           1        1           3        3
     Administrative and other           16       12          41       36
     Management fees                     4        4           8        8
                                   -------   ------      ------   ------
                                   $    29   $   25      $   65   $   63
                                   =======   ======      ======   ======

5.  Mortgage Note Payable
    ---------------------

      Mortgage note payable on the  consolidated  balance  sheets relates to the
Partnership's  consolidated joint venture, West Palm Beach Concourse Associates,
and is secured by the venture's operating investment property. At March 31, 1998
and  September  30, 1997,  mortgage  note payable  consists of the following (in
thousands):

                                                   March 30    September 30
                                                   --------    ------------
   
     11.12% first  mortgage,  payable in
     installments   of  $20  per  month,
     including interest, through January
     1, 2005. All outstanding  principal
     and  accrued  interest  is  due  on
     January 10, 2005. The fair value of
     this note payable  approximated its
     carrying value as of March 31, 1998
     and  September  30, 1997.                      $ 1,583      $ 1,614 
                                                    =======      ========

      In  accordance  with  the  Concourse  mortgage  loan  agreements,  certain
insurance  premiums and real estate taxes are required to be held in escrow. The
balance of escrow deposits on the accompanying  balance sheets at March 31, 1998
and September 30, 1997  consists of such  escrowed  insurance  premiums and real
estate taxes in the aggregate amounts of $34,000 and $72,000, respectively.

<PAGE>

            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Relating to Forward-Looking Statements
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified  in Item 7 of the  Partnership's  Annual  Report on Form 10-K for the
year ended  September  30, 1997 under the  heading  "Certain  Factors  Affecting
Future Operating Results", which could cause actual results to differ materially
from historical  results or those  anticipated.  The words "believe",  "expect",
"anticipate,"  and  similar  expressions  identify  forward-looking  statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which were made based on facts and conditions as they existed as of
the date of this report.  The  Partnership  undertakes no obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information, future events or otherwise.

Liquidity and Capital Resources
-------------------------------

      As  discussed  further  in the Annual  Report,  on  September  9, 1997 HMF
Associates  sold its remaining  asset,  The Enchanted  Woods  Apartments,  to an
unrelated third party for approximately $9.2 million.  The Partnership  received
net proceeds of approximately $261,000 in connection with the sale in accordance
with a  discounted  mortgage  loan payoff  agreement  reached with the lender in
April 1997.  In  addition,  as  previously  reported,  on December  18, 1997 The
Meadows on the Lake  Apartments was sold to an unrelated  third party for $9.525
million.  The sale generated net proceeds of approximately  $4.4 million,  after
repayment of the outstanding  first mortgage loan of approximately  $4.7 million
and closing costs of approximately  $400,000.  The Partnership  received 100% of
the net proceeds in accordance with the terms of the joint venture agreement. In
early  fiscal 1997 the  Partnership  and its  co-venture  partner  had  received
unsolicited  offers from  prospective  purchasers  to acquire The Meadows on the
Lake Apartments,  located in Birmingham,  Alabama. After carefully reviewing the
offers,  the  Partnership  determined  that the property should sell at a higher
price and  directed  the  co-venture  partner to market the  property  for sale.
During the fourth quarter of fiscal 1997,  several offers were received.  One of
these offers was from a qualified buyer and met the Partnership's sale criteria.
This offer was accepted by the Partnership and its co-venture partner;  however,
a  sale  agreement  could  not  be  finalized  with  this   prospective   buyer.
Negotiations  were  then  undertaken  with one of the  other  potential  buyers,
resulting in a purchase and sale agreement which was signed on November 12, 1997
and the final sale  transaction  which closed on December 18, 1997.  On February
13, 1998, the Partnership  made a special  distribution to the Limited  Partners
totalling approximately  $6,265,000,  or $165 per original $1,000 investment. Of
this amount, $116.39 per original $1,000 investment represented the net proceeds
from the sale of The Meadows on the Lake Apartments,  $13.52 per original $1,000
investment  represented net proceeds from the disposition of the Enchanted Woods
Apartments,  and $35.09 per original $1,000 investment  represented  Partnership
reserves that exceeded expected future requirements.

      The  Partnership is focusing on potential  disposition  strategies for the
remaining  investments in its portfolio,  which consist of two retail properties
and one multi-family apartment complex. The sale of the Partnership's  remaining
assets would be followed by a liquidation  of the  Partnership.  It is currently
contemplated  that sales of the  Partnership's  assets could be completed within
the next one to two years. There are no assurances,  however,  that the sales of
the remaining  assets and the liquidation of the  Partnership  will be completed
within  this time frame.  Of the three  assets  remaining  after the sale of the
Meadows on the Lake Apartments,  the Colony Apartments  property has significant
equity above the  outstanding  debt  obligation  based on the estimated  current
property value,  while the two retail  properties would not be expected to yield
substantial  net proceeds  after the mortgage debt if sold under current  market
conditions.

      The occupancy level at the Colony Apartments  averaged 97% for the quarter
ended March 31, 1998,  unchanged  from the  previous  quarter and up 3% from the
quarter ended March 31, 1997. In addition to the high  occupancy  level,  rental
rates continue to increase at the property, with the average monthly rental rate
per apartment unit  increasing 5% over the past twelve months.  The strong local
job market has  influenced  an  unusually  high  demand  for  apartments  in the
northwest suburbs, which is the property's local sub-market. Such conditions may
present the Partnership with favorable opportunities to sell its interest in the
Colony Apartments in the near term. Subsequent to the end of the second quarter,
the  Partnership  and its joint venture  partner agreed to solicit  proposals to
market the Colony  Apartments  property from three  national  full-service  real
estate  firms  specializing  in the sale of  large  apartment  complexes.  It is
expected that these  proposals will be received  during the third fiscal quarter
and that,  after  extensive  due  diligence  on each firm,  one company  will be
selected to market the  property  for sale.  The  potential  to sell this asset,
which represents the Partnership's sole source of liquidity,  on favorable terms
may prompt the accelerated dispositions of the two remaining retail properties.

      At the Colony Square  Shopping  Center,  the occupancy level declined from
100% to 92% when a 3,000  square  foot  restaurant  tenant  vacated its space in
March 1998. The property management team had allowed this tenant to remain after
its lease expired in November, on a month-to-month basis, while the owner of the
business  tried  to  sell  the  restaurant.   Such  efforts   ultimately  proved
unsuccessful. The property's management and leasing team is currently pursuing a
replacement  tenant for the space.  During the second  quarter,  the  property's
leasing team signed renewal leases with a 1,200 square foot  hairstylist  tenant
for five years and a 1,200  square foot travel  agency for three  years.  Asking
rental rates and actual contract rates for retail space in the local  sub-market
are up slightly  from one year ago,  which may provide an  opportunity  to renew
upcoming  leases at slightly  higher rental rates.  Capital  improvements to the
shopping center  completed during the second quarter included the replacement of
a rear security door and the  continuation of the conversion of electric heat to
gas heat.  With a high  occupancy  level and a stable base of locally  owned and
operated tenants,  the Partnership believes it would be appropriate to explore a
possible  sale  of the  Colony  Square  property.  Accordingly,  management  has
initiated  discussions with a prominent local retail real estate consulting firm
for the purpose of determining various options for the property.

      The occupancy level at the Concourse  Retail Plaza remained at 90% for the
quarter  ended  March 31,  1998.  Management  continues  to closely  monitor the
operating  performance of the three  restaurant  tenants at the Concourse Retail
Plaza. Two of these tenants,  which occupy  approximately  40% of the property's
leasable space,  reported  declining sales during fiscal 1996 and fell behind on
their rental  payments.  Management  negotiated  agreements with both tenants to
cure  the  rental  delinquencies  which,  in  one  of the  cases,  involved  the
forgiveness  of a portion  of the  delinquency  and a  reduction  in the  future
monthly  rent  payment  in  return  for an  increase  in the  term of the  lease
obligation. The Partnership had pursued legal action for eviction against one of
these tenants, a locally owned southwestern restaurant which occupies 28% of the
Plaza,  because of a failure to pay the  modified  rent.  Subsequently,  a court
judgement for eviction was entered against this restaurant  tenant.  This tenant
is now experiencing  improved sales and is paying its rent as modified under the
court judgement. However, the Partnership is pursuing additional legal action to
obtain a summary  judgement on the total rental  arrearage owed. The Partnership
will continue to collect this tenant's rent while also looking for a replacement
tenant in the event of a default. The other tenant, a locally owned and operated
far eastern  restaurant which occupies 12% of the leasable area, is experiencing
a  slow-down  in sales and has  fallen  behind in its  rental  obligations.  The
property management team had negotiated a temporary rental assistance program to
allow the restaurant to remain in business through the tourist season,  but this
tenant has failed to pay the full modified rent. The property's  management team
is now pursuing legal action against this tenant. The property's leasing team is
also working with a 1,200 square foot mortgage  company,  whose lease expired in
September 1997 and has been on a  month-to-month  lease,  to sign a 3-year lease
renewal. Two other tenants, a 3,200 square foot health care provider and a 1,200
square foot print  shop,  have  leases  coming up for  renewal  over the next 12
months. The leasing team expects these tenants to renew their leases.

      As  previously  reported,  the  Partnership  reviewed  its options for the
Concourse  Retail Plaza and determined  that it may be the  appropriate  time to
market the property for sale. For the past four years, 80% of the Plaza's 30,473
square feet has been leased to four  restaurant  operators  which,  for the most
part, have performed poorly. One of these restaurant tenants is currently paying
rent on space that was vacated in 1996 under a lease that can be  terminated  in
July 1999. One of the options under review is the  development of a leasing plan
that would put an emphasis on a greater  mixture of office and retail uses. This
could  involve  the  conversion  of one  of the  larger  restaurant  out  parcel
buildings  into  professional/service  office space.  Another option would be to
market the property for sale after  attempting to stabilize  the current  tenant
base. However,  the prospects for stabilizing the tenant roster are uncertain at
the present time in light of the bleak economic conditions which currently exist
in the local sub-market.  Management is aware of several  restaurant  tenants in
the local market whose  businesses  have failed in recent months,  and,  despite
diligent efforts,  the Partnership has been unable to identify and secure viable
tenants to replace  any of the three  financially  troubled  restaurant  tenants
referred to above.  Another  factor  impacting a possible  near term sale of the
Concourse Retail Plaza is the property's first mortgage loan. The mortgage loan,
which is assumable,  contains a prohibition  on prepayment  through  January 10,
2000. As a result, any sale transaction  completed prior to such date would have
to involve an assumption of this mortgage loan which carries an interest rate of
11.12%  per  annum.  In  connection  with its  plan to  explore  potential  sale
opportunities,  management  reviewed the  qualifications  of several  local real
estate  marketing firms to determine their expertise and track record in selling
properties similar to the Concourse.  During the second quarter, the Partnership
contracted with a local real estate firm  specializing  in retail  properties to
market the Concourse Retail Plaza for sale. Sales flyers and brochures have been
prepared,  and the real  estate  firm  commenced  its formal  marketing  program
subsequent to the quarter-end.

      At March 31, 1998, the Partnership and its  consolidated  venture had cash
and cash equivalents of approximately $1,402,000. Such cash and cash equivalents
will be utilized as needed for Partnership  requirements  such as the payment of
operating expenses, the funding of operating deficits or capital improvements of
the joint ventures in accordance with the terms of the respective  joint venture
agreements,  to the extent  economically  justified,  and for  distributions  to
partners.  The source of future  liquidity and  distributions to the partners is
expected to be from  available net cash flow  generated by the operations of the
Partnership's  remaining  investment  properties  and from net proceeds from the
sale or refinancing of such  properties.  Such sources of liquidity are expected
to be  sufficient  to meet the  Partnership's  needs on both a short-term  and a
long-term basis.

Results of Operations
Three Months Ended March 31, 1998
---------------------------------

      The Partnership reported net income of $761,000 for the three months ended
March 31, 1998,  as compared to a net loss of $20,000 for the same period in the
prior year. This favorable change in the  Partnership's net operating results is
attributable  to a  $488,000  favorable  change  in the  Partnership's  share of
unconsolidated  ventures' income (losses) and a $283,000 favorable change in the
Partnership's operating income (loss). The favorable change in the Partnership's
share of unconsolidated  ventures' income (losses) is primarily  attributable to
the sale of the  properties  owned by the HMF joint venture during the third and
fourth  quarters  of fiscal  1997.  The HMF joint  venture  had been  generating
sizable  operating  losses  prior to the sales of its assets.  Increases  in net
income  at  the  Colony   Apartments  and  Colony  Square  joint  ventures  also
contributed to the  improvement  in the  Partnership's  share of  unconsolidated
ventures'  income  (losses) for the current  three-month  period.  Net income at
Colony  Apartments  increased  mainly  due to an  increase  in  rental  revenues
resulting  from  increases in occupancy and rental rates combined with a decline
in property operating expenses. Net income at Colony Square increased mainly due
to a decline in property operating expenses.

      The  favorable  change in the  Partnership's  operating  income  (loss) is
attributable to a $266,000 increase in the Partnership's  operating revenues and
a $27,000 decline in operating  expenses.  The Partnership's  operating revenues
increased  mainly due to an increase in other income related to the receipt of a
residual cash  distribution  from the HMF joint venture in the current period in
connection with the final  liquidation of the joint venture.  The  Partnership's
operating   expenses   decreased   mainly  due  to   declines   in  general  and
administrative  expenses and depreciation and amortization expense.  General and
administrative  expenses  decreased  as a result of a timing  difference  in the
performance  of  certain  required  professional   services.   Depreciation  and
amortization expense decreased due to a $1 million impairment loss recognized on
the  Concourse  property  in fiscal  1997,  as  discussed  further in the Annual
Report.

Six Months Ended March 31, 1998
-------------------------------

      The Partnership reported net income of $5,458,000 for the six months ended
March 31, 1998, as compared to a net loss of $114,000 for the same period in the
prior year. This favorable change in the  Partnership's net operating results is
mainly  attributable to a $4,474,000  gain  recognized in the current  six-month
period on the sale of the Meadows  property,  as discussed  further above.  Also
contributing to the favorable change in the  Partnership's net operating results
was  an  $849,000  improvement  in the  Partnership's  share  of  unconsolidated
ventures' income (losses) and a $249,000 increase in the Partnership's operating
income for the current six-month period.

      The  Partnership  recognized  income  of  $731,000  from its  share of the
operating results of its unconsolidated  joint ventures for the six months ended
March 31, 1998, as compared to a net loss of $118,000 for the same period in the
prior year. The favorable change in the  Partnership's  share of  unconsolidated
ventures'  income  (losses)  is  primarily  attributable  to  the  sale  of  the
properties  owned by the HMF joint venture during the third and fourth  quarters
of fiscal 1997.  The HMF joint  venture had been  generating  sizable  operating
losses  prior to the sales of its assets.  Increases in net income at the Colony
Apartments  and Colony  Square joint  ventures,  which were mainly the result of
higher revenues,  also contributed to the improvement in the Partnership's share
of  unconsolidated  ventures' income (losses) for the current  six-month period.
The  Partnership's  operating income  increased  primarily due to an increase in
other income related to the receipt of a residual cash distribution from the HMF
joint venture in the current period in connection with the final  liquidation of
the joint venture.




<PAGE>



                                  PART II
                             Other Information


Item 1. Legal Proceedings   NONE

Item 2. through 5.     NONE

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:         NONE

(b)   No reports on Form 8-K have been filed  during the  quarter for which this
      report is filed.



<PAGE>

         PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP


                                SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the  Partnership  has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                      PAINE WEBBER INCOME PROPERTIES SEVEN
                               LIMITED PARTNERSHIP


                              By:  SEVENTH INCOME PROPERTIES FUND, INC.
                                   ------------------------------------
                                   Managing General Partner




                              By: /s/ Walter V. Arnold
                                  --------------------
                                  Walter V. Arnold
                                  Senior Vice President and
                                  Chief Financial Officer


Dated:  May 12, 1998