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 JUNE 30, 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
             June 30, 1998 and September 30, 1997 (Unaudited)
                              (In thousands)

                                  ASSETS

                                                    June 30   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                         (1,325)     (1,257)
                                                   ---------  ----------
                                                       2,226       2,294

Investments in unconsolidated ventures, at equity      1,941       1,406
Cash and cash equivalents                              1,168       2,856
Escrowed funds                                            57          72
Accounts receivable, net                                  80          26
Deferred expenses, net                                    90         103
Other assets                                              29          32
                                                   ---------  ----------
                                                   $   5,591  $    6,789
                                                   =========  ==========

                     LIABILITIES AND PARTNERS' CAPITAL

Mortgage note payable                              $   1,567  $    1,614
Accounts payable and accrued expenses                     46          84
Accounts payable - affiliates                              6           7
Accrued interest payable                                  15          15
Accrued real estate taxes                                 40          58
Other liabilities                                          9           9
Partners' capital                                      3,908       5,002
                                                   ---------  ----------
                                                   $   5,591  $    6,789
                                                   =========  ==========





                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For the three and nine months ended June 30, 1998 and 1997 (Unaudited)
                      (In thousands, except per Unit data)

                                      Three Months Ended   Nine Months Ended
                                            June 30,            June 30,
                                      ------------------   -----------------
                                      1998      1997        1998       1997
                                      ----      ----        ----       ----
Revenues:
   Rental income and expense
      recoveries                    $   134   $   122    $    394    $   364
   Interest and other income             18        63         404        213
                                    -------   -------    --------    -------
                                        152       185         798        577
Expenses:
   Mortgage interest                     45        47         137        142
   Property operating expenses           17        20          82         83
   Depreciation and amortization         26        36          77        109
   Real estate taxes                     20        20          61         61
   Management fees                       14        24          47         42
   General and administrative            47        76         159        174
                                    -------   -------    --------    -------
                                        169       223         563        611
                                    -------   -------    --------    -------
Operating income (loss)                 (17)      (38)        235        (34)

Partnership's share of 
   unconsolidated ventures' 
   income (losses)                      390        86       1,121        (32)
Partnership's share of gain on
   sale of operating investment 
   property                               -     1,929       4,474      1,929
                                    -------   -------    --------    -------
Income before extraordinary gain        373     1,977       5,830      1,863
Partnership's share of 
  extraordinary gain from 
  settlement of debt obligations          -     2,580           -      2,580
                                    -------   -------    --------    -------
Net income                          $   373   $ 4,557    $  5,830    $ 4,443
                                    =======   =======    ========    =======

Per Limited Partnership Unit:
   Income before extraordinary 
     gain                           $  9.72   $ 40.77    $ 151.93    $ 37.82
   Partnership's share of 
     extraordinary gain from 
     settlement of debt 
     obligations                          -     58.86           -      58.86
                                    -------   -------    --------    -------
   Net income                       $  9.72   $ 99.63    $ 151.93    $ 96.68
                                    =======   =======    ========    =======

   Cash distributions               $  5.12   $  6.00    $ 182.18    $ 52.25
                                    =======   =======    ========    =======

   The above per Limited  Partnership  Unit information is 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 nine months ended June 30, 1998 and 1997 (Unaudited)
                                 (In thousands)


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

Balance at September 30, 1996                     $    (756)    $   (621)
Cash distributions                                       (5)      (1,984)
Net income                                              772        3,671
                                                  ---------     --------
Balance at June 30, 1997                          $      11     $  1,066
                                                  =========     ========

Balance at September 30, 1997                     $    (653)    $  5,655
Cash distributions                                       (7)      (6,917)
Net income                                               61        5,769
                                                  ---------     --------
Balance at June 30, 1998                          $    (599)    $  4,507
                                                  =========     ========






















                          See accompanying notes.


<PAGE>


            PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          For the nine months ended June 30, 1998 and 1997 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)
                                                           1998       1997
                                                           ----       ----
Cash flows from operating activities:
  Net income                                            $ 5,830      $ 4,443
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                            77          109
    Amortization of deferred financing costs                  4            4
    Partnership's share of unconsolidated ventures'
      income (losses)                                    (1,121)          32
    Partnership's share of extraordinary gain on
       settlement of debt obligations                         -       (2,580)
    Partnership's share of gain on sale of operating
       investment property                               (4,474)      (1,929)
    Changes in assets and liabilities:
      Escrow deposits                                        15           18
      Accounts receivable                                   (54)          (6)
      Accounts receivable - affiliates                        -            2
      Other assets                                            3            4
      Accounts payable and accrued expenses                 (38)         (37)
      Accounts payable - affiliates                          (1)           7
      Accrued real estate taxes                             (18)           -
                                                        -------      -------
        Total adjustments                                (5,607)      (4,376)
                                                        -------      -------
        Net cash provided by operating activities           223           67

Cash flows from investing activities:
   Distributions from unconsolidated joint ventures       5,060        1,342

Cash flows from financing activities:
   Distributions to partners                             (6,924)      (1,989)
   Principal payments on long-term debt                     (47)         (42)
                                                        -------      -------
        Net cash used in financing activities            (6,971)      (2,031)
                                                        -------      -------

Net decrease in cash and cash equivalents                (1,688)        (622)

Cash and cash equivalents, beginning of period            2,856        5,067
                                                        -------      -------
Cash and cash equivalents, end of period                $ 1,168      $ 4,445
                                                        =======      =======

Cash paid during the period for interest                $   133      $   138
                                                        =======      =======

                          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 June 30, 1998 and  September  30, 1997 and  revenues and
expenses  for the three and nine  months  ended June 30,  1998 and 1997.  Actual
results could differ from the estimates and assumptions used.

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

      The Adviser  earned total  management  fees of $47,000 and $42,000 for the
nine-month periods ended June 30, 1998 and 1997, respectively.  Accounts payable
- affiliates at June 30, 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 nine months ended
June 30,  1998 and  1997 is  $66,000  and  $64,000,  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 the nine months
ended June 30, 1998 and 1997 is $7,000 and $12,000,  respectively,  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 June 30, 1998, the Partnership had investments in two unconsolidated
joint ventures (four at June 30, 1997) which own two operating  properties (four
at June 30, 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
nine months ended June 30, 1998 and 1997 are as follows:

                    Condensed Combined Summary of Operations
           For the three and nine months ended June 30, 1998 and 1997
                                 (in thousands)

                                    Three Months Ended   Nine Months Ended
                                          June 30,             June 30,
                                      ----------------   --------------------
                                       1998     1997        1998       1997
                                       ----     ----        ----       ----

   Rental revenues and
     expense recoveries              $ 1,796    $2,745      $5,569     $8,094
   Interest and other income              40        96         191        322
                                     -------    ------      ------     ------
                                       1,836     2,841       5,760      8,416

   Property operating expenses           474       889       1,537      2,822
   Interest expense                      347     1,010       1,139      2,992
   Real estate taxes                     402       466       1,223      1,405
   Depreciation and amortization         223       392         738      1,234
                                     -------    ------      ------     ------
                                       1,446     2,757       4,637      8,453
                                     -------    ------      ------     ------
   Operating income (loss)               390        84       1,123        (37)

   Gain on sale of operating 
     investment property                   -     2,018       4,870      2,018
                                     -------    ------      ------     ------

   Income before extraordinary gain      390     2,102       5,993      1,981

   Extraordinary gain from 
     settlement of debt 
     obligations                           -     2,699           -      2,699
                                     -------    ------      ------     ------
       Net income                    $   390    $4,801      $5,993     $4,680
                                     =======    ======      ======     ======


   Net income:
     Partnership's share of
       combined income               $   390    $4,597      $5,725     $4,482
     Co-venturers' share of
       combined income                     -       204         268        198
                                     -------    ------      ------     ------
                                     $   390    $4,801      $5,993     $4,680
                                     =======    ======      ======     ======

               Reconciliation of Partnership's Share of Operations
           For the three and nine months ended June 30, 1998 and 1997
                                 (in thousands)

                                    Three Months Ended    Nine Months Ended
                                         June 30,             June 30,
                                    -------------------   -----------------
                                       1998     1997        1998     1997
                                       ----     ----        ----     ----
   Partnership's share of combined
      income, as shown above         $  390   $ 4,597      $5,725   $ 4,482
   Amortization of excess basis           -        (2)       (130)       (5)
                                     ------   -------      ------   -------
   Partnership's share of
      unconsolidated ventures' 
      net income                     $  390   $ 4,595      $5,595   $ 4,477
                                     ======   =======      ======   =======
<PAGE>

      The Partnership's  share of unconsolidated  ventures' net income (loss) is
presented  as  follows  in  the   consolidated   statements  of  operations  (in
thousands):
                                      Three Months Ended    Nine Months Ended
                                           June 30,             June 30,
                                    -------------------   -----------------
                                       1998     1997        1998       1997
                                       ----     ----        ----       ----
   Partnership's share of
     unconsolidated ventures' 
     income (losses)                $    390   $    86     $1,121   $    (32)
   Partnership's share of gain on
     sale of operating investment
     property                              -     1,929      4,474       1,929
   Partnership's share of 
     extraordinary gain from 
     settlement of debt obligations        -     2,580          -       2,580
                                    --------   -------     ------    --------
   Partnership's share of 
      unconsolidated ventures' 
      net income                    $    390   $ 4,595     $5,595    $  4,477
                                    ========   =======     ======    ========

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 nine-month periods ended June 30, 1998 and 1997 (in thousands):

                                     Three Months Ended    Nine Months Ended
                                           June 30,             June 30,
                                    -------------------    -----------------
                                       1998     1997        1998     1997
                                       ----     ----        ----     ----

     Repairs and maintenance         $   4    $   4        $ 15     $  18
     Utilities                           1        1           3         3
     Insurance                           1        1           4         4
     Administrative and other            8       11          49        47
     Management fees                     3        3          11        11
                                     -----    -----        ----     -----
                                     $  17    $  20        $ 82     $  83
                                     =====    =====        ====     =====

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 June 30, 1998
and  September  30, 1997,  mortgage  note payable  consists of the following (in
thousands):
                                                   June 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 June 30, 1998
     and  September  30, 1997.                    $ 1,567    $  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 June 30, 1998
and September 30, 1997  consists of such  escrowed  insurance  premiums and real
estate taxes in the aggregate amounts of $57,000 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 year. 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 property's  estimated  current market
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 June 30, 1998, unchanged from the previous quarter and up from 94% for the
quarter ended June 30, 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 6% over the past twelve months.  The strong local
job market has  influenced  an  unusually  high  demand  for  apartments  in the
northwest suburbs of Chicago, which is the property's local sub-market. In light
of the current  strength of the  apartment  segment of the real estate market in
general and the current  favorable  local  market  conditions,  the  Partnership
believes  it is the  appropriate  time to sell the Colony  Apartments  property.
Accordingly,  during the second quarter of fiscal 1998 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.  During  the  current
quarter,  the Partnership and its co-venture partner selected a national firm to
market the property.  Sales materials were finalized and an extensive  marketing
campaign  began in early June 1998.  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 remained at 92%,
unchanged from the previous quarter.  The property's  leasing team is pursuing a
replacement tenant for the 3,000 square foot restaurant tenant which 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.  In addition,  the property's leasing team is working with
two tenants  occupying 2,570 square feet,  whose leases expire later in calendar
year 1998. 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 third quarter included
the  replacement  of five tenant  doors and the  continuation  of the project to
convert  the  property's  electric  heating  system to gas heat.  As  previously
reported,  the  Partnership  and its  co-venture  partner  have begun  exploring
potential  opportunities for the sale of the Colony Square property.  As part of
that  plan,  discussions  were held  with real  estate  brokerage  firms  with a
specialty  in small  retail  centers  like  Colony  Square.  During the  current
quarter,  the  Partnership  and its  co-venture  partner  selected a real estate
brokerage firm to begin  marketing this asset for sale.  Subsequently,  an offer
was received to purchase the Colony  Square  Shopping  Center from a prospective
third-party  buyer that met the  Partnership's  and  co-venture  partner's  sale
criteria.  Subsequent  to the  quarter-end,  a purchase and sale  agreement  was
signed with this prospective  buyer and they have undertaken their due diligence
work. The sale remains  continent  upon,  among other things,  the  satisfactory
completion of the buyer's due  diligence.  Accordingly,  there are no assurances
that this sale transaction will be completed.

      The occupancy level at the Concourse Retail Plaza decreased to 34% for the
quarter  ended June 30, 1998 from 90% at the beginning of the quarter when three
tenants occupying a total of 17,105 square feet closed operations.  Two of these
tenants, a 7,105 square foot steakhouse and a 1,200 square foot mortgage company
continue  to pay their rent  obligations  under the terms of their  leases.  The
third tenant which operated an 8,800 square foot  southwestern  restaurant,  had
been,  until this quarter,  paying its rent as modified under a court judgement.
As previously  reported,  the  property's  management  team pursued legal action
against this southwestern  restaurant tenant, which occupied 28% of the leasable
space at The Concourse,  because the restaurant owner  previously  failed to pay
its  modified  rent.  Subsequently,  a court  judgment  for eviction was entered
against this tenant;  however, the tenant continued to experience improved sales
during the recent  tourist  season and paid its rent as modified under the court
judgment  during the  quarter  ended  March 31,  1998.  The  Partnership  is now
pursuing  a  separate  judgment  for  the  outstanding  balance  owed.  As  also
previously reported, a locally-owned and operated far-eastern restaurant,  which
occupies 12% of the leasable area,  has  experienced a slow-down in sales and is
behind in its rental  obligations.  The property's  management  team is pursuing
legal remedies against this tenant.

      As previously  reported,  the Partnership has 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 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  reviewed  was the  development  of a leasing plan that would put an
emphasis on a greater  mixture of office and retail uses. This would involve the
likely  conversion of one of the larger  restaurant  out parcel  buildings  into
professional/service office space. Another option was to market the property for
sale now, with the net proceeds from any such potential sale  transaction  being
carefully  evaluated  in  comparison  to the risks of holding the  property  and
completing the conversion.  The Partnership has decided on the second option and
is marketing the property for sale now. Last quarter, the Partnership  initiated
discussions  with  area  real  estate  firms  concerning   potential   marketing
strategies  for selling The  Concourse and solicited  marketing  proposals  from
several  of  these  firms.  After  reviewing  their  respective   proposals  and
conducting  interviews to determine  their expertise and track record in selling
properties  similar to The Concourse,  the Partnership  selected a Florida-based
firm.  During the  current  quarter,  a  marketing  package  was  finalized  and
comprehensive  sale  efforts  began in early May.  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.

      At June 30, 1998, the  Partnership and its  consolidated  venture had cash
and cash equivalents of approximately $1,168,000. 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 June 30, 1998
--------------------------------

      The Partnership reported net income of $373,000 for the three months ended
June 30, 1998,  as compared to net income of  $4,557,000  for the same period in
the prior year.  This  decrease in net income of  $4,184,000  is  primarily  the
result of the gain of  $1,929,000  realized on the sale of the Hunt Club and The
Marina Club  Apartments  by HMF  Associates  during the same period in the prior
year and the related  extraordinary  gain of $2,580,000  from the  settlement of
debt  obligations  in  conjunction  with the sale of the two  properties.  These
sale-related  gains were  partially  offset by an increase in the  Partnership's
share of  unconsolidated  ventures'  income of  $304,000  and a decrease  in the
Partnership's operating loss of $21,000. The increase in the Partnership's share
of unconsolidated  ventures' income is primarily attributable to the sale of the
properties  owned by the HMF joint  venture  during the third  quarter of fiscal
1997. The HMF joint venture had been generating  sizable  operating losses prior
to the sales of its assets.  Net income also increased at the Colony  Apartments
joint  venture by $59,000  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.

     The decrease in the Partnership's  operating loss is primarily attributable
to a $54,000 decline in operating expenses. The Partnership's operating expenses
decreased  mainly  due to  declines  in  general  and  administrative  expenses,
depreciation and amortization  expense and management fees 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, which reduced ongoing  depreciation charges on the property.  Management
fee expense decreased due to a decline in distributions to the Limited Partners,
upon which such fees are  based.  In  addition,  there was a small  increase  in
rental income at the  consolidated  Concourse  Retail Plaza.  The  reductions in
general and administrative  expenses,  depreciation  charges and management fees
and the  increase  in rental  income  were  partially  offset by a  decrease  in
interest and other income. Interest and other income declined due to a reduction
in the  average  amount  of  cash  and  cash  equivalents  due to the  temporary
investment  of the  proceeds  from the sale the Hunt  Club and The  Marina  Club
Apartments  during  the  prior  period  and due to the  distribution  of  excess
reserves to the Limited  Partners along with the capital  proceeds from the sale
of the HMF  properties  and The  Meadows on the Lake  Apartments,  as  discussed
further above.

Nine Months Ended June 30, 1998
-------------------------------

      The  Partnership  reported  net income of  $5,830,000  for the nine months
ended June 30,  1998,  as  compared to a net income of  $4,443,000  for the same
period in the prior year. This increase in net income is mainly  attributable to
a  $1,153,000  favorable  change in the  Partnership's  share of  unconsolidated
ventures' income (losses). The gain of $4,474,000 recognized in the current year
on the sale of the Meadows  property  was offset by the gains on the sale of the
Hunt Club and The Marina Club  properties  and the related  forgiveness  of debt
recognized in the prior year, as discussed further above.

      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.  In addition,  net income  increased by
$281,000 at the Colony  Apartments  joint  venture  for the  current  nine-month
period, due to an increase in rental income. In addition,  there was a favorable
change in the Partnership's  operating income (loss) of $269,000. This favorable
change  was  mainly the result of 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.
Reductions  in  general  and   administrative   expenses  and  depreciation  and
amortization  charges,  along  with  an  increase  in  rental  income  from  the
consolidated  Concourse joint venture,  also contributed to the favorable change
in operating income (loss) for the current nine-month period.






<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:  August 11, 1998