UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

                  For the fiscal year ended December 31, 1997

                                       OR

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                        Commission file number:  0-11779


                         S/M REAL ESTATE FUND VII, LTD.
             (formerly Shearson-Murray Real Estate Fund VII, Ltd.)
              Exact name of registrant as specified in its charter


           Texas                                         75-1845682
           -----                                         ----------
  State or other jurisdiction of
        incorporation                      I.R.S. Employer Identification No.

5520 LBJ Freeway, Suite 500, Dallas, Texas                  75240
------------------------------------------                  -----
Address of principal executive offices                     zip code


Registrant's telephone number, including area code: (214) 404-7100

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:


                         LIMITED PARTNERSHIP INTERESTS
                         -----------------------------
                                 Title of Class


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 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
                             ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   [X]

State aggregate market value of the voting stock held by non-affiliates of the
registrant:  Not applicable

Documents Incorporated by Reference:  Prospectus dated June 10, 1983, contained
in Amendment No. 3 to Registrant's Registration Statement on Form S-11 filed
with the Securities and Exchange Commission on June 10, 1983. (Parts I, II, III
& IV).



                                     PART I

Item 1.  Business

S/M Real Estate Fund VII, Ltd. (the "Partnership"), formerly Shearson- Murray
Real Estate Fund VII, Ltd., was formed November 4, 1982 to acquire existing
garden apartment complexes.  The general partners of the Partnership are SM7
Apartment Investors Inc., a Texas corporation ("SM7"), (formerly Shearson
Apartment Investors XIV, Inc.), Murray Realty Investors VII, Inc. a Texas
corporation ("Murray") and Crozier Partners VII, Ltd., a Texas limited
partnership ("Crozier").  SM7, Murray and Crozier are hereinafter referred to
collectively as the "General Partners."  See Item 10. "Directors and Executive
Officers of the Registrant."

The Partnership offered, on June 10, 1983, a minimum of 6,250 and a maximum of
14,000 limited partnership interests (the "Interests") in the Partnership at
$1,000 per Interest with a minimum required purchase of two Interests for
purchases made on behalf of Individual Retirement Accounts and five Interests
for all other purchasers.  Additionally, the General Partners were given the
right to sell an additional 10,000 Interests in connection with the offering.
The offering of Interests was terminated on April 30, 1984, and the Partnership
accepted subscriptions for 11,080 Interests, for aggregate offering proceeds of
$11,080,000.

On July 29, 1983, the Partnership acquired Fifth Avenue Apartments ("Fifth
Avenue"), a 198-unit apartment complex located in San Antonio, Texas, for a
purchase price of $8,474,925.  On August 31, 1983, the Partnership acquired
Rockcreek Apartments ("Rockcreek"), a 314-unit apartment complex located in
Austin, Texas, for a purchase price of $10,948,228.  The two properties are
referred to collectively herein as the "Properties."

The San Antonio and Austin apartment markets deteriorated in the mid-1980s due
to overbuilding and the general economic decline of the Southwest economy.
Rental concessions and a decline in the Properties' operating results led to
the depletion of the Partnership's working capital reserve. In July 1986, the
General Partners suspended mortgage payments on the Partnership's two
Properties and commenced negotiations with the lenders in an effort to
restructure the terms of their respective mortgage loan agreements.
Subsequently, in November 1986 and March 1987, the Partnership executed letters
of intent with the holders of the Rockcreek and Fifth Avenue notes,
respectively to modify certain conditions and terms of the mortgage
obligations.  The Partnership resumed payments in March 1987 in accordance with
the proposed modifications.

Adverse market conditions continued to hamper the ability of the Properties to
generate sufficient cash flow to meet debt service payments and operating
expenses.  Given the diminishing balance of the Partnership's cash and the
capital improvement requirements at Rockcreek, in April 1989, the General
Partners commenced renegotiations and suspended debt service payments on the
mortgages secured by both Rockcreek and Fifth Avenue.  The objective of these
negotiations was to reduce the debt service payments required under the
mortgage notes to a level that could be paid out of cash flow generated by the
Properties.  Under the terms of these loan agreements, non-payment of debt
service represented an event of default.

In May 1989, two of the lenders for Rockcreek posted that property for
foreclosure on June 7, 1989.  As the Partnership was unable to reach an
agreement with one of these lenders to forbear prior to foreclosure date, the
Partnership commenced a voluntary case under Chapter 11 of the Federal
Bankruptcy Code on June 6, 1989, in an attempt to protect its Limited Partners
from the effects of foreclosure and to reorganize the Partnership's finances.

On October 4, 1989, the Partnership filed a plan of reorganization ("The Plan")
together with a disclosure statement with the Bankruptcy Court.  The Plan was
not approved, and the Partnership filed its modified plan of reorganization
(the "Modified Plan") and disclosure statement, which was confirmed on
February 20, 1990, and became effective on March 1, 1990.  The Modified Plan
restructured the liabilities of the Partnership in a manner which was intended
to permit such liabilities to be serviced by the Partnership's anticipated cash
flow.  Additionally, the Modified Plan required the Partnership to issue
reorganization notes to holders of mortgage notes payable.

The first mortgage note secured by Phase I of the Rockcreek Apartments and the
wraparound mortgage note secured by a third mortgage on Rockcreek were
scheduled to mature on December 31, 1993.  The General Partners had attempted
to either restructure the debt or sell the property (both Phases I and II) for
an amount greater than the outstanding debt.  As a result of the General
Partners' efforts to sell the property, the General Partners secured an offer
to purchase the property in the amount of $8,521,055. Such offer was accepted
and the property was sold on December 17, 1993. Concurrently with their sales
efforts, the General Partners successfully negotiated an agreement with the
holder of the wraparound mortgage on Rockcreek, whereby the Partnership
received a release of all the mortgage liens on the property by paying a
discounted amount of the total outstanding debt of $8,082,311.

The General Partners commenced discussions in 1995 with the lender of the
mortgage secured by Fifth Avenue as a result of the scheduled debt maturity on
December 31, 1995.  Such discussions continued past the December 31, 1995
maturity date, and on May 30, 1996, the General Partners of the Partnership
executed a modification and extension agreement (the "Modification Agreement")
with the lender, to modify the mortgage and extend its maturity for five years.
Details of the Modification Agreement are incorporated by reference to Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 6 "Mortgage Notes Payable" of the Notes to the Financial
Statements contained herein.

Competition
-----------
Fifth Avenue competes for tenants with other apartment complexes in
San Antonio.  When evaluating a particular location to lease, a tenant may
consider many factors, including, but not limited to, space availability,
rental rates, lease terms, access, parking, quality of construction and quality
of management.  While the General Partners believe that Fifth Avenue is
generally competitive in these factors, there can be no assurance that, in the
view of a prospective tenant, other properties may not be more attractive.

Fifth Avenue directly competes with the following seven apartment complexes:

                           Number of      Percent Occupied at
       Property              Units*        December 15, 1997*
       --------            ---------      -------------------
          1                    185                94%
          2                    688                96%
          3                    265                94%
          4                    248                92%
          5                    273                unavailable
          6                    253                90%
          7                    300                96%

  * This information has been obtained from sources believed to be reliable by
    the Partnership, but the Partnership has not verified the accuracy of such
    information.

Employees
---------
The Partnership has no employees.  The Partnership's Property is managed
by Anterra Management Corporation which provides certain administrative
and management services.  See Item 13. "Certain Relationships and Related
Transactions."


Item 2.   Properties

As of December 31, 1997, the Partnership owned Fifth Avenue Apartments, a
198-unit apartment complex located in San Antonio, Texas and situated on
approximately 8.45 acres with 169,270 square feet of net leasable space.
Occupancy at Fifth Avenue Apartments averaged 95% and 94% for the years ended
December 31, 1997 and 1996, respectively.  At December 31, 1997 and 1996, Fifth
Avenue Apartments was 95% and 92% occupied, respectively.


Item 3.   Legal Proceedings

There are no material pending legal proceedings to which the General Partners
or the Partnership is a party or to which its property is subject.


Item 4.   Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through solicitation of
proxies or otherwise.


                                    PART II


Item 5.   Market for Registrant's Limited Partnership Units and Related
          Security Holder Matters

A public market for Units does not exist and is not likely to develop.
Consequently, Limited Partners may not be able to liquidate their investment
and Units may not be readily accepted as collateral for a loan. Furthermore,
the transfer of Units is subject to certain limitations, including approval of
the General Partners.

At December 31, 1997, there were 1,053 Limited Partners of record, owning an
aggregate of 11,080 Units.

There have been no cash distributions to the Limited Partners since inception
of the Partnership.


Item 6.   Selected Financial Data
(dollars in thousands except per interest data)

For the years ended December 31,
                             1997(1)   1996(1)   1995(1)   1994(1)    1993(2)

Income                    $ 1,327   $ 1,341   $ 1,358   $ 1,361    $ 3,116

Loss Before Gain on Sale
of Real Estate and
Extraordinary Item           (417)     (365)     (270)     (262)      (820)

Net Income (Loss)            (417)     (139)     (270)     (262)     1,723

Net Income (Loss) per
Limited Partnership
Interest (3)               (37.28)   (12.43)   (24.12)   (23.45)    144.45

Total Assets
at Year-End                 3,942     4,329     5,213     5,543      6,028

Total Mortgage Notes
Payable at Year-End         6,198     6,250     6,381     6,381      6,381


(1)  Results for the years ended December 31, 1997, 1996, 1995 and 1994 solely
  reflect operations of Fifth Avenue as Rockcreek was sold in December 1993.

(2)  On December 17, 1993, the Partnership sold Rockcreek for $8,521,055
  resulting in a gain on the sale of real estate assets of $2,055,240 and gain
  on debt forgiveness totaling $487,508.  Reference is made to Item 1
  "Business" for a further discussion on the sale of Rockcreek.

(3)  Based on the Units outstanding at the end of such period and net income or
  loss allocated to the Limited Partners.

The above selected financial data should be read in conjunction with the
Financial Statements and related notes incorporated by reference to Item 8 of
this report.


Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

Liquidity and Capital Resources

The Partnership executed a modification and extension agreement (the
"Modification Agreement") on May 30, 1996 with Federal National Mortgage
Association (the "Lender"), the lender of the first mortgage secured by the
Partnership's sole remaining property, the Fifth Avenue Apartments located in
San Antonio, Texas (the "Property").  At the time the Modification Agreement
was executed the first mortgage had an aggregate balance of $7,111,142,
representing $5,830,000 in original principal and $1,281,142 in accrued
interest.  In accordance with the terms of the Modification Agreement, the
balance of the first mortgage remained $5,830,000, the interest rate was
reduced from 10.125% to 9.875%, and the first mortgage's maturity date was
extended five years to June 1, 2001 (the "New First Mortgage").  Pursuant to
the terms of the New First Mortgage, the Partnership is required to make fixed
monthly payments of principal and interest the amount of $52,464.

As a condition of the New First Mortgage, the Partnership entered into a
Replacement Reserve and Security Agreement (the "Replacement Agreement") with
the Lender providing that, concurrently with the execution of the Replacement
Agreement, the Partnership was required to deposit with the Lender the sum of
$49,500 into a reserve account ("Replacement Reserve"). Per the terms of the
Replacement Agreement, on each date that a regularly scheduled payment of
principal or interest is due under the New First Mortgage, the Partnership
deposits with the Lender the applicable monthly deposit of $4,125.  On a
quarterly basis, provided that no default exists under the Replacement
Agreement, upon written request from the Partnership, the Lender shall disburse
amounts from the Replacement Reserve necessary to reimburse the Partnership for
the actual approved costs of replacements as determined by the Lender.  The
Replacement Reserve is reflected as "Restricted cash - replacement reserve" on
the Partnership's balance sheets.

The accrued interest on the first mortgage in the amount of $1,281,142 was
converted into a second mortgage which is coterminous with the New First
Mortgage (the "New Second Mortgage").  Upon execution of the Modification
Agreement, the Partnership made a $300,000 payment to the Lender, at which time
the Lender reduced the New Second Mortgage balance to $681,142.  The New Second
Mortgage is non-interest bearing and is scheduled to be fully amortized over
the five-year term and is prepayable at any time.  Under the terms of the New
Second Mortgage, payments of principal, in monthly installments of $3,333 are
due on the first day of every month, commencing on July 1, 1996, and continuing
through June 1, 1998.  After that date, principal is payable in monthly
installments of $5,000 on the first day of every month, beginning July 1, 1998
and continuing through June 1, 2000. After that date, principal is payable in
monthly installments of $8,333 on the first day of every month, beginning July
1, 2000 and continuing until maturity on June 1, 2001.  The sum of the total
minimum monthly payments over the term of the New Second Mortgage is $300,000.
Pursuant to the Modification Agreement, if $500,000 in principal payments have
been received unconditionally and irrevocably by the Lender, the New Second
Mortgage's remaining unpaid principal in the amount $181,142 of unpaid
principal will be forgiven by the Lender.

It is anticipated that the Partnership will operate at a cash flow deficit
during 1998 in light of capital replacement reserve requirements at the
Property and general and administrative expenses of the Partnership.  It is
expected that cash flow deficits will be funded by the Partnership's existing
cash balances.  However, there can be no assurance that the Partnership will
have sufficient cash to fund such deficits.

Cash and cash equivalents totaled $209,924 at December 31, 1997, compared to
$362,932 at December 31, 1996.  The $153,008 decrease is primarily attributable
to cash used for operating and financing activities.

Cash held in escrow increased from $94,916 at December 31, 1996 to $201,966 at
December 31, 1997.  The $107,050 increase is primarily attributable to escrow
contributions for insurance and real estate taxes exceeding payments for
insurance.

Restricted cash - replacement reserve increased to $88,004 at December 31,
1997, from $78,345 at December 31, 1996.  The $9,659 increase is primarily
attributable to contributions to the replacement reserve, which were partially
offset by the release of replacement reserve funds to the Property, in
accordance with the terms of the Modification Agreement.

Other assets increased from $12,171 at December 31, 1996, to $13,928 at
December 31, 1997.  The increase is primarily due to the prepayment of 1997 and
1998 insurance, which was partially offset by the amortization of prepaid
insurance for the 1997 period.

Accounts receivable totaled $1,987 at December 31, 1997 compared to $2,186 at
December 31, 1996.  The decrease is primarily attributable to the timing of
tenant rental receipts.  Accounts payable totaled $46,478 at December 31, 1997,
compared to $42,394 at December 31, 1996.  The increase is primarily
attributable to the timing of payments associated with repairs and maintenance
for apartment preparation and replacements.

Accrued expenses and other liabilities totaled $210,422 at December 31, 1997
compared to $132,209 at December 31, 1996.  The change is primarily
attributable to the timing of payments for real estate taxes, administrative
costs, audit fees and legal fees.

Results of Operations

1997 versus 1996
Results of operations resulted in a net loss of $417,257 for the year ended
December 31, 1997 compared to a net loss of $139,137 for the year ended
December 31, 1996.  The higher net loss for the 1997 period is primarily
attributable to the Partnership realizing an extraordinary gain of $226,111 for
the 1996 period as a result of the Modification Agreement entered into with the
Lender in the second quarter of 1996.  Results of operations before the
extraordinary gain resulted in a net loss of $365,248 for the year ended
December 31, 1996.  The increased loss before extraordinary item from 1996 to
1997 is primarily attributable to an increase in general and administrative
expenses.

Rental income at the Property totaled $1,310,235 for the year ended
December 31, 1997, largely unchanged from $1,311,406 for the year ended
December 31, 1996.  Occupancy at the Property averaged approximately 95%
during 1997, compared to 94% during 1996.  The average rental income per
occupied square foot at the Property was $8.20 in 1997, compared to $8.21 in
1996.  At December 31, 1997, the Property was 95% occupied.

Interest and other income totaled $16,888 for the year ended December 31, 1997
compared $29,985 for the year ended December 31, 1996. The decrease is
primarily attributable to a lower average invested cash balance during 1997 as
a result of payments made in connection with the Modification Agreement during
the second quarter of 1996.

Total expenses for the year ended December 31, 1997 were $1,744,380 compared to
$1,706,639 for the year ended December 31, 1996.  The increase is due to higher
general and administrative, interest and depreciation expenses, which were
partially offset by lower property operating expenses.

Property operating expenses consisted primarily of on-site personnel expenses,
utility costs, repair and maintenance costs, property management fees,
advertising costs, insurance and real estate taxes.  Property operating
expenses for the year ended December 31, 1997 were $632,243 compared to
$670,974 for the year ended December 31, 1996.  The decrease is primarily
attributable to lower expenses in 1997 in all areas other than utilities and
other non-capital expenditures.

Interest expense totaled $617,680 for the year ended December 31, 1997 compared
with $612,738 for the year ended December 31, 1996.  The change is primarily
attributable to the Modification Agreement, as discussed above.

General and administrative expenses for the year ended December 31, 1997 were
$116,963 compared to $50,610 for the year ended December 31, 1996. Effective
January 1, 1997, certain expenses incurred by an unaffiliated third party
service provider in servicing the Partnership, which were voluntarily absorbed
by affiliates of SM7 Apartment Investors, Inc. in prior periods, were
reimbursable to SM7 Apartment Investors, Inc. and its affiliates.

1996 versus 1995
Results of operations resulted in a net loss of $139,137 for the year ended
December 31, 1996 compared to a net loss of $269,960 for the year ended
December 31, 1995.  The decreased net loss is primarily attributable to the
$226,111 extraordinary gain realized as a result of the debt restructuring.
Excluding this extraordinary gain, the Partnership generated a loss of $365,248
for the year ended December 31, 1996.

Rental income at the Property totaled $1,311,406 for the year ended
December 31, 1996, largely unchanged from $1,307,901 for the year ended
December 31, 1995.  Occupancy at the Property averaged approximately 94%
during 1996, unchanged from 1995.  The average rental income per occupied
square foot at the Property was $8.21 in 1996, compared to $8.23 in 1995.
At December 31, 1996, the Property was 92% occupied.

Interest and other income totaled $29,985 for the year ended December 31, 1996
compared to $50,060 for the year ended December 31, 1995.  The decrease is
primarily attributable to a lower average invested cash balance during 1996 as
a result of payments made in connection with the remodification of the mortgage
secured by the Property during the second quarter of 1996.

Property operating expenses consist primarily of on-site personnel expenses,
utility costs, repair and maintenance costs, property management fees,
insurance and real estate taxes.  Property operating expenses for the year
ended December 31, 1996 totaled $670,974, compared to $710,198 for the year
ended December 31, 1995.  The decrease is primarily attributable to lower bad
debt expense, management fees and repairs and maintenance costs in 1996.

Interest expense totaled $612,738 for the year ended December 31, 1996,
compared with $483,528 for the year ended December 31, 1995.  The increase is
primarily attributable to the difference in the calculation for financial
statement purposes based upon Generally Accepted Accounting Principles ("GAAP")
and to a lesser extent, the modification of the loan terms as previously
discussed.

For 1996 the interest expense was calculated using actual interest accrued for
the first five months at the carryover (matured loan) rate of interest of
10.125% and then at the modified rate of 9.875%.  Additionally, second mortgage
amortization of approximately $27,000 is included in the total interest expense
balance.  For 1995, the interest expense balance of $483,528 was calculated
using an effective rate of interest of 6.9% in accordance with GAAP.  The
actual interest expense accrued and paid based upon the interest pay rate of
10.125% during 1995 was $538,071.  No amortization of the second mortgage loan
was applicable during 1995.

General and administrative expenses totaled $50,610 for the year ended
December 31, 1996, compared to $60,752 for the year ended December 31, 1995.
The decrease is primarily attributable to a decrease in legal costs accrued
during 1995 in connection with the remodification of the mortgage secured by
the Property.


Item 8.       Financial Statements and Supplementary Data

The following financial statements are filed as part of this report:

                                                            Page Number

      Independent Auditors' Report                            F-1

      Balance Sheets - At December 31, 1997 and 1996          F-2

      Statements of Partners' Deficit - For the years
       ended December 31, 1997, 1996 and 1995                 F-2

      Statements of Operations - For the years ended
       December 31, 1997, 1996 and 1995                       F-3

      Statements of Cash Flows - For the years ended
       December 31, 1997, 1996 and 1995                       F-4

      Notes to the Financial Statements                       F-5

      Schedule III - Real Estate and Accumulated
       Depreciation                                           F-10


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None.


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

Murray Realty Investors VII, Inc., a Texas corporation, SM7 Apartment Investors
Inc., a Texas corporation, and Crozier Partners VII, Ltd., a Texas limited
partnership, are the General Partners of the Partnership. Anterra Property
Investors VII, Inc. is the general partner of Crozier Partners VII, Ltd.  The
following is a summary of certain information concerning the directors and
executive officers of Anterra Property Investors VII, Inc., Murray Realty
Investors VII, Inc. and SM7 Apartment Investors Inc., as of December 31, 1997.

Anterra Property Investors VII, Inc.,
general partner of Crozier Partners VII, Ltd.
---------------------------------------------
The directors and senior officers of Anterra Property Investors VII, Inc.
at December 31, 1997 were as follows:

Richard E. Hoffmann, 43, President, Treasurer and Director.  For more than five
years prior to July 15, 1990, Mr. Hoffmann was a Vice President and Treasurer
of Murray Properties Company and various other affiliate corporations.  He
resigned his position with substantially all of these corporations on July 15,
1990.  Mr. Hoffmann was elected Senior Vice President, Treasurer and Director
of Anterra Realty Corporation in June of 1990 and was elected President of
Anterra Realty Corporation in July of 1994.  He is Senior Vice President and
Director of Anterra Management Corporation and President, Treasurer and
Director of all other subsidiary corporations of Anterra Realty Corporation
including Anterra Property Investors VII, Inc.  Mr. Hoffmann received a Master
of Business Administration degree from the University of Texas at Austin in
1979 and a B.S. from Tulane University in 1977.  He is a Certified Public
Accountant.

Lynn D. Maynard, 45, Executive Vice President and Director.  For more than five
years prior to December 26, 1989, Ms. Maynard was an officer of Murray
Properties Company and its affiliates.  She was elected Vice President of
Murray Properties Company and Murray Realty Investors, Inc. in December of
1986.  Ms. Maynard resigned her positions with substantially all Murray
Properties Company affiliates on December 26, 1989.  Ms. Maynard became Senior
Vice President and Director of Anterra Realty Corporation in November 1989 and
is President and Director of Anterra Management Corporation and Executive Vice
President and Director of all other subsidiary corporations including Anterra
Property Investors VII, Inc.  Ms. Maynard holds a Bachelor of Science Degree in
Accounting from the University of Texas at Dallas and is a Certified Public
Accountant.  She is a member of the American Institute of Certified Public
Accountants, the Texas Society of Certified Public Accountants and the Dallas
Chapter of Certified Public Accountants.

Murray Realty Investors VII, Inc., Corporate General Partner
------------------------------------------------------------
The directors and senior officers of Murray Realty Investors VII, Inc. at
December 31, 1997 were as follows:

Fulton Murray, 57, President and Chairman of the Board.  Mr. Murray has been
Chairman of the Board and Chief Executive Officer of Murray Properties Company
and Murray Financial Corporation for more than five years prior to the date of
this report.  In addition, he is a director or officer of substantially all
affiliates of Murray Properties Company.  His family, or trusts for their
benefit, own approximately 64% of the outstanding stock of Murray Financial
Corporation, which is the parent corporation of Murray Properties Company and
most of its affiliates. He holds a Bachelor of Business Administration degree
in Finance from Southern Methodist University.

Charles W. Karlen, 62, Vice President.  Mr. Karlen is Senior Vice President and
Treasurer of Murray Financial Corporation.  Prior to joining the Murray
Organization in 1971, he was employed by Peat Marwick Mitchell & Co., a public
accounting firm.  Mr. Karlen is a Certified Public Accountant and holds a
Bachelor of Business Administration degree in Accounting from the University of
North Texas.

SM7 Apartment Investors Inc., Corporate General Partner
-------------------------------------------------------
The directors and executive officers of SM7 Apartment Investors Inc. at
December 31, 1997 were as follows:

Jeffrey C. Carter, 52, is a Senior Vice President of Lehman Brothers in the
Diversified Asset Group.  Mr. Carter joined Lehman Brothers in September 1988.
From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear
Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including
Director of Consulting Services at both firms. From 1982 through 1987, Mr.
Carter was President of Keystone Hospitality Services, an independent hotel
consulting and brokerage company.  Mr. Carter received his B.S. degree in Hotel
Administration from Cornell University and an M.B.A. degree from Columbia
University.

Rocco F. Andriola, 39, is a Managing Director of Lehman Brothers Inc. in its
Diversified Asset Group and has held such position since October 1996. Since
joining Lehman in 1986, Mr. Andriola has been involved in a wide range of
restructuring and asset management activities involving real estate and other
direct investment transactions.  From June 1991 through September 1996, Mr.
Andriola held the position of Senior Vice President in Lehman's Diversified
Asset Group.  From June 1989 through May 1991, Mr. Andriola held the position
of First Vice President in Lehman's Capital Preservation and Restructuring
Group.  From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman, Mr. Andriola practiced corporate and securities law at
Donovan Leisure Newton & Irvine in New York.  Mr. Andriola received a B.A. from
Fordham University, a J.D. from New York University School of Law, and an LL.M
in Corporate Law from New York University's Graduate School of Law.

Timothy E. Needham, 29, is an Assistant Vice President of Lehman Brothers Inc.
and assists in the management of commercial real estate in the Diversified
Asset Group.  Mr. Needham joined Lehman in September 1995. Prior to joining
Lehman, Mr. Needham was a consultant with KPMG Peat Marwick LLP in the Banking
and Investment Services Group from 1994-1995. Mr. Needham received his master's
degree in international management from the American Graduate School of
International Management in December 1993. In addition, Mr. Needham is
currently a candidate for the designation of Chartered Financial Analyst.

Affiliated Bankruptcies
-----------------------
Certain officers and directors of Murray Realty Investors VII, Inc. were also
officers and directors or general partners of affiliates of Murray Realty
Investors VII, Inc. which served as general partners of certain private
placements and affiliated public funds which had filed cases under Chapter 11
of the Federal Bankruptcy Code.  Certain officers and directors of SM7
Apartment Investors Inc. were also officers and directors of affiliates which
served as general partners of these affiliated public funds.  Additionally,
Fulton Murray was a general partner of a partnership that had an involuntary
bankruptcy petition filed against it, which was subsequently dismissed.  All
the partnerships which commenced cases  under the Federal Bankruptcy Code
owned real estate that was secured by significant amounts of debt.  As a
result of the dramatic decline in the economy and overbuilding in
the markets in which the partnerships own real estate, those partnerships were
unable to meet their scheduled debt payments and commenced bankruptcy cases to
protect the partnerships' properties from foreclosure by the secured lender or
lenders to such partnerships.


Item 11.  Executive Compensation

The Partnership has not paid and does not propose to pay any cash compensation,
bonuses or deferred compensation, compensation pursuant to retirement or other
plans, or other compensation to the officers, directors, or partners of the
General Partners.  During the operational and, in the event the Partnership is
liquidated, the liquidation stages of the Partnership, the General Partners and
their affiliates may receive various fees and distributions.  See Item 13.
"Certain Relationships and Related Transactions" for information on the fees
and other compensation or reimbursements paid to the General Partners or their
affiliates during the year ended December 31, 1997.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

  (a)  Beneficial owners of 5% or more of Registrant's Securities

                                          Amount and
                                          Nature of
                                          Beneficial          Percent
  Title of Class     Beneficial Owner     Ownership          of Class
  --------------     ----------------     ---------          --------
Limited Partnership  Naomi Ruth              600               5.4%
Interest, $1,000     Wilden Trust     (owned beneficially
per Interest         130 E. Main St.,    and of record)
                     #299
                     Medford, OR 97501-6004

(b) No general partner or any officer or director of a general partner
    beneficially owned or owned of record directly or indirectly any Interests
    as of December 31, 1997.


Item 13.  Certain Relationships and Related Transactions

(a)  During the years ended December 31, 1997, 1996 and 1995, the General
     Partners or their affiliates were reimbursed for Partnership
     administrative and operating expenses, excluding property management fees,
     in the amounts of $1,262, $7,132 and $8,024, respectively.

     On January 1, 1990, Murray Management Corporation subcontracted Anterra
     Management Corporation to provide certain administrative and management
     services with respect to the Partnership and its Properties.  Anterra
     Management Corporation is a real estate related service company formed by
     former executive officers of Murray and its affiliates, and earned
     property management fees of $52,420, $55,489 and $65,378 for the years
     ended December 31, 1997, 1996 and 1995, respectively.

     Effective as of January 1, 1997, the Partnership began reimbursing certain
     expenses incurred by an unaffiliated third party service provider in
     servicing the Partnership to the extent permitted by the partnership
     agreement.  In prior years, affiliates of SM7 Apartment Investors Inc. had
     voluntarily absorbed these expenses.

     (b)  None.

     (c)  No management person is indebted to the Partnership.

     (d)  Not applicable.



                                    PART IV


Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)   1.  Financial Statements - see Index to Financial Statements in Item 8
          of this Form 10-K.

      2.  Financial Statement Schedule - see Index to Financial Statements in
          Item 8 of this Form 10-K.

      All other schedules have been omitted because they are not required
      or the required information is shown in the financial statements or
      notes thereto.

(b)   Reports on Form 8-K filed during the last quarter of the fiscal
      year:

      None.

(c)   Exhibits:

      2a   Voluntary Petition of Shearson-Murray Real Estate Fund VII, Ltd. to
           commence a case under chapter 11 of the federal Bankruptcy Code
           in the United States Bankruptcy Court for the Western District
           of Texas-Austin Division, as filed on June 6, 1989.  Reference
           is made to Exhibit 2a to Form 10-K filed with the Securities and
           Exchange Commission on June 14, 1989.

      2b   Modified First Amended Plan of Reorganization of Shearson-Murray
           Real Estate Fund VII, Ltd. in the United States Bankruptcy Court
           for the Western District of Texas-Austin Division Case No.
           89-11662-LC filed February 20, 1990.  Reference is made to the
           Partnership's Annual Report on Form 10-K filed with the
           Securities and Exchange Commission on April 12, 1990.

      4    Agreement of Limited Partnership of Shearson-Murray Real Estate
           Fund VII, Ltd., as amended as of September 30, 1983. Reference is
           made to Form 8-K filed with the Securities and Exchange Commission
           on October 26, 1983.  Reference is made to Exhibit A to the
           Prospectus dated June 10, 1983 contained in Amendment No. 3 to
           Partnership's Form S-11 Registration Statement filed with the
           Securities and Exchange Commission June 10, 1983.

    10a    Assignment and Assumption Agreement between Murray Management
           Corporation and Anterra Management Corporation for property
           management and leasing services dated January 1, 1990.  Reference
           is made to Exhibit 10u to the Partnership's Annual Report on
           Form 10-K for the year ended December 31, 1989 filed with the
           Securities and Exchange Commission May 15, 1990.

     27   Financial Data Schedule.

     28a  Pages A-16 to A-18 of Exhibit A to the Prospectus dated
          June 10, 1983, contained in Amendment No. 3 to Partnership's
          Form S-11 Registration Statement filed with the Securities and
          Exchange Commission on June 10, 1983. Reference is made to Exhibit
          28a of the Registrant's Form 10-K filed with the Securities and
          Exchange Commission on May 12, 1988.

    28b   Pages 10-18 of the Prospectus dated June 10, 1983. contained
          in Amendment No. 3 to Partnership's Form S-11 Registration Statement
          filed with the Securities and Exchange Commission on June 10, 1983.
          Reference is made to Exhibit 28b of the Registrant's Form 10-K
          filed with the Securities and Exchange Commission on May 12,
          1988.

     99a  Compromise Settlement Agreement between S/M Real Estate Fund
          VII, Ltd. and Federal National Mortgage Association, dated
          May 6, 1996.  (Incorporated by reference from Exhibit 99.1 to the
          Registrant's Quarterly Report on Form 10-Q for the quarter ended
          June 30, 1996).

     99b  $5,830,000 Multifamily Note and Addendum, dated May 30, 1996.
          (Incorporated by reference from Exhibit 99.2 to the
          Registrant's Quarterly Report on Form 10-Q for the quarter ended
          June 30, 1996).

     99c  $681,142 Subordinate Multifamily Note and Addendum, dated
          May 30, 1996.  (Incorporated by reference from Exhibit 99.3 to
          the Registrant's Quarterly Report on Form 10-Q for the quarter
          ended June 30, 1996).



                                   SIGNATURES

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


                         S/M REAL ESTATE FUND VII, LTD.

                    BY:  SM7 APARTMENT INVESTORS INC.
                         A General Partner





Date:  March 27, 1998

                    BY:  /s/ Jeffrey C. Carter
                         ---------------------
                         Jeffrey C. Carter
                         Director and President




Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following members of the Board of Directors
and officers of SM7 Apartment Investors Inc., a corporate general partner of
the registrant, on behalf of the Registrant in the capacities and on the dates
indicated.






Date:  March 27, 1998

                    BY:  /s/ Jeffrey C. Carter
                         ---------------------
                         Jeffrey C. Carter
                         Director and President


Date:  March 27, 1998

                    BY:  /s/ Rocco F. Andriola
                         ---------------------
                         Rocco F. Andriola
                         Director


Date:  March 27, 1998

                    BY:  /s/ Timothy E. Needham
                         ----------------------
                         Timothy E. Needham
                         Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following members of the Board of Directors
and officers of Anterra Property Investors VII, Inc., a corporate general
partner of the registrant, on behalf of the Registrant in the capacities and on
the dates indicated.



                         BY:  CROZIER PARTNERS VII, LTD.
                              A general partner

                         BY:  ANTERRA PROPERTY INVESTORS VII, INC.,
                              General Partner of Crozier Partners VII, Ltd.




Date:  March 27, 1998    BY:  /s/ Richard E. Hoffman
                              ----------------------
                              Richard E. Hoffman
                              President, Director and Treasurer




Date:  March 27, 1998    BY:  /s/ Lynn D. Maynard
                              -------------------
                              Lynn D. Maynard
                              Executive Vice President and
                              Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following members of the Board of
Directors and officers of Murray Realty Investors VII, Inc., a corporate
general partner of the registrant, on behalf of the Registrant in the
capacities and on the dates indicated.



                         MURRAY REALTY INVESTORS VII, INC.
                         A General Partner



Date:  March 27, 1998    BY:  /s/ Fulton Murray
                              -----------------
                              Fulton Murray
                              President and Chairman of the Board


Date:  March 27, 1998    BY:  /s/ Charles W. Karlen
                              ---------------------
                              Charles W. Karlen
                              Vice President



                          Independent Auditors' Report


The Partners
S/M Real Estate Fund VII, Ltd.:

We have audited the financial statements of S/M Real Estate Fund VII, Ltd. (a
Texas Limited Partnership), as listed in the accompanying index.  In connection
with our audits of the financial statements, we also have audited the financial
statement schedule as listed in the accompanying index.   These financial
statements and the financial statement schedule are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of S/M Real Estate Fund VII, Ltd.
as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.  Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.


                                        KPMG PEAT MARWICK LLP

Boston, Massachusetts
February 3, 1998



Balance Sheets                           At December 31,      At December 31,
                                                   1997                 1996
Assets
Real estate, at cost:
  Land                                      $   962,216          $   962,216
  Buildings and improvements                  7,663,486            7,643,886
                                            -----------          -----------
                                              8,625,702            8,606,102
  Less accumulated depreciation              (5,199,331)          (4,827,620)
                                            -----------          -----------
                                              3,426,371            3,778,482

Cash and cash equivalents                       209,924              362,932
Cash held in escrow                             201,966               94,916
Restricted cash - replacement reserve            88,004               78,345
Accounts receivable                               1,987                2,186
Other assets                                     13,928               12,171
                                            -----------          -----------
  Total Assets                              $ 3,942,180          $ 4,329,032
                                            ===========          ===========
Liabilities and Partners' Deficit
Liabilities:
  First mortgage note payable               $ 5,738,101          $ 5,797,795
  Second mortgage note payable (less
    unamortized discount based on imputed
    interest rate of 10.5% - $221,592)          459,550              451,748
  Accounts payable:
    Trade                                         5,814                1,730
    Affiliates                                   40,664               40,664
    Accrued expenses and other liabilities      210,422              132,209
                                            -----------          -----------
    Total Liabilities                         6,454,551            6,424,146
                                            -----------          -----------
Partners' Deficit:
 General Partners                              (111,736)            (107,563)
 Limited Partners
   (11,080 units outstanding)                (2,400,635)          (1,987,551)
                                            -----------          -----------
  Total Partners' Deficit                    (2,512,371)          (2,095,114)
                                            -----------          -----------
  Total Liabilities and Partners' Deficit   $ 3,942,180          $ 4,329,032
                                            ===========          ===========


Statements of Partners' Deficit
For the years ended December 31, 1997, 1996 and 1995

                                      General         Limited
                                     Partners        Partners           Total
Balance at December 31, 1994       $ (103,472)   $ (1,582,545)   $ (1,686,017)
Net Loss                               (2,700)       (267,260)       (269,960)
Balance at December 31, 1995       $ (106,172)   $ (1,849,805)   $ (1,955,977)
Net Loss                               (1,391)       (137,746)       (139,137)
Balance at December 31, 1996       $ (107,563)   $ (1,987,551)   $ (2,095,114)
Net Loss                               (4,173)       (413,084)       (417,257)
                                   ----------    ------------    ------------
Balance at December 31, 1997       $ (111,736)   $ (2,400,635)   $ (2,512,371)
                                   ==========    ============    ============



Statements of Operations

For the years ended December 31,         1997            1996            1995
Income
Rental                            $ 1,310,235     $ 1,311,406     $ 1,307,901
Interest and other                     16,888          29,985          50,060
                                  -----------     -----------     -----------
  Total Income                      1,327,123       1,341,391       1,357,961
                                  -----------     -----------     -----------
Expenses
Property operating                    632,243         670,974         710,198
Interest                              617,680         612,738         483,528
Depreciation and amortization         377,494         372,317         373,443
General and administrative            116,963          50,610          60,752
                                  -----------     -----------     -----------
  Total Expenses                    1,744,380       1,706,639       1,627,921
                                  -----------     -----------     -----------
  Loss before extraordinary item     (417,257)       (365,248)       (269,960)
                                  -----------     -----------     -----------
Extraordinary Item
Gain on debt restructuring                 _          226,111               _
                                  -----------     -----------     -----------
  Net Loss                        $  (417,257)    $  (139,137)    $  (269,960)
                                  ===========     ===========     ===========
Net Loss Allocated:
  To the General Partners         $   (4,173)     $    (1,391)    $    (2,700)
  To the Limited Partners           (413,084)        (137,746)       (267,260)
                                  ----------      -----------     -----------
                                  $ (417,257)     $  (139,137)    $  (269,960)
                                  ==========      ===========     ===========
Per Limited Partnership Unit
(11,080 outstanding)
Net loss before extraordinary item   $(37.28)         $(32.63)        $(24.12)
Extraordinary item                         _            20.20               _
                                     -------          -------         -------
Net Loss                             $(37.28)         $(12.43)        $(24.12)
                                     =======          =======         =======


Statements of Cash Flows
For the years ended December 31,        1997             1996            1995
Cash Flows From Operating Activities:
Net Loss                           $(417,257)       $(139,137)      $(269,960)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
  Depreciation and amortization      377,494          372,317          373,443
  Extraordinary gain on debt
    restructuring                          _         (226,111)               _
  Increase (decrease) in cash arising
  from changes in operating assets
  and liabilities:
    Cash held in escrow             (107,050)          10,985          (13,046)
    Accounts receivable                  199           (1,385)          11,500
    Other assets                      (1,757)           9,989            8,402
    Accounts payable                   4,084          (23,409)          22,375
    Accrued interest payable               _          (67,052)         (54,543)
    Accrued expenses and other
    liabilities                       78,213           22,811          (27,704)

Net cash provided by (used for)
   operating activities              (66,074)         (40,992)          50,467

Cash Flows From Investing Activities:

Restricted cash - replacement reserve (9,659)         (78,345)               _
Additions to real estate             (25,383)          (2,478)         (47,897)
Net cash used for investing
 activities                          (35,042)         (80,823)         (47,897)
Cash Flows From Financing Activities:
Payments of principal on first
mortgage note payable                (59,694)         (32,205)               _
Amortization of discount on second
mortgage note payable                  7,802            4,188                _
Refinancing costs                          _         (123,230)               _
Payment of interest payable                _         (300,000)               _

Net cash used for financing
    activities                       (51,892)        (451,247)               _
Net increase (decrease) in cash
    and cash equivalents            (153,008)        (573,062)           2,570

Cash and cash equivalents,
    beginning of year                362,932          935,994          933,424

Cash and cash equivalents,
    end of year                    $ 209,924        $ 362,932        $ 935,994

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year
  for interest                     $ 569,878        $ 908,550        $ 538,071

Supplemental Disclosure of Non-Cash Investing Activities:

Write-off of fully depreciated
  building improvements            $   5,783        $   9,535        $       _

Supplemental Disclosure of Non-Cash Financing Activities:

Refinancing costs funded through
     accrued expenses              $       _        $  50,137        $       _




Notes to the Financial Statements
December 31, 1997, 1996 and 1995

1. Organization

S/M Real Estate Fund VII, Ltd. (the "Partnership") (see below)
was organized on November 4, 1982 pursuant to the filing of a Certificate of
Limited Partnership with the Secretary of State of the State of Texas.  The
Partnership was formed for the purpose of acquiring existing garden style
apartment complexes.  The general partners of the Partnership are SM7 Apartment
Investors Inc. (see below), a Texas corporation and affiliate of Lehman
Brothers Inc. ("Lehman"), Murray Realty Investors VII, Inc., a Texas
corporation ("Murray") and Crozier Partners VII, Ltd., a Texas limited
partnership (collectively referred to as the "General Partners").  The
Partnership will continue until January 31, 2012, unless sooner terminated in
accordance with the terms of the Partnership Agreement.

On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc.  The transaction did not
affect the ownership of the General Partners.  However, the assets acquired by
Smith Barney included the name "Shearson."  Consequently, effective January 13,
1994, Shearson Apartment Investors XIV, Inc., a General Partner, changed its
name to SM7 Apartment Investors Inc. to delete any references to "Shearson." In
addition, effective February 15, 1994, the Partnership's name was changed from
Shearson-Murray Real Estate Fund VII, Ltd. to S/M Real Estate Fund VII, Ltd.

2. Liquidity

It is anticipated that the Partnership will operate at a cash flow
deficit during 1998 in light of capital replacement reserve requirements at the
Partnership's property and general and administrative expenses of the
Partnership.  It is expected that cash flow deficits will be funded by the
Partnership's existing cash balances.  However, there can be no assurance that
the Partnership will have sufficient cash to fund such deficits.

3. Significant Accounting Policies

Basis of Accounting
-------------------
The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles.  Income is recognized as earned and expenses are
recorded as obligations are incurred.

Real Estate Investment
----------------------
The real estate investment, which consists of land, apartment buildings,
building improvements and furniture, fixtures and equipment, is recorded at
cost less accumulated depreciation. Cost includes the initial purchase price
of the property plus acquisition costs.  Depreciation is computed using the
straight-line method based on estimated useful lives of the related assets
ranging from three to twenty-one years.

Impairment of Long-Lived Assets
-------------------------------
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("FAS 121"), requires the Partnership to assess its real estate investment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the real estate may not be recoverable.  Recoverability of
real estate to be held and used is measured by a comparison of the carrying
amount of the real estate to future net cash flows (undiscounted and without
interest) expected to be generated by the real estate.  If the real estate is
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the real estate exceeds the fair value
of the real estate.

Lease Revenue
-------------
The Partnership has determined that all leases associated with
the rental of space at the investment property are operating leases.  Leases on
the Partnership's property typically have a term of one year or less.

Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of short-term highly liquid investments which
have maturities of three months or less from the date of issuance.  The
carrying value approximates fair value because of the short maturity of these
instruments.

Income Taxes
------------
The Partnership distributes all profits, losses and other taxable
items to the individual partners.  No provision for income taxes is made in the
financial statements of the Partnership since the liability for such taxes is
that of the partners rather than the Partnership.

Net Income (Loss) Per Limited Partnership Unit
----------------------------------------------
Net income (loss) per limited partnership unit is based upon the limited
partnership interests outstanding at year-end and the net income (loss)
allocated to the limited partners (the "Limited Partners").

Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.

Fair Value of Financial Instruments
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("FAS 107"), requires that the Partnership
disclose the estimated fair values of its financial instruments. Fair values
generally represent estimates of amounts at which a financial instrument could
be exchanged between willing parties in a current transaction other than in
forced liquidation.

Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgment regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors.  In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.

Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the current
year's presentation.

4. Partnership Agreement

Pursuant to the terms of the Partnership Agreement, all items of income, gain,
loss, deduction and credit are generally allocated 1% to Crozier Partners VII,
Ltd. and 99% to the Limited Partners except that: (a) first, income and net
gain shall be allocated to the General Partners and the Limited Partners pro
rata based on and to the extent of their respective deficit balances in their
capital accounts in an amount sufficient to cause the aggregate deficits in the
Partners' capital accounts to not exceed the Minimum Gain (as defined), (b) net
gain shall then be allocated: (i) to the Limited Partners in an amount
sufficient to cause each Limited Partner's capital account to equal its
unreturned Original Invested Capital plus any unpaid Preferred Return (as
defined); and (ii) then, to the Limited Partners and the General Partners in
the proportion between them of 85% to the Limited Partners and 15% to the
General Partners.

Cash distributions from operations, as defined, will be allocated 1% to Crozier
Partners VII, Ltd. and 99% to the Limited Partners. Cash distributions from
sales or refinancings of property will be allocated 99% to the Limited Partners
and 1% to Crozier Partners VII, Ltd. until the Limited Partners have received
an amount from cash distributions from sales or refinancings or property equal
to their original invested capital plus their Preferred Return (as defined).
Next, cash distributions from the sale or refinancing of property will be
allocated 1% to Crozier Partners VII, Ltd., and 99% to the Limited Partners and
the General Partners in the proportions between them of 85% to the Limited
Partners and 15% to the General Partners.

5. Real Estate Investments

Fifth Avenue Apartments
-----------------------
On July 29, 1983, the Partnership acquired Fifth Avenue Apartments ("Fifth
Avenue"), a 198-unit apartment complex located in San Antonio, Texas.  As of
December 31, 1997 and 1996, Fifth Avenue was 95% and 92% occupied,
respectively.

Rockcreek Apartments
--------------------
On August 31, 1983, the Partnership acquired Rockcreek Apartments
("Rockcreek"), a 314-unit apartment complex located in Austin, Texas.

On December 17, 1993, Rockcreek was sold to an independent third party for
$8,521,055 resulting in a gain on sale of $2,055,240. In conjunction with the
sale, the General Partners negotiated an agreement with the holder of the
wraparound mortgage on Rockcreek, whereby the Partnership would receive a
release of all mortgage liens on the property by paying a discounted amount on
the total debt outstanding of $8,082,311.

6. Mortgage Notes Payable

In 1995, the General Partners had commenced discussions with Federal National
Mortgage Association (the "Lender"), the lender of the first mortgage loan
secured by Fifth Avenue, as a result of the scheduled maturity of the loan on
December 31, 1995.  Such discussions continued past the December 31, 1995
maturity date, with the Lender agreeing to forbear from foreclosing on Fifth
Avenue while such discussions continued.  As a result of the General Partners'
efforts, the Partnership executed a modification and extension agreement (the
"Modification Agreement") on May 30, 1996.

At the date the Modification Agreement was executed, the first mortgage loan
had an aggregate balance of $7,111,142, representing $5,830,000 in original
principal and $1,281,142 in accrued interest.  In accordance with the terms of
the Modification Agreement, the balance of the first mortgage loan remained
$5,830,000, the interest rate was reduced from 10.125% to 9.875%, and the first
mortgage loan's maturity date was extended five years to June 1, 2001 (the "New
First Mortgage"). Pursuant to the terms of the New First Mortgage, the
Partnership is required to make fixed monthly payments of principal and
interest the amount of $52,464, commencing on July 1, 1996 until maturity on
June 1, 2001, at which time the entire outstanding principal balance is due.

The accrued interest of $1,281,142 was converted into a second mortgage loan
which is coterminous with the New First Mortgage (the "New Second Mortgage").
Upon execution of the Modification Agreement, the Partnership made a $300,000
payment to the Lender, at which time the Lender reduced the New Second Mortgage
balance to $681,142.  The New Second Mortgage is non-interest bearing and is
scheduled to be fully amortized over the five-year term and is prepayable at
any time.  Under the terms of the New Second Mortgage, payments of principal,
in monthly installments of $3,333 are due on the first day of every month
commencing on July 1, 1996, and continuing through June 1, 1998.  After that
date, principal is payable in monthly installments of $5,000 on the first day
of every month, beginning July 1, 1998 and continuing through June 1, 2000.
After that date, principal is payable in monthly installments of $8,333 on the
first day of every month, beginning July 1, 2000 and continuing until maturity
on June 1, 2001.  The sum of the total minimum monthly payments over the term
of the New Second Mortgage is $300,000.  Pursuant to the Modification
Agreement, if $500,000 in principal payments have been received unconditionally
and irrevocably by the Lender, the New Second Mortgage's remaining unpaid
principal in the amount $181,142 will be forgiven by the Lender.

The Modification Agreement required the Partnership to enter into a Replacement
Reserve and Security Agreement (the "Replacement Agreement") with the Lender
providing that, concurrently with the execution of the Replacement Agreement,
the Partnership was required to deposit with the Lender the sum of $49,500 into
a reserve account ("Replacement Reserve").  Per the terms of the Replacement
Agreement, the Partnership shall make additional monthly deposits of $4,125. On
a quarterly basis, provided that no default exists under the Replacement
Agreement, upon written request from the Partnership, the Lender shall disburse
amounts from the Replacement Reserve necessary to reimburse the Partnership for
the actual approved costs of replacements as determined by the Lender.  As of
December 31, 1997, a total of $88,004 was deposited with the Lender and is
reflected as "Restricted cash - replacement reserve" on the Partnership's
balance sheets.

The Modification Agreement also required the Partnership to pay to the Lender
on the day monthly installments of principal or interest are payable, until the
New First Mortgage is paid in full, a sum equal to one-twelfth of the yearly
real estate taxes and property insurance premiums (the "Funds").  The Lender
shall apply the Funds to pay the real estate taxes and property insurance
premiums so long as the Partnership is in compliance with the terms of the New
First Mortgage.  The Funds are recorded as "Cash held in escrow" on the
Partnership's balance sheets.

Based on the borrowing rates currently available to the Partnership for
mortgage loans with similar terms and average maturities, the fair value of
long-term debt approximates its carrying value as of the balance sheet date.

7. Transactions with Related Parties

During the years ended December 31, 1997, 1996 and 1995, the General Partners
or their affiliates were reimbursed for Partnership administrative and
operating expenses, excluding property management fees, in the amounts of
$1,262, $7,132 and $8,024, respectively.

Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by an unaffiliated third party service provider in servicing
the Partnership to the extent permitted by the partnership agreement.  In prior
years, affiliates of the SM7 Apartment Investors Inc. general partner had
voluntarily absorbed these expenses.

Certain cash and cash equivalents were on deposit with an affiliate of SM7
Apartment Investors Inc. during a portion of 1996 and all of 1995.  As of
December 31, 1996 and throughout 1997, no cash and cash equivalents were on
deposit with an affiliate of the General Partners or the Partnership.

On January 1, 1990, Murray Management Corporation subcontracted Anterra
Management Corporation to provide certain administrative and management
services with respect to the Partnership and its Properties.  Anterra
Management Corporation is a real estate management company and an affiliate of
a general partner, and earned property management fees of $52,420, $55,489 and
$65,378 for the years ended December 31, 1997, 1996 and 1995, respectively.

8. Reconciliation of Financial Statement Net Loss and Partners' Deficit to
   Federal Income Tax Basis Net Loss and Partners' Deficit

The following is a reconciliation of the net loss for financial statement
purposes to federal income tax basis net loss for the years ended December 31,
1997, 1996 and 1995:

                                                  1997        1996        1995

Net loss for financial statements
  purposes                                  $ (417,257) $ (139,137) $ (269,960)
Financial statement depreciation
  over (under) tax basis depreciation          167,854      32,479     (14,635)
Financial statement gain on debt
  restructuring over tax basis                       _    (226,111)          _
Federal income tax basis interest expense
  under financial statement interest expense    58,900      37,676           _
Other                                             (536)     42,406       1,294
Federal income tax basis net loss under (over)
  financial statement net income               226,218    (113,550)    (13,341)

Federal income tax basis net loss           $ (191,039) $ (252,687) $ (283,301)


Reconciliation of financial statement partners' deficit to federal income tax
basis partners' deficit for the years ended December 31, 1997, 1996 and 1995:

                                                1997         1996         1995

Financial statement basis
  partners' deficit                      $(2,512,371) $(2,095,114) $(1,955,977)
Current year federal income tax basis
  net loss under (over) financial
  statement net loss                         226,218     (113,550)     (13,341)
Cumulative federal income tax basis net
  loss over financial statement net
  loss                                    (1,954,255)  (1,840,705)  (1,827,364)

Federal income tax basis partners'
  deficit                                $(4,240,408) $(4,049,369) $(3,796,682)

Because many types of transactions are susceptible to varying interpretations
under federal and state income tax laws and regulations, the amounts reported
above may be subject to change at a later date upon final determination by the
taxing authorities.

Schedule III - Real Estate and Accumulated Depreciation
December 31, 1997

                                  Fifth Avenue
Office Buildings:                   Apartments

Location                       San Antonio, TX

Date of construction                      1982
Acquisition date                          1983
Life on which depreciation
in latest income statements
is computed                       3 - 21 years
Encumbrances                        $6,249,543
Initial cost to Partnership (1):
     Land                              962,216
     Building and
     improvements                    7,512,710
Costs capitalized
subsequent to acquisition:
     Land, buildings
     and improvements                  166,094
Retirements                            (15,318)
Gross amount at which
carried at close of period (2):
     Land                             $962,216
     Building and
     improvements                    7,663,486

                                    $8,625,702

Accumulated depreciation (3)        $5,199,331

(1)  The initial cost to the Partnership represents the original
     purchase price of the property.
(2)  The aggregate cost of real estate at December 31, 1997 and 1996
     and 1995, for Federal income tax purposes is $8,787,461, $8,762,079
     and $8,759,601, respectively.

A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1997, 1996, and 1995 follows:

                                               1997        1996        1995
Real estate investments:
Beginning of year                        $8,606,102  $8,613,159  $8,565,262
Additions                                    25,383       2,478      47,897
Retirements                                  (5,783)     (9,535)          _

End of year                              $8,625,702  $8,606,102  $8,613,159

Accumulated depreciation:
Beginning of year                        $4,827,620  $4,464,838  $4,091,395
Depreciation expense                        377,494     372,317     373,443
Retirements                                  (5,783)     (9,535)          _
End of year                              $5,199,331  $4,827,620  $4,464,838