CARLYLE REAL ESTATE LTD PARTNERSHIP VII, 10-K405, 1999-03-15

CARLYLE REAL ESTATE LTD PARTNERSHIP VII
10-K405, 1999-03-15
OPERATORS OF NONRESIDENTIAL BUILDINGS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the period from
January 1, 1998
to December 17, 1998 Commission file number 0-8915

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(Exact name of registrant as specified in its charter)

Illinois 36-2875192
(State of organization) (I.R.S. Employer Identification No.)

900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312-915-1987

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

Name of each exchange on
Title of each class which registered
- ------------------- -------------------------------

None 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 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 [ ]

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 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 the aggregate market value of the voting stock held by non-affiliates
of the Registrant. Not applicable.

Documents incorporated by reference: None

<PAGE>

TABLE OF CONTENTS

Page
----
PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . 1

Item 2. Properties . . . . . . . . . . . . . . . . . . 4

Item 3. Legal Proceedings. . . . . . . . . . . . . . . 4

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

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . . 4

Item 6. Selected Financial Data. . . . . . . . . . . . 5

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

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . . 10

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . 11

Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . 28

PART III

Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . 28

Item 11. Executive Compensation . . . . . . . . . . . . 31

Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . 32

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . 34

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . 34

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 36

<PAGE>

PART I

ITEM 1. BUSINESS

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report. Capitalized terms used herein, but
not defined, have the same meanings as used in the Notes.

The registrant, Carlyle Real Estate Limited Partnership-VII (the
"Partnership"), was a limited partnership formed in 1976 and governed by
the Revised Uniform Limited Partnership Act of the State of Illinois to
invest in improved income-producing commercial and residential real
property. The Partnership sold $18,000,000 in Limited Partnership
Interests (the "Interests") to the public commencing on October 17, 1977
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration No. 2-59231). A total of 18,000 Interests were sold
to the public at $1,000 per Interest. The offering closed March 31, 1978.
No Limited Partner has made any additional capital contribution after such
date. The Limited Partners of the Partnership shared in their portion of
the benefits of ownership of the Partnership's real property investments
according to the number of Interests held.

The Partnership was engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments had been held by fee title, leasehold estates and/or
through joint venture partnership interests. All of the Partnership's
investments in real estate have been sold. The Partnership's real property
investments were located throughout the United States and it had no real
estate investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials, or
seasonality was not applicable and would not have been material to an
understanding of the Partnership's business taken as a whole. Upon the
sale of a particular property, the net proceeds, if any, were generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. The Partnership made a final liquidating
cash distribution of $1,590,562 to the Limited Partners ($88.34 per
Interest) and $192,458 to the General Partners and wound up its affairs and
dissolved effective December 17, 1998. Reference is also made to Item 7.

The Partnership made the real property investments set forth in the
following table:

<PAGE>

NAME, TYPE OF PROPERTY DATE OF SALE OR
AND LOCATION SIZE PURCHASE DISPOSITION DATE TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1. Waterford Corners
Shopping Center
Waterford Township,
Michigan. . . . . . 73,000 3-8-77 3-17-78 fee ownershipof land and
sq.ft. improvements
g.l.a.
2. Place II Apartments
Phoenix, Arizona. . 161 units 6-6-77 4-1-82 fee ownership of land and
improvements
3. Southland Mall
Columbus, Ohio. . . 119,000 7-15-77 1-1-84 fee ownership of land and
sq.ft. improvements
g.l.a.
4. Walnut Bend
Apartments
Dallas, Texas . . . 260 units 10-1-77 6-27-83 fee ownership of land and
improvements
5. Bellfort II
Apartments
Houston, Texas. . . 180 units 7-15-77 3-29-85 fee ownership of land and
improvements (through joint
venture partnership)
6. Spice Island
Apartments
Houston, Texas. . . 256 units 9-16-77 5-31-84 fee ownership of land and
improvements
7. Bush River Mall
Columbia,
South Carolina. . . 108,000 7-15-77 12-15-83 fee ownership of land and
sq.ft. improvements
g.l.a.
8. Oakridge Mall
San Jose,
California. . . . . 335,000 10-15-77 4-8-98 fee ownership of improve-

sq.ft. ments and ground leasehold
g.l.a. interest in land (through
joint venture partnership)
(a)(b)
9. Windridge Apartments
Dallas, Texas. . . 232 units 12-29-77 10-1-89 fee ownership of land and
improvements (through joint
venture partnership)

<PAGE>

NAME, TYPE OF PROPERTY DATE OF SALE OR
AND LOCATION SIZE PURCHASE DISPOSITION DATE TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------- ---------------------

10. Shadowridge of
San Antonio
Apartments
San Antonio, Texas 252 units 12-29-77 8-29-83 fee ownership of land and
improvements
11. North Chase
Apartments
Houston, Texas . . 294 units 4-7-78 2-5-91 fee ownership of land and
improvements (through joint
venture partnerships)
12. Wakefield
Apartments
Marietta, Georgia. 312 units 7-31-78 12-20-82 fee ownership of land and
improvements

<FN>

- ---------------

(a) Reference is made to the Notes for a description of the joint venture partnership through which the
Partnership made this real property investment.

(b) The Partnership's interest in the property was sold. Reference is made to the Notes for a description of
the sale of the Partnership's interest in such property.

</TABLE>

<PAGE>

The Partnership's real property investments were subject to competi-
tion from similar types of properties (including properties owned by
affiliates of the General Partners) in the respective vicinities in which
they were located. Such competition was generally for the retention of
existing tenants and for securing new tenants in markets where significant
vacancies were present.

The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.

ITEM 2. PROPERTIES

The Partnership owned directly or through joint venture partnerships
the properties or interests in the properties referred to under Item 1
above to which reference is hereby made for a description of said
properties.

ITEM 3. LEGAL PROCEEDINGS

At the time of liquidation, the Partnership was not subject to any
material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
1997 and 1998.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

Immediately prior to the dissolution of the Partnership, there were
1,633 record holders of Interests in the Partnership. The Partnership made
a final liquidating cash distribution to its holders of Interests and wound
up its affairs and dissolved effective December 17, 1998. There had been
no public market for Interests and it had not been anticipated that a
public market for Interests would develop. Upon request, the Corporate
General Partner provided information relating to a prospective transfer of
Interests to an investor desiring to transfer his Interests. The price
paid for the Interests, as well as any other economic aspects of the
transaction, was subject to negotiation by the investor.

Reference is made to Item 6 below for a discussion of cash
distributions made to the Limited Partners.

Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.

<PAGE>

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

FOR THE PERIOD ENDED DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1997, 1996, 1995 AND 1994
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)

Total income. . . . . . . $ 2,756,180 10,378,344 8,761,868 8,438,395 7,996,717
=========== ========== ========== ========== ==========
Earnings (loss) before
gain on sale of
interest in invest-
ment property. . . . . . $ 378,962 1,651,012 656,212 954,353 1,003,409
Gain on sale of interest
in investment property . 22,738,661 -- -- -- --
Extraordinary item, net
of venture partner's
share. . . . . . . . . . -- -- -- (391,010) --
----------- ---------- ---------- ---------- ----------
Net earnings (loss) . . . $23,117,623 1,651,012 656,212 563,343 1,003,409
=========== ========== ========== ========== ==========
Net earnings (loss)
per Interest (b):
Earnings (loss)
before gain on
sale of interest
in investment
property . . . . . . $ 20.21 88.03 34.99 50.88 53.50
Gain on sale of
interest in
investment
property . . . . . . 1,001.92 -- -- -- --
Extraordinary item,
net of venture
partner's share. . . -- -- -- (21.50) --
----------- ---------- ---------- ---------- ----------
Net earnings (loss) . $ 1,022.13 88.03 34.99 29.38 53.50
=========== ========== ========== ========== ==========

<PAGE>

1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------

Total assets. . . . . . . $ 1,783,020 25,211,227 24,881,744 28,723,368 16,393,988
Long-term debt. . . . . . $ -- -- 23,002,015 24,532,836 13,741,800
Cash distributions per
Interest (c)(d). . . . . $ 1,050.00 -- 125.00 -- 5.00
=========== ========== ========== ========== ==========

<FN>
- -------------

(a) The above summary of financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.

(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of
each period (18,005) and the specified profit and loss allocations (as discussed in the Notes) between the Limited
and General Partners.

(c) Cash distributions from the Partnership were generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (loss) from the Partnership in
each year was equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the
cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore
represented a return of capital.

(d) Cash distributions per Interest for 1998 does not include final liquidating distribution of $88.34 per
Interest.

</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

As a result of the public offering of Interests as described in
Item 1, the Partnership had approximately $16,270,000 (after deducting
selling expenses and other offering costs) with which to make investments
in income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments and for working capital requirements. A portion of such
proceeds was utilized to acquire the properties described in Item 1 above.

The board of directors of JMB Realty Corporation ("JMB"), the
Corporate General Partner of the Partnership, had established a special
committee (the "Special Committee") consisting of certain directors of JMB
to deal with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee had retained independent counsel to advise it in
connection with any potential tender offers for Interests and had retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests.

During 1996 and 1997, some of the Holders of Interests in the
Partnership received from unaffiliated third parties unsolicited tender
offers to purchase up to 4.9% of the Interests in the Partnership for
amounts ranging from $335 to $485 per Interest. The Partnership
recommended against acceptance of these offers on the basis that, among
other things, the offer prices were inadequate. Such offers have expired.

In April 1998, an unaffiliated third party made an unsolicited tender
offer to some of the Holders of Interests to purchase up to 4.9% of the
Interests in the Partnership at $375 per Interest. Such offer expired in
May 1998. The Special Committee recommended against acceptance of this
offer on the basis that, among other things, the offer price was
inadequate.

In May 1998, a group that includes affiliates of MacKenzie Patterson,
Inc. (collectively, the "Purchasers") commenced a tender offer (the "Prior
Offer") for up to 2,700 Interests (approximately 15% of the outstanding
Interests) at a purchase price of $800 per Interest. The Special Committee
determined that the Purchasers' Prior Offer was inadequate and not in the
best interests of the Holders of Interests. Accordingly, the Partnership
recommended that the Holders of Interests reject the Purchasers' Prior
Offer and not tender their Interests. As more fully discussed below, at
the end of May 1998, the Partnership made a distribution to the Holders of
Interests of $1,050 per Interest. In June 1998, the Purchasers amended
their Prior Offer (the "Amended Prior Offer") to (i) increase the number of
Interests sought to include all of the outstanding Interests, (ii) reduce
the purchase price to $20 per Interest and (iii) extend the expiration date
under the Purchasers' Amended Prior Offer to June 30, 1998. The Special
Committee determined that the Purchasers' Amended Prior Offer was
inadequate and not in the best interests of the Holders of Interests.
Accordingly, the Partnership recommended that the Holders of Interests
reject the Purchasers' Amended Prior Offer and not tender their Interests
pursuant to such Amended Prior Offer. The Partnership believes that the
Purchasers did not acquire any Interests pursuant to their Prior Offer or
Amended Prior Offer. In July 1998, the Purchasers commenced another tender
offer (the "Offer") for Interests on substantially the same terms as the
Purchasers' Amended Prior Offer except that the purchase price was $30 per
Interest and the scheduled expiration date was August 31, 1998. The
Special Committee determined that the Purchasers' Offer was inadequate and
not in the best interests of the Holders of Interests. Accordingly, the
Partnership recommended that the Holders of Interests reject the
Purchasers' Offer and not tender their Interests pursuant to such Offer.
As discussed more fully below, on December 17, 1998, the Partnership made a
final liquidating cash distribution to its Holders of Interests of $88.34
per Interest.

<PAGE>

As of the date of this report, the Partnership is aware that 3.90% of
the outstanding Interests were purchased by such unaffiliated third parties
either pursuant to such tender offers or through negotiated purchases.

OAKRIDGE MALL

Oakridge Mall had been considered held for sale or disposition as of
December 31, 1996. On April 8, 1998, the Partnership sold its interest to
the venture partner for $31,950,000 ($20,700,000 plus the assumption of the
Partnership's share of the mortgage loan of approximately $11,250,000).
Reference is made to the Notes for a further description of such sale. Net
proceeds from the sale of the Partnership's interest ($1,000 per Interest)
and cash from operations ($50 per Interest) were distributed to the
partners in May 1998. In connection with the sale of the Partnership's
interest in the venture and as is customary in such transactions, the
Partnership agreed to certain representations, warranties and covenants
with a stipulated survival period which expired December 1, 1998.

DALLAS TOLLWAY PARTNERS

The Partnership had an interest in Dallas Tollway Partners, the
venture which owned the Windridge Apartments. In 1989, the Windridge
Apartments were sold. However, due to disputes between the Partnership's
Corporate General Partner and one of the Dallas Tollway venture partners
(who had pledged its interest in the venture to the Corporate General
Partner in partial satisfaction of an unrelated obligation), the final
distribution of proceeds from the sale of the Windridge Apartments relative
to such venture partner's interest had been withheld. The Corporate
General Partner had claimed that it was entitled to receive such
distribution, but had been awaiting the resolution of certain legal issues
relating to the principals of such venture partner. Such Partnership
liability was represented on the Partnership's consolidated balance sheet
as venture partner's subordinated equity in venture at December 31, 1997.
In order to wind up its affairs, the Partnership paid the Corporate General
Partner $114,918 representing the estimated amount owed, respecting the
interest of the former venture partner, in the proceeds related to the sale
of the Windridge Apartments and the Corporate General Partner agreed to
assume any remaining Partnership liability to the former venture partner.

GENERAL

The Partnership's interest in the Oakridge venture was its only
remaining property investment and due to its sale, the Partnership made a
final liquidating cash distribution of $1,590,562 ($88.34 per Interest) to
the Limited Partners and $192,458 to the General Partners and wound up its
affairs and dissolved effective December 17, 1998.

RESULTS OF OPERATIONS

The decrease in cash and cash equivalents at December 17, 1998 as
compared to December 31, 1997 is due primarily to the distribution of cash
from operations of $50 per Interest in May 1998 as discussed above.

Various decreases in the consolidated financial statements at
December 17, 1998 as compared to December 31, 1997 and for the period ended
December 17, 1998 as compared to the year ended December 31, 1997 are
primarily due to the sale of the Partnership's interest in the Oakridge
Mall in April 1998.

The decrease in venture partner's subordinated equity in venture at
December 17, 1998 as compared to December 31, 1997 is due to the payment by
the Partnership to the Corporate General Partner and the corresponding
assumption by the Corporate General Partner of amounts due to a former
venture partner in the Dallas Tollway Partners venture related to unpaid
sales proceeds, as discussed more fully above.

<PAGE>

The increase in rental income for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is primarily due to increased
average occupancy and increased effective rental rates achieved on new
leases and lease renewals during 1997 including the early lease renewal of
a tenant occupying 15,268 square feet (approximately 5% of the total gross
leasable area) at the Oakridge investment property.

The increase in interest income for the period ended December 17, 1998
as compared to the year ended December 31, 1997 is primarily due to the
temporary investment of approximately $20,900,000 of net proceeds related
to the April 1998 sale of the Partnership's interest in the Oakridge Mall
until distribution of such proceeds in May 1998. The decrease in interest
income for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 is primarily due to a decrease in the amount of cash
available for short-term investments as a result of Oakridge venture
distributions made to its partners and the subsequent distribution by the
Partnership to its Partners during 1996.

The decrease in depreciation expense for the period ended December 17,
1998 and the year ended December 31, 1997 as compared to the year ended
December 31, 1996 is due to the Oakridge investment property being
classified as held for sale as of December 31, 1996, and therefore, no
longer subject to continued depreciation.

The increase in property operating expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is
primarily due to the increase in ground rent participation expense and
increased HVAC and parking lot repairs at the Oakridge investment property
in 1997.

The increase in professional services for the period ended
December 17, 1998 as compared to the years ended December 31, 1997 and
December 31, 1996 is due to an increase in certain costs due to the winding
up of the Partnership.

The decrease in amortization of deferred expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is
primarily due to the full amortization of certain tenant lease commissions
at the Oakridge investment property during 1997.

The management fees to corporate general partner for the period ended
December 17, 1998 are due to the May 1998 sale and operating distribution
and the December 1998 final liquidating distribution, a portion of which is
a management fee paid to the Corporate General Partner.

The increase in general and administrative expense for the period
ended December 17, 1998 as compared to the year ended December 31, 1997 is
due to an increase in certain costs due to the winding up of the
Partnership. The increase in general and administrative expenses for the
year ended December 31, 1997 as compared to the year ended December 31,
1996 is primarily due to an increase in investor report printing costs,
professional liability insurance costs and outsource service fees in 1997.

The increase in venture partner's share of venture's operations for
the year ended December 31, 1997 as compared to the year ended December 31,
1996 is primarily due to the increase in rental income and the decrease in
depreciation expense at the Oakridge investment property in 1997 as
discussed above.

The gain from sale of interest in investment property for the period
ended December 17, 1998 is due to the sale in April 1998 of the
Partnership's interest in the Oakridge Mall.

<PAGE>

INFLATION

Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses. Inflation in future years is not applicable
since the Partnership wound up its affairs and dissolved effective
December 17, 1998.

YEAR 2000

The Partnership wound up its affairs and dissolved effective
December 17, 1998.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership wound up its affairs and dissolved effective
December 17, 1998. As a result, there is no meaningful disclosure for this
item.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

INDEX

Independent Auditors' Report

Consolidated Balance Sheets, December 17, 1998 (Immediately prior
to final liquidating distribution) and December 31, 1997

Consolidated Statements of Operations, period ended December 17,
1998 (Immediately prior to final liquidating distribution)
and years ended December 31, 1997 and 1996

Consolidated Statements of Partners' Capital Accounts (Deficits),
period ended December 17, 1998 (Immediately prior to final
liquidating distribution) and years ended December 31, 1997 and 1996

Consolidated Statements of Cash Flows, period ended December 17,
1998 (Immediately prior to final liquidating distribution)
and years ended December 31, 1997 and 1996

Notes to Consolidated Financial Statements

SCHEDULES NOT FILED:

All schedules have been omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII:

We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - VII (a limited partnership) and consolidated
venture as listed in the accompanying index. These consolidated financial
statements are the responsibility of the General Partners of the
Partnership. Our responsibility is to express an opinion on these
consolidated financial statements 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 the General Partners of the
Partnership, 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Carlyle Real Estate Limited Partnership - VII and consolidated venture at
December 17, 1998 (immediately prior to final liquidating distribution) and
December 31, 1997, and the results of their operations and their cash flows
for the period ended December 17, 1998 (immediately prior to final
liquidating distribution) and the years ended December 31, 1997 and 1996,
in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
February 23, 1999

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED BALANCE SHEETS

DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND DECEMBER 31, 1997

ASSETS
------
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 1,783,020 4,078,008
Rents and other receivables . . . . . . . . . . . . . . . . . . . . -- 773,584
Escrow deposits and other assets. . . . . . . . . . . . . . . . . . -- 304,079
------------ -----------

Total current assets. . . . . . . . . . . . . . . . . . . . 1,783,020 5,155,671
------------ -----------

Property held for sale or disposition . . . . . . . . . . . . . . . -- 16,148,745
------------ -----------

Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,222,059
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . -- 1,211,580
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . -- 1,473,172
------------ -----------

$ 1,783,020 25,211,227
============ ===========

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1998 1997
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ -- 23,002,015
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,087,454
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . -- 176,157
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . -- 24,265,626

Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . -- 54,562
Long-term debt, less current portion. . . . . . . . . . . . . . . . . -- --
------------ -----------

Commitments and contingencies

Total liabilities . . . . . . . . . . . . . . . . . . . . . -- 24,320,188

Venture partner's subordinated equity in venture. . . . . . . . . . . -- 105,529

Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . 4,082,565 (631,646)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (3,891,107) (676,244)
------------ -----------
192,458 (1,306,890)
------------ -----------
Limited partners (18,005 interests):
Capital contributions, net of offering costs . . . . . . . . . . 16,269,038 16,269,038
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . 33,718,295 15,314,883
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (48,396,771) (29,491,521)
------------ -----------
1,590,562 2,092,400
------------ -----------
Total partners' capital accounts (deficit). . . . . . . . . 1,783,020 785,510
------------ -----------

$ 1,783,020 25,211,227
============ ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $ 2,465,238 10,127,703 8,318,615
Interest income . . . . . . . . . . . . . . . . . . 290,942 250,641 443,253
------------ ------------ ------------
2,756,180 10,378,344 8,761,868
------------ ------------ ------------
Expenses:
Mortgage and other interest . . . . . . . . . . . . 564,917 2,181,931 2,324,469
Depreciation. . . . . . . . . . . . . . . . . . . . -- -- 932,159
Property operating expenses . . . . . . . . . . . . 1,043,529 4,424,469 3,685,371
Professional services . . . . . . . . . . . . . . . 89,900 77,668 78,423
Amortization of deferred expenses . . . . . . . . . 58,887 245,789 280,651
Management fees to corporate general partner. . . . 70,419 -- --
General and administrative. . . . . . . . . . . . . 136,081 98,391 84,560
------------ ------------ ------------
1,963,733 7,028,248 7,385,633
------------ ------------ ------------
792,447 3,350,096 1,376,235
Venture partner's share of venture's
operations. . . . . . . . . . . . . . . . . . . . . (413,485) (1,699,084) (720,023)
------------ ------------ ------------
Earnings (loss) before gain on sale
of interest in investment property. . . . . 378,962 1,651,012 656,212

Gain from sale of interest in
investment property . . . . . . . . . . . . . . . . 22,738,661 -- --
------------ ------------ ------------

Net earnings (loss) . . . . . . . . . . . . . $ 23,117,623 1,651,012 656,212
============ ============ ============

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1998 1997 1996
------------ ------------ ------------
Net earnings per limited partnership
interest:
Earnings (loss) before gain on sale
of interest in investment property. . . $ 20.21 88.03 34.99
Gain from sale of interest in
investment property . . . . . . . . . . 1,001.92 -- --
------------ ------------ ------------

$ 1,022.13 88.03 34.99
============ ============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
PERIOD ENDED DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1997 AND 1996

<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (18,005 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit) at
December 31,
1995 . . . . . .$1,000 (723,934) (279,075) (1,002,009) 16,269,038 13,099,947 (27,240,896) 2,128,089

Net earnings
(loss) . . . . . -- 26,248 -- 26,248 -- 629,964 -- 629,964
Cash distribu-
tions ($125
per limited
partnership
interest). . . . -- -- (397,169) (397,169) -- -- (2,250,625) (2,250,625)
------ -------- -------- ---------- ---------- ---------- ----------- ---------
Balance
(deficit) at
December 31,
1996 . . . . . .1,000 (697,686) (676,244) (1,372,930) 16,269,038 13,729,911 (29,491,521) 507,428

Net earnings
(loss) . . . . . -- 66,040 -- 66,040 -- 1,584,972 -- 1,584,972
Cash distribu-
tions ($0
per limited
partnership
interest). . . . -- -- -- -- -- -- -- --
------ -------- -------- ---------- ---------- ---------- ----------- ---------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED

GENERAL PARTNERS LIMITED PARTNERS (18,005 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------

Balance
(deficit) at
December 31,
1997 . . . . . .1,000 (631,646) (676,244) (1,306,890) 16,269,038 15,314,883 (29,491,521) 2,092,400

Net earnings
(loss) . . . . . -- 4,714,211 -- 4,714,211 -- 18,403,412 -- 18,403,412
Cash distribu-
tions ($1,050
per limited
partnership
interest). . . . -- -- (3,214,863) (3,214,863) -- -- (18,905,250)(18,905,250)
------ -------- -------- ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 17,
1998 . . . . . .$1,000 4,082,565 (3,891,107) 192,458 16,269,038 33,718,295 (48,396,771) 1,590,562
====== ======== ======== ========== ========== ========== =========== ==========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIOD ENDED DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . $ 23,117,623 1,651,012 656,212
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . -- -- 932,159
Amortization of deferred expenses . . . . . . . . 58,887 245,789 280,651
Venture partner's share of venture's
operations. . . . . . . . . . . . . . . . . . . 413,485 1,699,084 720,023
Gain from sale of interest in investment
property. . . . . . . . . . . . . . . . . . . . (22,738,661) -- --
Changes in:
Rents and other receivables . . . . . . . . . . . . 196,007 (632,495) 313,502
Escrow deposits and other assets. . . . . . . . . . (97,435) (52,538) 21,545
Accrued rents receivable. . . . . . . . . . . . . . 74,823 (319,779) (81,691)
Accounts payable. . . . . . . . . . . . . . . . . . (57,081) 217,317 (39,284)
Accrued interest. . . . . . . . . . . . . . . . . . (3,102) (11,724) (10,697)
Tenant security deposits. . . . . . . . . . . . . . (2,953) 3,700 (10,387)
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . 961,593 2,800,366 2,782,033
----------- ----------- -----------
Cash flows from investing activities:
Restricted funds. . . . . . . . . . . . . . . . . . -- -- 4,294,143
Restricted construction loan proceeds . . . . . . . -- -- 2,783,191
Additions to investment property. . . . . . . . . . -- (406,870) (1,186,303)
Payment of deferred expenses. . . . . . . . . . . . (16,359) (220,046) (164,508)
Proceeds from sale of interest in investment
property. . . . . . . . . . . . . . . . . . . . . 20,447,750 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . 20,431,391 (626,916) 5,726,523
----------- ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . (405,109) (1,530,822) (1,396,897)
Distributions to venture partners . . . . . . . . . (1,162,750) (405,000) (3,450,000)
Distributions to limited partners . . . . . . . . . (18,905,250) -- (2,250,625)
Distributions to general partners . . . . . . . . . (3,214,863) -- (397,169)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . (23,687,972) (1,935,822) (7,494,691)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . (2,294,988) 237,628 1,013,865
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . 4,078,008 3,840,380 2,826,515
----------- ----------- -----------
Cash and cash equivalents, end of year. . . $ 1,783,020 4,078,008 3,840,380
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . $ 568,019 2,193,655 2,335,166
=========== =========== ===========
Non-cash investing and financing activities:
Distribution of net assets to venture
partner upon liquidation of joint venture . . . . $ 2,116,908 -- --
=========== =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII
AND CONSOLIDATED VENTURE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PERIOD ENDED DECEMBER 17, 1998 (IMMEDIATELY PRIOR TO
FINAL LIQUIDATING DISTRIBUTION) AND YEARS ENDED
DECEMBER 31, 1997 AND 1996

OPERATIONS AND BASIS OF ACCOUNTING

GENERAL

The Partnership held (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consisted of rentals to a wide variety of commercial and retail
companies, rentals to individuals and the ultimate sale or disposition of
such real estate.

The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, Oakridge
Associates ("Oakridge") (prior to its sale in April 1998). The effect of
all transactions between the Partnership and the consolidated venture has
been eliminated in the consolidated financial statements.

The Partnership's records were maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect
the Partnership's accounts in accordance with generally accepted accounting
principles ("GAAP") and to include the accounts of the venture as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the period
ended December 17, 1998 (immediately prior to final liquidating
distribution) and the year ended December 31, 1997 is summarized as
follows:

<PAGE>

<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 1,783,020 1,783,020 25,211,227 3,279,035
Partners' capital accounts
(deficit):
General partners. . . . . . . . 192,458 192,458 (1,306,890) (1,345,360)
Limited partners. . . . . . . . 1,590,562 1,590,562 2,092,400 1,222,278
Net earnings (loss):
General partners. . . . . . . . 4,714,211 4,752,681 66,040 42,966
Limited partners. . . . . . . . 18,403,412 19,273,534 1,584,972 1,031,193
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . 1,022.13 1,070.45 88.03 57.27
=========== ========== =========== ===========

</TABLE>

<PAGE>

The net earnings (loss) per limited partnership interest was based
upon the number of limited partnership interests outstanding at the end of
each period (18,005). Also, because net earnings (loss) was computed
immediately prior to dissolution, holders of Interests may have an
additional capital gain or loss on dissolution depending on the holder's
basis for Federal income tax purposes.

The preparation of financial statements in accordance with GAAP
required the Partnership to make estimates and assumptions that affected
the reported or disclosed amount of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could have differed from those
estimates.

Statement of Financial Accounting Standards No. 95 required the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. The
Partnership recorded amounts held in U.S. Government obligations at cost,
which approximates market. For the purposes of these statements, the
Partnership's policy was to consider all such amounts held with original
maturities of three months or less (none and $3,219,670 at December 17,
1998 and December 31, 1997, respectively) as cash equivalents, which
included investments in commercial paper and an institutional mutual fund
which held U.S. Government obligations. Remaining amounts, if any,
(generally with original maturities of one year or less) were reflected as
short-term investments being held to maturity.

Deferred expenses consisted primarily of commitment fees incurred in
connection with the acquisition and financing of the Partnership's
investment properties along with lease commissions paid on the
Partnership's commercial and retail properties. Deferred loan fees and
leasing fees were amortized using the straight-line method over the terms
stipulated in the related agreements.

Although certain leases of the Partnership provided for tenant
occupancy during periods for which no rent was due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrued
rental income for the full period of occupancy on a straight-line basis.

No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the Partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to Partners.

The Partnership had acquired, either directly or through joint
ventures, eight apartment complexes and four shopping centers. All of the
properties have been sold or disposed of. The cost of the investment
properties represented the total cost to the Partnership and its ventures,
plus miscellaneous acquisition costs.

Depreciation on the properties had been provided over the estimated
useful lives of the various components as follows:

YEARS
-----
Building and improvements (new)--
straight-line or 150% declining-balance. . . . . . 5-40
Building and improvements (used)--
125% declining-balance or
straight-line. . . . . . . . . . . . . . . . . . . 5-40
====

The investment properties were pledged as security for the long-term
debt, for which there was no recourse to the Partnership.

<PAGE>

Maintenance and repair expenses were charged to operations as
incurred. Significant betterments and improvements were capitalized and
depreciated over their estimated useful lives.

The Partnership adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121") as required in the first
quarter of 1996. SFAS 121 required that the Partnership record an
impairment loss on its properties to be held for investment whenever their
carrying value could not be fully recovered through estimated undiscounted
future cash flows from their operations and sale. The amount of the
impairment loss to be recognized would have been the difference between the
property's carrying value and the property's estimated fair value. The
Partnership's policy was to consider a property to be held for sale or
disposition when the Partnership committed to a plan to sell such property
and active marketing activity had commenced or was expected to commence in
the near term. In accordance with SFAS 121, any property identified as
"held for sale or disposition" was no longer depreciated. Adjustments for
impairment loss for such properties (subsequent to the date of adoption of
SFAS 121) were made in each period as necessary to report these properties
at the lower of carrying value or fair value less costs to sell. The
adoption of SFAS 121 did not have any effect on the Partnership's financial
position, results of operations or liquidity.

As the venture had committed to a plan to sell the Partnership's
Oakridge investment property, the property was classified as held for sale
as of December 31, 1996, and therefore, was not subject to continued
depreciation beginning January 1, 1997. The results of operations of the
Partnership's Oakridge investment property (which was sold in April 1998)
included in the accompanying consolidated financial statements were net
income of $808,192, $3,398,168 and $1,440,046 for the period ended
December 17, 1998 and for the years ended December 31, 1997 and 1996,
respectively.

During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only had general and limited partnership
interests, the Partnership did not experience any significant impact on its
consolidated financial statements.

VENTURE AGREEMENTS

DALLAS TOLLWAY PARTNERS

<PAGE>

INVESTMENT PROPERTY

OAKRIDGE MALL

The Partnership was a general partner in the Oakridge Associates Ltd.
venture with the seller of the property.

Pursuant to the venture agreement, beginning January 1, 1983, any net
cash flow was distributed equally to the Partnership and the seller. The
Partnership had a preferred position (related to the Partnership's cash
investment in the venture) with respect to distributions of sale or
refinancing proceeds from the venture. Once the preferred position had
been satisfied, any excess sale or refinancing proceeds from the venture
were distributed so that the Partnership and the venture partner equally
share the proceeds. The Partnership's preferred position was satisfied in
1996 as a result of a distribution of refinancing proceeds.

Venture operating profits and losses were allocated to the venture
partners generally in proportion to their distributions of net cash flow.
In 1998, 1997 and 1996, profits and losses were allocated 50% to the
Partnership and 50% to the venture partner. An affiliate of the venture
partner managed the property pursuant to an agreement which provided for a
management fee calculated at a percentage of certain types of income.

The Partnership had been in discussions with potential buyers for the
Oakridge Shopping Mall (on behalf of the venture) or the Partnership's
interest in the property. Per the venture agreement, the venture partner
held the right of first opportunity to purchase the Partnership's interest
in the venture had the Partnership pursued a sale of the property.
Pursuant to the venture agreement, if the venture partner elected to
exercise its right of first opportunity, the venture partner would then
have 90 days after making such an election to close such sale. The
purchase price of the Partnership's interest would be such as would produce
for the Partnership the same consideration as the sale of the property to
an unaffiliated third party.

On April 8, 1998, the Partnership sold its interest to the venture
partner for a cash payment of $20,700,000 plus the assumption of the
Partnership's share of the mortgage loan of approximately $11,250,000. The
Partnership received approximately $20,900,000 in cash at closing including
a distribution of previously undistributed cash flow from operations of
approximately $494,000 and adjustments for prorations and closing costs,
but before consideration of certain costs of sale incurred by the
Partnership. Pursuant to the sale agreement, a cash reserve of $250,000
was established to pay for certain maintenance items at the property. Any
funds remaining in the cash reserve at December 1, 1998 were distributed
one-half to the Partnership and one-half to the venture partner. In
December 1998, the Partnership received $107,619 representing its share of
the remaining cash reserve. As a result of this transaction, the
Partnership recognized a gain of $22,738,661 for financial reporting
purposes and a gain of $23,745,177 for Federal income tax purposes in 1998.

In connection with the sale of the Partnership's interest in the
venture and as is customary in such transactions, the Partnership agreed to
certain representations, warranties and covenants with a stipulated
survival period which expired December 1, 1998. Additionally, the
Partnership provided a representation regarding its title relating to its
Partnership interest in the venture. Such representation was for the full
proceeds from sale of the interest and also expired December 1, 1998.

<PAGE>

LONG-TERM DEBT

Long-term debt consists of the following at December 17, 1998 and
December 31, 1997:

1998 1997
----------- -----------

9.19% mortgage note; assumed by
buyer at sale in April 1998;
secured by the Oakridge Mall
Shopping Center in San Jose,
California; balance payable in
monthly installments of $310,165
(including interest) until
maturity in August 1998. . . . . . $ -- 23,002,015

Less current portion of
long-term debt . . . . . . . -- 23,002,015
----------- -----------
Total long-term debt . . . . . $ -- --
=========== ===========

PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations were allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties were allocated to the General Partners
in an amount equal to the greater of any cash distributions of the proceeds
of any such sale or refinancing (as described below) or 1% of the profits
from the sale or refinancing. Losses from the sale or refinancing of
investment properties were allocated 1% to the General Partners. The
remaining sale or refinancing profits and losses were allocated to the
Limited Partners.

An amendment to the Partnership Agreement, effective January 1, 1991,
generally provided that notwithstanding any allocation contained in the
Agreement, if at any time profits were realized by the Partnership, any
current or anticipated event that would cause the deficit balance in
absolute amount in the Capital Account of the General Partners to be
greater than their share of the Partnership's indebtedness (as defined)
after such event, then the allocation of profits to the General Partners
shall be increased to the extent necessary to cause the deficit balance in
the Capital Account of the General Partners to be no less than their
respective shares of the Partnership's indebtedness after such event. In
general, the effect of this amendment was to allow the deferral of the
recognition of taxable gain to the Limited Partners. Pursuant to such
provisions, the General Partners were allocated in 1996 additional amounts
of gain for Federal income tax purposes. Such allocations had no effect on
total Partnership assets or results of operations.

The Partnership Agreement provided that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership 6% of the selling price, and that the remaining proceeds (net
after expenses and retained working capital) be distributed 85% to the
Limited Partners and 15% to the General Partners. However, the Limited
Partners received 100% of such net sale proceeds until the Limited Partners
(i) had received cash distributions of sale or refinancing proceeds in an
amount equal to the Limited Partners' aggregate initial capital investment
in the Partnership and (ii) had received cumulative cash distributions from
the Partnership's operations which, when combined with sale or refinancing
proceeds previously distributed, equalled a 6% annual return on the Limited
Partners' average capital investment for each year (their initial capital
investment as reduced by sale or refinancing proceeds previously
distributed) commencing with the third fiscal quarter of 1978. The Limited
Partners received cash distributions that satisfied the requirements in (i)
and (ii) above.

<PAGE>

TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses incurred and paid by the
Partnership to the General Partners and their affiliates for the period
ended December 17, 1998 (immediately prior to final liquidating
distribution) and for the years ended December 31, 1997 and 1996 were as
follows:

UNPAID AT
DECEMBER 17,
1998 1997 1996 1998
------- -------- -------- ------------
Management fees to
corporate general
partner. . . . . . . . $70,419 -- -- --
Reimbursement (at
cost) for out-of-
pocket expenses. . . . 7,336 -- 5,716 --
------- ------ -------- -----
$77,755 -- 5,716 --
======= ====== ======== =====

As a result of the sale of the Partnership's interest in the Oakridge
Mall, as described above, the General Partners received a distribution of
sales proceeds of $3,177,353 and cash flow from operations of $37,510 in
May 1998. In December 1998, in conjunction with the liquidation of the
Partnership, the General Partners received a distribution of sales proceeds
of $165,191 and cash flow from operations of $27,267.

The Limited Partners received an amount from sale or refinancing
proceeds in excess of their initial capital investment plus any deficiency
in a 6% cumulative annual return on their average capital investment. The
General Partners, therefore, were entitled to participate in sale and
refinancing proceeds to the extent of their previously deferred disposition
fees earned on the properties sold to date. All such fees, which total
$940,488, were paid as of December 17, 1998.

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

There were no changes of or disagreements with accountants during the
period ended December 17, 1998 (immediately prior to final liquidating
distribution) and the fiscal year 1997.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

The Corporate General Partner of the Partnership was JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB, as the Corporate General Partner, had responsibility for all aspects
of the Partnership's operations, subject to the requirement that sales of
real property were to be approved by the Associate General Partner of the
Partnership, AGPP Associates, L.P., an Illinois limited partnership with
JMB as its sole general partner. The limited partners of the Associate
General Partner are generally officers, directors and affiliates of JMB or
its affiliates.

The Partnership was subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services were provided to
the Partnership or its investment properties by affiliates of the General
Partners, including property management services and insurance brokerage
services. In general, such services were to be provided on terms no less
favorable to the Partnership than could be obtained from independent third
parties and were otherwise subject to conditions and restrictions contained
in the Partnership Agreement. The Partnership Agreement permitted the
General Partners and their affiliates to provide services to, and otherwise
deal and do business with, persons who may have been engaged in
transactions with the Partnership, and permitted the Partnership to borrow
from, purchase goods and services from, and otherwise do business with,
persons doing business with the General Partners or their affiliates. The
General Partners and their affiliates may have been in competition with the
Partnership under certain circumstances, including, in certain geographical
markets, for tenants and/or for the sale of properties. Because the timing
and amount of cash distributions and profits and losses of the Partnership
may have been affected by various determinations by the General Partners
under the Partnership Agreement, including whether and when to sell or
refinance a property, the establishment and maintenance of reasonable
reserves and the determination of the sources (i.e., offering proceeds,
cash generated from operations or sales proceeds) and uses of such
reserves, the timing of expenditures and the allocation of certain tax
items under the Partnership Agreement, the General Partners may have had a
conflict of interest with respect to such determinations.

The names, positions held and length of service therein of each
director, and the executive officers and certain other officers of the
Corporate General Partner are as follows:

<PAGE>

SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91

There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 2, 1999. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 2,
1999. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.

JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-
XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), and
Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing
general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB
Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X ("JMB Income-X") and JMB Income Properties, Ltd.-XI ("JMB Income-
XI"). JMB is also the sole general partner of the associate general
partner of most of the foregoing partnerships. Most of the foregoing
directors and officers are also officers and/or directors of various
affiliated companies of JMB including Arvida/JMB Managers, Inc. (the
general partner of Arvida/JMB Partners, L.P.) ("Arvida"). Most of such
directors and officers are also partners, directly or indirectly, of
certain partnerships which are or were associate general partners in the
following real estate limited partnerships, among others: the Partnership,
Carlyle-XI, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, JMB Income-VII, JMB
Income-X, JMB Income-XI, and Carlyle Income Plus-II.

<PAGE>

The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:

Judd D. Malkin (age 61) is an individual general partner of JMB
Income-V. Mr. Malkin has been associated with JMB since October 1969. Mr.
Malkin is also a director of Urban Shopping Centers, Inc., an affiliate of
JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is a Certified Public
Accountant.

Neil G. Bluhm (age 61) is an individual general partner of JMB Income-
V. Mr. Bluhm has been associated with JMB since August 1970. He is also a
principal of Walton Street Capital, L.L.C., which sponsors real estate
investment funds, and a director of Urban Shopping Centers, Inc. Mr. Bluhm
is a member of the Bar of the State of Illinois and a Certified Public
Accountant.

Burton E. Glazov (age 60) has been associated with JMB since June 1971
and served as an Executive Vice President of JMB until December 1990. Mr.
Glazov is currently retired. He is a member of the Bar of the State of
Illinois.

Stuart C. Nathan (age 57) has been associated with JMB since July
1972. He is a member of the Bar of the State of Illinois.

A. Lee Sacks (age 65) has been associated with JMB since December
1972. He is also President and a director of JMB Insurance Agency, Inc.

John G. Schreiber (age 52) has been associated with JMB since December
1970 and served as an Executive Vice President of JMB until December 1990.
Mr. Schreiber is President of Schreiber Investments, Inc., which is engaged
in the real estate investing business. He is also a senior advisor and
partner of Blackstone Real Estate Advisors L.P., an affiliate of the
Blackstone Group, L.P. He is also a director of Urban Shopping Centers,
Inc., a trustee of Amli Residential Property Trust and a director of a
number of investment companies advised or managed by T. Rowe Price
Associates, Inc. and its affiliates. Mr. Schreiber holds a Masters degree
in Business Administration from Harvard University Graduate School of
Business.

H. Rigel Barber (age 50) has been associated with JMB since March
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.

Glenn E. Emig (age 51) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.

Gary Nickele (age 46) has been associated with JMB since February
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.

Gailen J. Hull (age 50) has been associated with JMB since March 1982.

He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.

Howard Kogen (age 63) has been associated with JMB since March 1973.
He is a Certified Public Accountant.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The Partnership had no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Limited Partners, and a
share of profits or losses. Reference is also made to the Notes filed with
this annual report for a description of such distributions and allocations.

In 1998, 1997 and 1996, the General Partners received distributions,
including the final liquidating distribution, of $3,214,863, $0 and
$397,169, respectively, and management fees of $70,419, $0 and $0,
respectively. The General Partners received a share of Partnership
earnings for tax purposes aggregating $4,752,681 in 1998.

JMB Realty Corporation ("JMB"), the Corporate General Partner, has
earned fees aggregating $940,488 in connection with the sales of the Place
II Apartments located in Phoenix, Arizona, the Wakefield Apartments located
in Marietta, Georgia, the Walnut Bend Apartments located in Dallas, Texas,
the Shadowridge of San Antonio Apartments located San Antonio, Texas, the
Bush River Mall Shopping Center located in Columbia, South Carolina, the
Spice Island Apartments located in Houston, Texas, the Bellfort II
Apartments located in Houston, Texas and the Windridge Apartments located
in Dallas, Texas.

The Limited Partners have received an amount from sale or refinancing
proceeds in excess of their initial capital investment plus any deficiency
in a 6% cumulative annual return on their average capital investment. The
General Partners, therefore, are entitled to participate in sale and
refinancing proceeds to the extent of their previously deferred disposition
fees earned on the properties sold to date which total $940,488, all of
which were paid as of December 17, 1998.

The General Partners of the Partnership may be reimbursed for their
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's real property investments. In 1998, the
Corporate General Partner of the Partnership was reimbursed for such out-
of-pocket expenses in the amount of $7,336, all of which were paid as of
December 17, 1998.

The Partnership was permitted to engage in various transactions
involving affiliates of the Corporate General Partner of the Partnership.
The relationship of the Corporate General Partner to its affiliates is set
forth above in Item 10 and Exhibit 21 hereto.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) The following owned, or may be deemed to have owned, beneficially more than 5% of the outstanding
Interests of the Partnership immediately prior to its liquidation.

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>

Limited Partnership Liquidity Fund XVI (1) 20 Interests Less than
Interests directly (2) 1%

Limited Partnership LF 31, L.P. (1) 256 Interests 1.4%
Interests directly (2)

Limited Partnership Liquidity Fund 32, 455 Interests 2.5%
Interests L.P. (1) directly (2)

Limited Partnership Liquidity Fund Income- 11 Interests Less than
Interests Growth '87 (1) directly (2) 1%

Limited Partnership Liquidity Fund 65, 565.75 Interests 3.1%
Interests L.P. (1) directly (2)

Limited Partnership Liquidity Financial 1,307.75 Interests 7.3%
Interests Group, L.P. (1) indirectly (3)

Limited Partnership Liquidity Financial 1,307.75 Interests 7.3%
Interests Corporation (1) indirectly (3)

<FN>

(1) The address of each beneficial owner listed in this subsection (a) is P.O. Box 882044, San Francisco,
California 94188.

(2) Each entity referenced by this note (2) has reported that it has sole voting and dispositive power with
respect to the Interests that it owned directly as shown in the above table in this subsection (a). However,
voting and dispositive power was exercised on behalf of each such entity by its general partner, Liquidity
Financial Group, L.P. The general partner of Liquidity Financial Group, L.P. is Liquidity Financial Corporation.
Because of their affiliation, all beneficial owners identified in this subsection (a) may be deemed to be members
of a group with shared voting and dispositive power with respect to the aggregate 1,307.75 Interests (7.3%)
beneficially owned by them. See note (3) of this subsection (a). The exercise of voting power with respect to
any Interests was subject to the terms and conditions of the Partnership Agreement of the Partnership.

<PAGE>

(3) Includes the aggregate 1,307.75 Interests owned directly by the entities referenced by note (2) in this
subsection (a). Liquidity Financial Group, L.P. is the general partner of each such entity and exercises voting
and dispositive power on behalf of each such entity. Liquidity Financial Corporation is the general partner of
Liquidity Financial Group, L.P. As such, Liquidity Financial Group, L.P. and Liquidity Financial Corporation may
be deemed to have shared voting and dispositive power with respect to the aggregate 1,307.75 Interests owned by
such entities. Reference is made to note (2) in this subsection (a).

</TABLE>

<TABLE>
<CAPTION>
(b) The Corporate General Partner, its officers and directors and the Associate General Partner beneficially
owned the following Interests of the Partnership immediately prior to its liquidation:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 5 Interests directly Less than 1%
Limited Partnership
Interests Corporate General Partner, 15 Interests directly (1) Less than 1%
its officers and
directors and the
Associate General
Partner as a group
<FN>
(1) Included 10 Interests owned by an officer or his relatives for which such officer had voting and
dispositive power as to such Interests so owned.

No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.

Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.

(c) There existed no arrangement, known to the Partnership, the operation of which may have resulted in a
change in control of the Partnership.

</TABLE>

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements (See Index to Financial Statements
filed with this annual report).

(2) Exhibits

3-A.* The Prospectus of the Partnership dated October 17,
1977, as supplemented on December 5, 1977, January 16, 1978 and March 28,
1978, as filed with the Commission pursuant to Rules 424(b) and 424(c), is
hereby incorporated herein by reference.

3-B.* Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, and which agreement
is hereby incorporated herein by reference.

4-A. Secured promissory note #1 dated February 15, 1995
in the amount of $23,900,000 relating to the refinancing of the mortgage
note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose,
California is hereby incorporated herein by reference to the Partnership's
Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11,
1995).

4-B. Secured promissory note #2 dated February 15, 1995
in the amount of $3,100,000 relating to the refinancing of the mortgage
note by Oakridge Associates, Ltd. which owns Oakridge Mall in San Jose,
California is hereby incorporated herein by reference to the Partnership's
Report for March 31, 1995 on Form 10-Q (File No. 0-8915) dated May 11,
1995).

10-A. Acquisition documents relating to the purchase by
the Partnership of an interest in Oakridge Mall in San Jose, California,
are hereby incorporated herein by reference to the Partnership's
Registration Statement on Form S-11 (File No. 2-59231) dated October 17,
1977 as amended.

10-B. Closing statement dated February 15, 1995 relating
to the refinancing by Oakridge Associates, Ltd. which owns Oakridge Mall in
San Jose, California is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-8915)
dated May 11, 1995).

<PAGE>

10-C. Purchase Agreement and exhibits thereto between
Carlyle Real Estate Limited Partnership - VII and Trizechahn Centers, Inc.
relating to the sale of the Partnership's interest in Oakridge Associates
dated April 8, 1998 is hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-8915) dated April 23, 1998.

10-D. Winding Up Agreement dated December 17, 1998, by and
between the Partnership and JMB Realty Corporation is hereby incorporated
by reference to the Partnership's report for December 14, 1998 on Form 8-K
(File No. 0-8915) dated January 12, 1999.

21. List of Subsidiaries.

24. Powers of Attorney

27. Financial Data Schedule
- ----------

* Previously filed as Exhibit 3-A and 3-B, respectively, to the
Partnership's Report for December 31, 1993 on Form 10-K of the Securities
Exchange Act of 1934 (File No. 0-8915) filed on March 25, 1994 and hereby
incorporated herein by reference.

(b) The following report on Form 8-K was filed since the beginning of
the last quarter of the period covered by this report.

The Partnership's report on Form 8-K (File No. 0-8915) for
December 14, 1998, dated January 12, 1999 describing the Partnership's
final liquidating cash distribution and winding up of its affairs was
filed.

No annual report or proxy material for the fiscal year 1998 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.

<PAGE>

SIGNATURES

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

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII

By: JMB Realty Corporation
Corporate General Partner

By Gailen J. Hull
Senior Vice President
Date: March 15, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: JMB Realty Corporation
Corporate General Partner

JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 15, 1999

NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 15, 1999

H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 15, 1999

GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 15, 1999

By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 15, 1999

A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 15, 1999

STUART C. NATHAN*
By: Stuart C. Nathan,
Executive Vice President and Director
Date: March 15, 1999

*By: GAILEN J. HULL, Pursuant to a Power of Attorney

By: Gailen J. Hull, Attorney-in-Fact
Date: March 15, 1999

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - VII

EXHIBIT INDEX

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----

3-A. The Prospectus of the
Partnership dated October 17,
1977 Yes

3-B. Amended and Restated Agreement
of Limited Partnership Yes

4-A. Secured Promissory Note #1
secured by Oakridge Mall
in San Jose, California Yes

4-B. Secured Promissory Note #2
secured by Oakridge Mall
in San Jose, California Yes

10-A. Acquisition documents relating
to the purchase by the
Partnership of an interest
in Oakridge Mall in San Jose,
California, are hereby
incorporated herein by reference
to the Partnership's Registration
Statement on Form S-11 (File
No. 2-59231) dated October 17,
1977 as amended Yes

10-B. Closing statement relating to the
refinancing by Oakridge Associates,
Ltd. of Oakridge Mall located in
San Jose, California Yes

10-C. Purchase Agreement and exhibits
relating to the sale of the
Partnership's interest in
Oakridge Associates Yes

10-D. Winding Up Agreement Yes

21. List of Subsidiaries No

24. Powers of Attorney No

27. Financial Data Schedule No

EXHIBIT 21

LIST OF SUBSIDIARIES

The Partnership was a partner of Oakridge Associates, a general
partnership which held title to the Oakridge Mall located in San Jose,
California. The developer of the property was a partner in the joint
venture.

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - VII, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1998, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1999.

H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer

GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer

The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1998,
and any and all amendments thereto, the 22nd day of January, 1998.

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1999.

NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm

JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin

A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks

STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998

<CASH> 1,783,020
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,783,020
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,783,020
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,783,020
<TOTAL-LIABILITY-AND-EQUITY> 1,783,020
<SALES> 2,465,238
<TOTAL-REVENUES> 2,756,180
<CGS> 0
<TOTAL-COSTS> 1,102,416
<OTHER-EXPENSES> 296,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564,917
<INCOME-PRETAX> 792,447
<INCOME-TAX> 0
<INCOME-CONTINUING> 378,962
<DISCONTINUED> 22,738,661
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,117,623
<EPS-PRIMARY> 1,022.13
<EPS-DILUTED> 1,022.13

</TABLE>