10-Q 1 dsi007-908.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended: September 30, 2008. ________________ /__/ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ________________. Commission File Number: 2-83291 ________ DSI REALTY INCOME FUND VII, A California Limited Partnership __________________________________________________________________ (Exact name of registrant as specified in its charter) California 95-3871044 __________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6700 E. Pacific Coast Hwy, Long Beach, California 90803 __________________________________________________________________ (Address of principal executive offices) (Zip Code) (562)493-8881 __________________________________________________________________ (Registrant's telephone number, including area code) 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The issuer is a limited partnership. All 24,000 limited partnership units originally sold for $500 per unit. There is no trading market for the limited partnership units. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DSI REALTY INCOME FUND VII (A Limited Partnership) BALANCE SHEETS (UNAUDITED) September 30, 2008 AND DECEMBER 31, 2007 September 30, December 31, 2008 2007 ASSETS CASH AND CASH EQUIVALENTS $ 856,181 $ 760,743 PROPERTY, Net 1,739,926 2,159,537 OTHER ASSETS 169,570 159,060 ---------- ---------- TOTAL $2,765,677 $3,079,340 ========== ========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES Distribution to Partners $ 242,424 $ 242,424 Incentive management fee payable to general partners 238,571 218,069 Property management fee payable 12,292 14,890 Customer deposits and other liabilities 102,239 136,647 Capital lease obligation 12,848 47,090 ---------- ---------- Total liabilities 608,374 659,120 ---------- ---------- PARTNERS' EQUITY (DEFICIT): General Partners (86,196) (83,567) Limited Partners (24,000 limited partnership units outstanding at September 30, 2008 and December 31, 2007) 2,243,499 2,503,787 ---------- ---------- Total partners' equity 2,157,303 2,420,220 ---------- ---------- TOTAL $2,765,677 $3,079,340 ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED September 30, 2008 AND 2007 September 30, September 30, 2008 2007 REVENUES: Rental revenue $ 546,257 $ 532,226 Ancillary operating revenue 50,274 36,732 Interest and other income 185 163 ---------- ---------- Total revenues 596,716 569,121 EXPENSES: Operating 296,411 245,094 General and administrative 50,350 52,559 ---------- ---------- Total expenses 346,761 297,653 ---------- ---------- INCOME FROM CONTINUING OPERATIONS $ 249,955 $ 271,468 INCOME FROM DISCONTINUED OPERATIONS (49,563) 60,908 NET GAIN ON SALE OF DISCONTINUED OPERATIONS 2,983,708 - ---------- ---------- NET INCOME $3,184,100 $ 332,376 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $3,152,259 $ 329,052 General Partners 31,841 3,324 ---------- ---------- TOTAL $3,184,100 $ 332,376 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 131.34 $ 13.71 ========== ========== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED September 30, 2008 AND 2007 September 30, September 30, 2008 2007 REVENUES: Rental $1,624,301 $1,573,900 Ancillary operating revenue 129,127 113,541 Interest and other income 458 488 ---------- ---------- Total revenues 1,753,886 1,687,929 EXPENSES: Operating 824,342 736,423 General and administrative 213,780 211,164 ---------- ---------- Total expenses 1,038,122 947,587 ---------- ---------- INCOME FROM CONTINUING OPERATIONS $ 715,764 $ 740,342 INCOME FROM DISCONTINUED OPERATIONS 80,337 175,558 NET GAIN ON SALE OF DISCONTINUED OPERATIONS 2,983,708 - ---------- ---------- NET INCOME $3,779,809 $ 915,900 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $3,742,011 $ 906,741 General Partners 37,798 9,159 ---------- ---------- TOTAL $3,779,809 $ 915,900 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 155.92 $ 37.78 ========== ========== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE NINE MONTHS ENDED September 30, 2008 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2008 ($83,567) $2,503,787 $2,420,220 NET INCOME 37,798 3,742,011 3,779,809 DISTRIBUTIONS (40,427) (4,002,299) (4,042,726) -------- ---------- ---------- BALANCE AT September 30, 2008 ($86,195) $2,243,498 $2,157,303 ======== ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED September 30, 2008 AND 2007 September 30, September 30, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,779,809 $ 915,900 Adjustments to reconcile net income to net cash provided by operating activities(including discontinued operations): Depreciation 38,343 35,078 Gain on sale of discontinued operations (2,983,708) - Changes in assets and liabilities: Increase in other assets (10,510) (30,255) Decrease in liabilities (16,504) (43,453) --------- -------- Net cash provided by operating activities 807,430 877,270 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (4,042,726) (727,272) Payments on capital lease obligations (34,242) (30,395) --------- -------- Net cash used in financing activities (4,076,968) (757,667) CASH FLOWS FROM INVESTING ACTIVITIES - Proceeds from sale of discontinued operations 3,364,976 - --------- -------- Net cash used in investing activities (3,364,976) - NET INCREASE IN CASH AND CASH EQUIVALENTS 95,438 119,603 CASH AND CASH EQUIVALENTS: At beginning of period 760,743 715,368 --------- --------- At end of period $ 856,181 $ 834,971 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for interest $ 2,664 $ 2,035 ========= ========= NONCASH FINANCING ACTIVIITES - Distribution due partners included in partners' equity $ 242,424 $ 242,424 ========= ========= See accompanying notes to financial statements (unaudited). DSI REALTY INCOME FUND VII (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund VII (the "Partnership"), has two general partners (DSI Properties, Inc., and Diversified Investors Agency) and limited partners owning 24,000 limited partnership units. The Partnership was formed under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership has acquired five mini-storage facilities located in Chico, Fairfield, La Verne, and Riverside, California and Littleton, Colorado. All facilities were purchased from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc. is a general partner. The accompanying interim financial statements have been prepared by the Company's management in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regu- lations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature which are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2007. 2. PROPERTY Properties owned by the Partnership are all mini-storage facilities. Depreciation was calculated using the straight line method over the estimated useful life of 15 years. Property under capital leases is amortized over the lives of the respective leases. The total cost of property and accumulated depreciation is as follows: September 30, 2008 December 31, 2007 Land $ 1,714,700 $ 2,089,800 Buildings and improvements 6,379,900 7,794,172 Rental trucks under capital leases 140,093 175,116 ------------ ------------ Total 8,234,693 10,059,088 Less: Accumulated Depreciation ( 6,494,767) ( 7,899,551) ------------ ------------ Property - Net $ 1,739,926 $ 2,159,537 ============ ============ 3. NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is calculated by dividing the net income allocated to the limited partners by the number of limited partnership units outstanding during the period. 4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE MANAGEMENT FEE Under the Agreement of limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations, and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The General Partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition or refinancing of the project. In addition, the General Partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 9% per annum of the cash available for distribution on a cumulative basis, calculated as cash generated from operations less capital expenditures. 5. RELATED-PARTY TRANSACTIONS The Partnership has entered into a management agreement with Dahn to operate its mini-storage facilities. The management agreement provides for a management fee equal to 5% of gross revenue from operations, which is defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. The management agreement is renewable annually. Dahn earned management fees equal to $32,346 and $33,434, for the three month period ended September 30, 2008 and 2007, respectively, and $102,110 and $102,574 for the nine month period ended September 30, 2008 and 2007 respectively. Amounts payable to Dahn at September 30, 2008 and December 31, 2007, were $12,292 and $14,890, respectively. In 2004, the Partnership entered into truck lease agreements with KMD Trucks, LLC ("KMD"). The president of Dahn, Brian Dahn, is also a member of KMD. Trucks are leased under 48-month leases with total monthly payments in the amount of $3,000. 6. DISCONTINUED OPERATIONS In accordance with Statement of Financial Accounting Standards No. 144, the net income of a mini-storage facility located in Fort Collins, Colorado is reflected in the statement of income as discontinued operations for all periods presented. In June 2008, a sales agreement was signed with Pedersen Properties, LP, whereby it would acquire the Partnerships' mini-storage facility in Fort Collins, Colorado for a gross sales price of $4,147,500. Escrow closed in August 15, 2008. The following table summarizes the revenue and expense components that comprise discontinued operations: FOR THE THREE MONTHS ENDED 9/30/08 9/30/07 ------- ------- REVENUE $ 46,607 $119,716 EXPENSES 96,170 58,808 -------- -------- NET OPERATING (LOSS) INCOME FROM DISCONTINUED OPERATIONS $(49,563) $ 60,908 ======== ======== FOR THE NINE MONTHS ENDED 9/30/08 9/30/07 ------- ------- REVENUE $300,396 $364,032 EXPENSES 220,059 188,474 -------- -------- NET OPERATING INCOME FROM DISCONTINUED OPERATIONS $ 80,337 $175,558 ======== ======== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. We are pleased to enclose the Partnership's unaudited financial statements for the period ended September 30, 2008. The following is Management's discussion and analysis of the Partnership's financial condition and results of its operations. For the three-month periods ended September 30, 2008 and 2007, total revenues increased 4.8% from $569,121 to $596,716 and total expenses increased 16.5% from $297,653 to $346,761 and income from discontinued operations increased from $60,908 to $2,934,145. As a result, net income increased from $332,376 for the three-month period ended September 30, 2007, to $3,184,100 for the same period in 2008. Rental revenue increased as a result of higher unit rental rates. Occupancy levels for the Partnership's five mini-storage facilities averaged 81.8% for the three-month period ended September 30, 2008 and 83.4% for the same period in 2007. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. Operating expenses increased approximately $51,300 or 20.9% primarily as a result of increases in advertising, maintenance and repair, office supplies and salaries and wages expenses. General and administrative expenses remained constant. For the nine-month periods ended September 30, 2008, and 2007, total revenues increased 3.9% from $1,687,929 to $1,753,886 and total expenses increased 9.6% from $947,587 to $1,038,122 and income from discontinued operations increased from $175,588 to $3,064,045. As a result, net income increased from $915,900 for the nine-month period ended September 30, 2007, to $3,779,809 for the same period in 2008. Rental revenue increased primarily as a result of higher unit rental rates and imcome from truck rental commissions. Occupancy levels for the Partnerships' five mini-storage facilities averaged 82.3% for the nine- month period ended September 30, 2008 and 81.8% for the same period in 2007. Operating expenses increased approximately $87,900 or 11.9% primarily as a result of increases in advertising, utilities, office supplies, salaries and wages and security alarm services expenses, partially offset by a decrease in legal expense. General and administrative expenses remained constant. In June 2008, a sales agreement was signed with Pedersen Properties, LP, whereby it would acquire the Partnerships' mini-storage facility in Fort Collins, Colorado for a gross sales price of $4,147,500. Escrow closed August 15, 2008, and the proceeds in the amount of $3,303,030 was distributed to the Limited Partners on September 15, 2008. The General Partners will continue their policy of funding improvements and maintenance of Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs. The General Partners anticipate distributions to the Limited Partners to remain at the current level for the foreseeable future. Item 3. Quantitative and Qualitative Disclosures About Market Risk NONE Item 4T. CONTROLS AND PROCEDURES Evaluation of Effectiveness of Disclosure Controls and Procedures The Partnership evaluated the effectiveness of its disclosure controls and procedures. This evaluation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Exchange Commission (the Commission) is recorded, processed, summarized and reported, within the time periods specified by the Commission's rules and forms, and that the informa- tion is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation. Changes in Internal Control Over Financial Reporting There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings Registrant is not a party to any material pending legal proceedings. Item 1A. Risk Factors Please refer to the risk factors disclosed by the partnership in response to Item 1A, part I of the Form 10-KSB filed on April 15, 2008. There has been no material change to the risk factors disclosed therein. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE Item 6. Exhibits (a) Exhibits 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32.1 Section 1350 Certification by Chief Executive Officer 32.2 Section 1350 Certification by Principal Financial Officer SIGNATURES Pursuant to the requirements 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. DSI REALTY INCOME FUND VII, a California Limited Partnership by: DSI Properties, Inc., a By: Diversified Investors Agency California corporation, a general partnership, as General Partner as General Partner /s/ ROBERT J. CONWAY /s/ ROBERT J. CONWAY By_____________________________ By_____________________________ Dated: November 14, 2008 Dated: November 14, 2008 ROBERT J. CONWAY, President, ROBERT J. CONWAY, Chief Executive Officer, Chief General Partner Financial Officer, and Director /s/ JOSEPH W. CONWAY /s/ JOSEPH W. CONWAY By_____________________________ By_____________________________ Dated: November 14, 2008 Dated: November 14, 2008 JOSEPH W. CONWAY, Executive JOSEPH W. CONWAY, Vice President and Director General Partner EXHIBIT 31.1 RULE 13A-14(A)/15D-14(A) CERTIFICATION BY CHIEF EXECUTIVE OFFICER I, Robert J. Conway, certify that: 1. I have reviewed this quarterly report of DSI Realty Income Fund VII; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effective- ness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2008 /s/ ROBERT J. CONWAY By_____________________________ ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director EXHIBIT 31.2 RULE 13A-14(A)/15D-14(A) CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER I, Richard P. Conway, certify that: 1. I have reviewed this quarterly report of DSI Realty Income Fund VII; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effective- ness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2008 /s/ RICHARD P. CONWAY By_____________________________ RICHARD P. CONWAY, SR. VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VII (the "Partnership") on Form 10-Q for the period ending September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Corporate General Partner, certify,pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. /s/ ROBERT J. CONWAY By_____________________________ ROBERT J. CONWAY, Chief Executive Officer November 14, 2008 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VII (the "Partnership") on Form 10-Q for the period ending September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Senior Vice President of the Corporate General Partner, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. /s/ RICHARD P. CONWAY By_____________________________ Richard P. Conway Senior Vice President (Principal Financial and Accounting Officer) November 14, 2008