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, 2007.
/___/ Transition report pursuant to Section 13 or 15(d) of the
Securities 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) Identification No.)
6700 E. Pacific Coast Hwy, Long Beach, California 90803
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code-(562)493-8881
_________________________________________________________________
Former name, former address and former fiscal year, if changed
since last report.
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__.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSI REALTY INCOME FUND VII
(A Limited Partnership)
BALANCE SHEETS(UNAUDITED)
SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
September 30, December 31,
2007 2006
ASSETS
CASH AND CASH EQUIVALENTS $ 834,971 $ 715,368
PROPERTY, Net 2,176,413 2,211,491
OTHER ASSETS 183,203 152,948
---------- ----------
TOTAL $3,194,587 $3,079,807
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
LIABILITIES
Distribution to Partners $ 242,424 $ 242,424
Incentive management fee
payable to general partners 254,961 234,821
Property management
fee payable 13,763 14,812
Customer deposits and
other liabilities 82,484 145,026
Capital lease obligation 57,529 87,926
---------- ----------
Total liabilities 651,161 725,009
---------- ----------
PARTNERS' EQUITY (DEFICIT):
General Partners (82,334) (84,221)
Limited Partners (24,000
limited partnership units
outstanding at September 30,
2007 and December 31, 2006) 2,625,760 2,439,019
---------- ----------
Total partners' equity 2,543,426 2,354,798
---------- ----------
TOTAL $3,194,587 $3,079,807
========== ==========
See accompanying notes to financial statements (unaudited).
STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
September 30, September 30,
2007 2006
REVENUES:
Rental $ 688,674 $ 693,176
---------- ----------
EXPENSES:
Operating 303,902 335,190
General and administrative 52,559 43,264
---------- ----------
Total expenses 356,461 378,454
---------- ----------
OPERATING INCOME 332,213 314,722
OTHER INCOME
Interest 163 162
---------- ----------
NET INCOME $ 332,376 $ 314,884
========== ==========
AGGREGATE NET INCOME ALLOCATED TO:
Limited Partners $ 329,052 $ 311,735
General Partners 3,324 3,149
---------- ----------
TOTAL $ 332,376 $ 314,884
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 13.71 $ 12.99
========== ==========
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, 2007 AND 2006
September 30, September 30,
2007 2006
REVENUES:
Rental $2,051,473 $2,108,229
---------- ----------
EXPENSES:
Operating 924,897 929,456
General and administrative 211,164 202,425
---------- ----------
Total expenses 1,136,061 1,131,881
---------- ----------
OPERATING INCOME 915,412 976,348
OTHER INCOME
Interest 488 486
---------- ----------
NET INCOME $ 915,900 $ 976,834
========== ==========
AGGREGATE NET INCOME ALLOCATED TO:
Limited Partners $ 906,741 $ 967,066
General Partners 9,159 9,768
---------- ----------
TOTAL $ 915,900 $ 976,834
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 37.78 $ 40.29
========== ==========
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, 2007
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
BALANCE AT JANUARY 1, 2007 ($84,221) $2,439,019 $2,354,798
NET INCOME 9,159 906,741 915,900
DISTRIBUTIONS (7,272) (720,000) (727,272)
-------- ---------- ----------
BALANCE AT SEPTEMBER 30, 2007 ($82,334) $2,625,760 $2,543,426
======== ========== ==========
See accompanying notes to financial statements (unaudited).
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
September 30, September 30,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 915,900 $ 976,834
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 35,078 30,179
Changes in assets and liabilities:
Increase in other assets (30,255) 0
Decrease in liabilities (43,453) (3,416)
-------- --------
Net cash provided by
operating activities 877,270 1,003,597
CASH FLOWS FROM FINANCING ACTIVITIES -
Distributions to partners (727,272) (727,272)
Payments on capital
lease obligations (30,395) (28,635)
-------- --------
Net cash used in
financing activities (757,667) (755,907)
-------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 119,603 247,690
CASH AND CASH EQUIVALENTS:
At beginning of period 715,368 655,295
--------- ---------
At end of period $ 834,971 $ 902,985
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION -
Cash paid for interest $ 2,035 $ 718
========= =========
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 six mini-storage facilities located in
Chico, Fairfield, La Verne, and Riverside, California and Ft. Collins
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, 2007. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's quarterly report on Form 10-K for the year
ended December 31, 2006.
2. PROPERTY
Properties owned by the Partnership are all mini-storage facilities.
Depreciation is calculated using the straight line method over the
estimated useful life of 15 years. The total cost of property and
accumulated depreciation is as follows:
September 30, 2007 December 31, 2006
Land $ 2,089,800 $ 2,089,800
Buildings and improvements 7,792,522 7,792,522
Rental trucks
under capital leases 175,116 175,116
------------ ------------
Total 10,057,438 10,057,438
Less: Accumulated Depreciation ( 7,881,025) ( 7,845,947)
------------ ------------
Property - Net $ 2,176,413 $ 2,211,491
============ ============
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
$33,434 and $34,658, for the three month periods ended September 30, 2007
and 2006, respectively, and $102,574 and $105,411 for the nine month
period ended September 30, 2007 and 2006, respectively. Amounts payable to
Dahn at September 30, 2007 and December 31, 2006, were $13,763 and $14,812,
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 $3,750.
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, 2007. 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, 2007 and 2006, total revenues
decreased 0.7% from $693,176 to $688,674 and total expenses decreased 5.8%
from $378,454 to $356,461 and other income increased from $162 to $163. As
a result, net income increased 5.6% from $314,884 for the three-month period
ended September 30, 2006, to $332,376 for the same period in 2007. Rental
revenue remained relatively stable. Occupancy levels for the Partnerships'
six mini-storage facilities averaged 83.8% for the three-month period ended
September 30, 2007 and 84.0% for the same period in 2006. The Partnership
is continuing its marketing efforts to attract and keep new tenants in its
various mini-storage facilities. Operating expenses decreased approximately
$31,300 (9.3%) primarily as a result of decreases in advertising and salaries
and wages expenses. General and administrative expenses increased approxi-
mately $9,300 (21.5%) primarily as a result of increases in incentive manage-
ment fees, administrative and equipment and computer lease expenses.
For the nine-month periods ended September 30, 2007, and 2006, total revenues
decreased 2.7% from $2,108,229 to $2,051,473 and total expenses increased
0.4% from $1,131,881 to $1,136,061 and other income increased from $486 to
$488. As a result, net income decreased 6.2% from $976,834 for the nine-
month period ended September 30, 2006, to $915,900 for the same period in
2007. Rental revenue decreased primarily as a result of lower occupancy rates.
Occupancy levels for the Partnerships' six mini-storage facilities averaged
82.1% for the nine-month period ended September 30, 2007 and 84.8% for the
same period in 2006. Operating expenses decreased approximately $4,600
(0.5%) primarily as a result of decreases in advertising, purchase of locks
and packing materials, salaries and wages and workers compensation expenses,
partially offset by increases in legal, maintenance and repair and real estate
tax expenses. Property management fees, which are based on revenue, decreased
as a result of the decrease in rental revenue. General and administrative
expenses increased approximately $8,700 (4.3%) primarily as a result of in-
creases in administrative, state tax and equipment and computer lease expenses,
partially offset by decreases in incentive management fee and legal and pro-
fessional expenses.
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 4. 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.
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-K filed on March 30,
2007. 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
NONE
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: November 14, 2007 DSI REALTY INCOME FUND VII
A California Limited Partnership
(Registrant)
By____\s\ Robert J. Conway_____
DSI Properties, Inc., as General
Partner by ROBERT J. CONWAY,
President and Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: November 14, 2007 DSI REALTY INCOME FUND VII
A California Limited Partnership
(Registrant)
By__\s\ Robert J. Conway________
DSI Properties, Inc., as General
Partner by ROBERT J. CONWAY,
President and Chief Financial Officer
CERTIFICATIONS
I, Robert J. Conway, certify that:
1. I have reviewed this report on Form 10-Q for the quarter ended
September 30, 2007 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 cover-
ed 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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, 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
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) 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 our 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 officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and general partners (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 affect the registrant's ability to record, pro-
cess, 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 in-
ternal controls over financial reporting.
Date: November 14, 2007
Robert J. Conway
Chief Executive Officer
CERTIFICATIONS
I, Richard P. Conway, certify that:
1. I have reviewed this report on Form 10-Q for the quarter ended
September 30, 2007 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 cover-
ed by this report.
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our super-
vision, 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
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) 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 our 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 officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and general partners (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 affect the registrant's ability to record, pro-
cess, 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 in-
ternal controls over financial reporting.
Date: November 14, 2007
Richard P. Conway
Vice President
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, 2007 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Robert J. Conway, Chief Executive Officer of the Partnership, 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.
Robert J. Conway
Chief Executive Officer
November 14, 2007
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, 2007 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Richard P. Conway, 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.
Richard P. Conway
Vice President
November 14, 2007