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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



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(Mark One)



|x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- |  | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2003



OR



| ̈ |  | 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 0-25606



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WELLS REAL ESTATE FUND VII, L.P.

(Exact name of registrant as specified in
its charter)



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|Georgia                                                        |  | 58-2022629                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|6200 The Corners Pkwy.,Norcross, Georgia                       |  | 30092                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                         



---

(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 ̈



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TABLE OF CONTENTS





|         |  |  |  |  |  |                       |  |                                                                                                                               |  | Page No.
|-------- |  |  |  |  |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |  |  | 
|PART I.  |  |  |  |  |  | FINANCIAL INFORMATION |  |                                                                                                                              
|         |  |  |  |  | 
|         |  |  |  |  |  | Item 1.               |  | Financial Statements                                                                                                          |  |         
|         |  |  |  |  | 
|         |  |  |  |  |  |                       |  | Balance SheetsSeptember 30, 2003 (unaudited) and December 31, 2002                                                           |  | 3       
|         |  |  |  |  | 
|         |  |  |  |  |  |                       |  | Statements of Income for the Three Months and Nine Months EndedSeptember 30, 2003 (unaudited) and 2002 (unaudited)            |  | 4       
|         |  |  |  |  | 
|         |  |  |  |  |  |                       |  | Statements of Partners Capital for the Nine Months Ended September 30, 2003 (unaudited) and the Year Ended December 31, 2002 |  | 5       
|         |  |  |  |  | 
|         |  |  |  |  |  |                       |  | Statements of Cash Flows for the Nine Months Ended September 30, 2003(unaudited) and 2002 (unaudited)                         |  | 6       
|         |  |  |  |  | 
|         |  |  |  |  |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                           |  | 7       
|         |  |  |  |  | 
|         |  |  |  |  |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 12      
|         |  |  |  |  | 
|         |  |  |  |  |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risks                                                                   |  | 17      
|         |  |  |  |  | 
|         |  |  |  |  |  | Item 4.               |  | Controls and Procedures                                                                                                       |  | 17      
|         |  |  |  | 
|PART II. |  |  |  |  |  | OTHER INFORMATION     |  | 18                                                                                                                           







Page 2



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WELLS REAL ESTATE FUND VII, L.P.

BALANCE SHEETS



|                                                                                                                    |  | (unaudited) September 30, 2003 |                   | 
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------------- | 
|                                                                                                                    |  |                                | December 31, 2002
|ASSETS:                                                                                                             |  |                                |                   | 
|Investments in Joint Ventures                                                                                       |  | $                              | 13,407,171        | 
|Cash and cash equivalents                                                                                           |  |                                | 1,158,623         | 
|Due from Joint Ventures                                                                                             |  |                                | 418,461           | 
|                                                                                                                    |  |                                |                   | 
|Total assets                                                                                                        |  | $                              | 14,984,255        | 
|                                                                                                                    |  |                                |                   | 
|                                                                                                                    |  |                               
|LIABILITIES AND PARTNERS CAPITAL:                                                                                  |  |                                |                   | 
|Liabilities:                                                                                                        |  |                                |                   | 
|Partnership distributions payable                                                                                   |  | $                              | 368,584           | 
|Accounts payable                                                                                                    |  |                                | 13,246            | 
|                                                                                                                    |  |                                |                   | 
|Total liabilities                                                                                                   |  |                                | 381,830           | 
|                                                                                                                    |  |                                |                   | 
|                                                                                                                    |  |                               
|Partners capital:                                                                                                  |  |                                |                   | 
|Limited partners:                                                                                                   |  |                                |                   | 
|Class A2,106,197 units and 2,092,547 units outstandingas of September 30, 2003 and December 31, 2002,
respectively |  |                                | 14,602,425        | 
|ClassB311,820 units and 325,470 units outstandingas of September 30, 2003 and December 31, 2002,
respectively      |  |                                | 0                 | 
|General Partners                                                                                                    |  |                                | 0                 | 
|                                                                                                                    |  |                                |                   | 
|Total partners capital                                                                                             |  |                                | 14,602,425        | 
|                                                                                                                    |  |                                |                   | 
|Total liabilities and partners capital                                                                             |  | $                              | 14,984,255        | 
|                                                                                                                    |  |                                |                   | 



See accompanying notes



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WELLS REAL ESTATE FUND VII, L.P.

STATEMENTS OF INCOME



|                                                                    |  | (unaudited)                     |           | (unaudited)                   
|------------------------------------------------------------------- |  | ------------------------------- | --------- | ------------------------------
|                                                                    |  | Three Months EndedSeptember 30, |           | Nine Months EndedSeptember 30,
|                                                                    |  | 2003                            |           | 2002                          
|REVENUES:                                                           |  |                                 |           |                               
|Equity in income of Joint Ventures                                  |  | $                               | 330,415   |                               
|Other income                                                        |  |                                 | 3,106     |                               
|                                                                    |  |                                 |           |                               
|                                                                    |  |                                 | 333,521   |                               
|                                                                    |  |                                 |           |                               
|EXPENSES:                                                           |  |                                 |           |                               
|Partnership administration                                          |  |                                 | 22,260    |                               
|Legal and accounting                                                |  |                                 | 278       |                               
|Other general and administrative                                    |  |                                 | 3,068     |                               
|                                                                    |  |                                 |           |                               
|                                                                    |  |                                 | 25,606    |                               
|                                                                    |  |                                 |           |                               
|NET INCOME                                                          |  | $                               | 307,915   |                               
|                                                                    |  |                                 |           |                               
|NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS                    |  | $                               | 307,915   |                               
|                                                                    |  |                                 |           |                               
|NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS                      |  | $                               | 0         |                               
|                                                                    |  |                                 |           |                               
|NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT        |  | $                               | 0.15      |                               
|                                                                    |  |                                 |           |                               
|NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT          |  | $                               | 0.00      |                               
|                                                                    |  |                                 |           |                               
|CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT |  | $                               | 0.18      |                               
|                                                                    |  |                                 |           |                               
|WEIGHTED AVERAGE LIMITED PARTNER UNITS OUTSTANDING:                 |  |                                 |           |                               
|CLASS A                                                             |  |                                 | 2,106,197 |                               
|                                                                    |  |                                 |           |                               
|CLASS B                                                             |  |                                 | 311,820   |                               
|                                                                    |  |                                 |           |                               



See accompanying notes



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WELLS REAL ESTATE FUND VII, L.P.

STATEMENTS OF PARTNERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2002

AND THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)



|                                        |  | Limited Partners |  | GeneralPartners |            | TotalPartners Capital |      
|--------------------------------------- |  | ---------------- |  | --------------- | ---------- | ---------------------- | -----
|                                        |  | Class A          |  |                 | Class B    |                        |      
|                                        |  | Units            |  | Amounts         |            |                        | Units
|BALANCE, December 31, 2001              |  | 2,067,020        |  | $               | 15,807,751 |                        |      
|Net income                              |  | 0                |  |                 | 803,711    |                        |      
|Partnership distributions               |  | 0                |  |                 | (1,678,619 | )                      |      
|Class B conversion elections            |  | 25,527           |  |                 | 0          |                        |      
|                                        |  |                  |  |                 |            |                        |      
|BALANCE, December 31, 2002              |  | 2,092,547        |  |                 | 14,932,843 |                        |      
|Net income                              |  | 0                |  |                 | 772,724    |                        |      
|Partnership distributions               |  | 0                |  |                 | (1,103,142 | )                      |      
|Class B conversion elections            |  | 13,650           |  |                 | 0          |                        |      
|                                        |  |                  |  |                 |            |                        |      
|BALANCE, September 30, 2003 (unaudited) |  | 2,106,197        |  | $               | 14,602,425 |                        |      
|                                        |  |                  |  |                 |            |                        |      



See accompanying notes





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WELLS REAL ESTATE FUND VII, L.P.

STATEMENTS OF CASH FLOWS



|                                                                             |  | (unaudited) Nine Months EndedSeptember 30, |           
|---------------------------------------------------------------------------- |  | ------------------------------------------ | ----------
|                                                                             |  | 2003                                       |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                        |  |                                            |           
|Net income                                                                   |  | $                                          | 772,724   
|Adjustments to reconcile net income to net cash used in operatingactivities: |  |                                            |           
|Equity in income of Joint Ventures                                           |  |                                            | (845,688  
|Changes in assets and liabilities:                                           |  |                                            |           
|Accounts payable                                                             |  |                                            | (1,931    
|                                                                             |  |                                            |           
|Net cash used in operating activities                                        |  |                                            | (74,895   
|                                                                             |  |                                            |           
|                                                                             |  |                                           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                        |  |                                            |           
|Distributions received from Joint Ventures                                   |  |                                            | 1,366,654 
|                                                                             |  |                                            |           
|                                                                             |  |                                           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                        |  |                                            |           
|Distributions to limited partners                                            |  |                                            | (1,126,916
|                                                                             |  |                                            |           
|                                                                             |  |                                           
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                    |  |                                            | 164,843   
|                                                                             |  |                                           
|CASH AND CASH EQUIVALENTS, beginning of period                               |  |                                            | 993,780   
|                                                                             |  |                                            |           
|                                                                             |  |                                           
|CASH AND CASH EQUIVALENTS, end of period                                     |  | $                                          | 1,158,623 
|                                                                             |  |                                            |           
|                                                                             |  |                                           
|SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:                              |  |                                            |           
|Due from Joint Ventures                                                      |  | $                                          | 418,461   
|                                                                             |  |                                            |           
|Partnership distributions payable                                            |  | $                                          | 368,584   
|                                                                             |  |                                            |           



See accompanying notes





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WELLS REAL ESTATE FUND VII, L.P.

CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2003 (UNAUDITED)



|1. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------



|(a) |  | Organization and Business
|--- |  | -------------------------



Wells Real Estate Fund VII, L.P. (the Partnership) is a public limited partnership organized on December 1, 1992 under the laws of the state of Georgia. The
general partners are Leo F. Wells, III and Wells Partners, L.P. (Wells Partners), a Georgia non-public limited partnership (the General Partners). Upon subscription, limited partners elect to have their units treated as
either Class A Units or Class B Units. Limited partners have the right to change their prior elections to have some or all of their units treated as Class A or Class B Units one time during each quarterly accounting period. Limited partners may vote
to, among other things, (a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; and (c) remove a General Partner. A majority vote on any of the above-described
matters will bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights, regardless of class.



On April 6, 1994, the Partnership commenced an offering of up to $25,000,000 of Class A or Class B limited partnership units pursuant to a Registration Statement filed
on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on January 5, 1995 upon receiving gross proceeds of $24,180,174 representing subscriptions for approximately 1,678,810 Class A Units and 739,207 Class B Units
held by 1,591 and 319 limited partners, respectively.



The Partnership owns
interests in all of its real estate assets through Joint Ventures with other Wells Real Estate Funds. During the periods presented, the Partnership owned interests in the following eight properties through the affiliated Joint Ventures (the
Joint Ventures) listed below:



|                                                                     
|---------------------------------------------------------------------
|                                                                     
|Joint Venture                                                        
|                                                                     
|Fund II, III, VI, and VII Associates(Fund II-III-VI-VII Associates)
|                                                                     
|Fund V, Fund VI, and Fund VII Associates (Fund V-VI-VII Associates)
|                                                                     
|Fund VI and Fund VII Associates(Fund VI-Fund VII Associates)       
|                                                                     



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|                                                                          
|--------------------------------------------------------------------------
|                                                                          
|Joint Venture                                                             
|                                                                          
|Fund VI, Fund VII and Fund VIII Associates (Fund VI-VII-VIII Associates)
|                                                                          
|Fund VII and Fund VIII Associates (Fund VIIFund VIII Associates)       
|                                                                          



|* |  | Fund II-III Associates is a Joint Venture between Fund II and Fund II-OW and Wells Real Estate Fund III, L.P.; Fund II and Fund II-OW is a Joint Venture between Wells Real Estate
Fund II and Wells Real Estate Fund II-OW.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Each of the
aforementioned properties was acquired on an all-cash basis. For further information regarding the foregoing Joint Ventures and properties, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2002.



On October 1, 2001, Fund I, II, II-OW, VI and VII Associates (Fund I-II-IIOW-VI-VII
Associates), a joint venture between the Partnership, Wells Real Estate Fund I, Fund II and II-OW, and Wells Real Estate Fund VI, L.P., sold the Cherokee Commons property to an unrelated third party. Fund I-II-IIOW-VI-VII Associates was
liquidated during the fourth quarter of 2002.



On October 7, 2002, Fund
VI-VII-VIII Associates sold an outparcel of land at Tanglewood Commons to an unrelated third party for a gross selling price of $558,570. As a result of this sale, net sales proceeds of approximately $175,000 and gain of approximately $4,400 were
allocated to the Partnership.



|(b) |  | Basis of Presentation
|--- |  | ---------------------



The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the
instructions to Form 10-Q and Article 10 of Regulation S-X, in accordance with such rules and regulations, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States
(GAAP) for complete financial statements. The quarterly statements have not been examined by independent auditors. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments
that are of a normal and recurring nature and necessary to fairly present the results for these periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and
footnotes included in the Partnerships Form 10-K for the year ended December 31, 2002.



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|(c) |  | Allocations of Net Income, Net Loss and Gain on Sale
|--- |  | ----------------------------------------------------



For the purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for
depreciation and amortization. Net income, as defined, of the Partnership will be allocated each year in the same proportions that net cash from operations is distributed to the limited partners holding Class A Units and the General Partners. To the
extent the Partnerships net income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners and 1% to the General Partners.



Net loss, depreciation, and amortization deductions for each fiscal year are allocated as follows: (a) 99% to the limited partners holding
Class B Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then to any partner having a positive balance in his/her capital account in an amount not to exceed such positive balance; and (c) thereafter to the
General Partners.



Gains on the sale or exchange of the Partnerships
properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to a qualified income offset provision
in the partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; (c) allocations to Class B limited partners in amounts equal to deductions for
depreciation and amortization previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale of such property; and (d)
allocations to Class A limited partners and General Partners in amounts equal to the deductions for depreciation and amortization previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of
gain on sale recognized by the Partnership with respect to the sale of such property.



|(d) |  | Distribution of Net Cash From Operations
|--- |  | ----------------------------------------



Cash available for distribution, as defined by the partnership agreement, is distributed to the limited partners quarterly. In accordance with the partnership agreement,
distributions are paid first to limited partners holding Class A Units until they have received a 10% per annum return on their adjusted Capital Contributions, as defined. Cash available for distribution is then paid to the General Partners until
they have received an amount equal to 10% of distributions. Any remaining cash available for distribution is split between the limited partners holding Class A Units and the General Partners on a basis of 90% and 10%, respectively. No cash
distributions will be made to the limited partners holding Class B Units.



|(e) |  | Distribution of Sales Proceeds
|--- |  | ------------------------------



Upon sales of properties, the net sales proceeds are distributed in the following order:



| |  |  | In the event that the particular property sold is sold for a price less than the original property purchase price, to the limited partners holding Class A Units until they receive
an amount equal to the excess of the original property purchase price over the price for which the property was sold, limited to the amount of depreciation deductions taken by the limited partners holding Class B Units with respect to such property.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners holding units, which at any time have been treated as Class B Units, until they receive an amount necessary to equal the net cash available for distribution
received by the limited partners holding Class A Units
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | To limited partners, on a per-unit basis, until each limited partner has received 100% of his/her adjusted Capital Contributions, as defined
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners until they receive a cumulative 10% per annum return on their adjusted Capital Contributions, as defined
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until they receive an amount equal to their respective cumulative limited partner return (defined as the sum of a 10% per annum cumulative
return on net Capital Contributions for all periods during which the units were treated as Class A Units and a 15% per annum cumulative return on net Capital Contributions for all periods during which the units were treated as Class B Units)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To the General Partners until they have received 100% of their Capital Contributions, as defined
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | To the General Partners until they have received 100% of their Capital Contributions; in the event that limited partners have received aggregate cash distributions from the
Partnership over the life of their investment in excess of a return of their net Capital Contributions plus their cumulative limited partner return, then the General Partners shall receive an additional sum equal to 25% of such excess
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 80% to the limited partners and 20% to the General Partners
| | - |  | -----------------------------------------------------------------------



|2. |  | INVESTMENT IN JOINT VENTURES
|-- |  | ----------------------------



|(a) |  | Basis of Presentation
|--- |  | ---------------------



The Partnership owned interests in eight properties during the periods presented through its ownership in the Joint Ventures. The Partnership does not have control over
the operations of these Joint Ventures; however, it does exercise significant influence. Accordingly, investments in the Joint Ventures are recorded using the equity method of accounting. For further information, refer to the report filed for the
Partnership on Form 10-K for the year ended December 31, 2002.



|(b) |  | Summary of Operations
|--- |  | ---------------------



The following information summarizes the operations of the Joint Ventures for the three months and nine months ended September 30, 2003 and 2002, respectively:



|                                 |  | Total Revenues                  |           |      | Net Income                      |           | Partnerships Share of Net Income
|-------------------------------- |  | ------------------------------- | --------- | ---- | ------------------------------- | --------- | ---------------------------------
|                                 |  | Three Months EndedSeptember 30, |           |      | Three Months EndedSeptember 30, |           | Three Months EndedSeptember 30,  
|                                 |  | 2003                            |           | 2002 |                                 |           | 2003                             
|Fund V-VI-VII Associates         |  | $                               | 242,699   |      | $                               | 244,445   |                                  
|Fund VI-VII Associates           |  |                                 | 206,460   |      |                                 | 200,199   |                                  
|Fund II-III-VI-VII Associates    |  |                                 | 194,228   |      |                                 | 161,289   |                                  
|Fund VII-VIII Associates         |  |                                 | 311,711   |      |                                 | 332,082   |                                  
|Fund VI-VII-VIII Associates      |  |                                 | 715,543   |      |                                 | 706,034   |                                  
|Fund I-II-IIOW-VI-VII Associates |  |                                 | 0         |      |                                 | 37,846    |                                  
|                                 |  |                                 |           |      |                                 |           |                                  
|                                 |  | $                               | 1,670,641 |      | $                               | 1,681,895 | (1)                              
|                                 |  |                                 |           |      |                                 |           |                                  



|(1) |  | Amounts have been restated to reflect tenant reimbursements of $278,027 as revenues for the three months ended September 30, 2002, which has no impact on net income.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                 |  | Total Revenues                  |           |      | Net Income                      |           | Partnerships Share of Net Income
|-------------------------------- |  | ------------------------------- | --------- | ---- | ------------------------------- | --------- | ---------------------------------
|                                 |  | Nine Months Ended September 30, |           |      | Nine Months Ended September 30, |           | Nine Months EndedSeptember 30,   
|                                 |  | 2003                            |           | 2002 |                                 |           | 2003                             
|Fund V-VI-VII Associates         |  | $                               | 728,436   |      | $                               | 731,264   |                                  
|Fund VI-VII Associates           |  |                                 | 661,551   |      |                                 | 671,534   |                                  
|Fund II-III-VI-VII Associates    |  |                                 | 476,085   |      |                                 | 549,417   |                                  
|Fund VII-VIII Associates         |  |                                 | 966,684   |      |                                 | 993,344   |                                  
|Fund VI-VII-VIII Associates      |  |                                 | 2,158,494 |      |                                 | 2,106,192 |                                  
|Fund I-II-IIOW-VI-VII Associates |  |                                 | 0         |      |                                 | 108,124   |                                  
|                                 |  |                                 |           |      |                                 |           |                                  
|                                 |  | $                               | 4,991,250 |      | $                               | 5,159,875 | (2)                              
|                                 |  |                                 |           |      |                                 |           |                                  



|(2) |  | Amounts have been restated to reflect tenant reimbursements of $836,740 as revenues for the nine months ended September 30, 2002, which has no impact on net income.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | RECENT ACCOUNTING PRONOUNCEMENTS
|-- |  | --------------------------------



In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, which clarifies
the application of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements, relating to consolidation of certain entities. FIN 46 requires the identification of the Partnerships participation in variable
interest entities (VIEs), which are defined as entities with a level of invested equity that is not sufficient to fund future activities to permit them to operate on a stand-alone basis, or whose equity holders lack certain
characteristics of a controlling financial interest. For entities identified as VIEs, FIN 46 sets forth a model to evaluate potential consolidation based on an assessment of which party to the VIE, if any, bears a majority of the exposure to its
expected losses, or stands to gain from a majority of its expected returns. FIN 46 is effective for all new VIEs created or acquired after January 31, 2003. For VIEs created or acquired prior to February 1, 2003, the Partnership has adopted the
provisions of FIN 46 commencing on June 15, 2003. FIN 46 also sets forth certain disclosures regarding interests in VIEs that are deemed significant, even if consolidation is not required. As the Joint Ventures do not fall under the definition of
VIEs provided above, the adoption of FIN 46 has not resulted in the consolidation of any previously unconsolidated entities.



|4. |  | RELATED-PARTY TRANSACTIONS
|-- |  | --------------------------



|(a) |  | Management and Leasing Fees
|--- |  | ---------------------------



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, receives compensation for the management and leasing of the
Partnerships properties owned through Joint Ventures equal to (a) 3% of the gross revenues for management and 3% of the gross revenues for leasing (aggregate maximum of 6%) plus a separate fee for the one-time lease-up of newly constructed
properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic area for similar properties or (b) in the case of commercial properties which are leased
on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. The properties in which the Partnership owns interests



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incurred management and leasing fees payable to Wells Management of $94,562 and $91,903 for the three months ended September 30, 2003 and 2002, respectively,
and $281,893 and $287,688 for the nine months ended September 30, 2003 and 2002, respectively.



|(b) |  | Administration Reimbursements
|--- |  | -----------------------------



Wells Capital, Inc., an affiliate of the General Partners, and its affiliates perform certain administrative services for the Partnership, such as accounting, property
management, and other partnership administration, and incur the related expenses. Such expenses are allocated among the various Wells Real Estate Funds based on time spent on each fund by individual administrative personnel. The Partnership
reimbursed $15,224 and $12,889 for the three months ended September 30, 2003 and 2002, respectively, and $42,377 and $31,364 for the nine months ended September 30, 2003 and 2002, respectively, to Wells Capital, Inc. and its affiliates for these
services and expenses. The Joint Ventures reimbursed $49,823 and $30,425 for the three months ended September 30, 2003 and 2002, respectively, and $139,697 and $106,679 for the nine months ended September 30, 2003 and 2002, respectively, to Wells
Capital, Inc. and its affiliates for these services and expenses.



|(c) |  | Conflicts of Interest
|--- |  | ---------------------



The General Partners of the Partnership are also general partners of other Wells Real Estate Funds. As such, there may exist conflicts of interest where the General
Partners in their capacity as general partners of other Wells Real Estate Funds may be in competition with the Partnership in connection with property acquisitions or for tenants in similar geographic markets.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto.



|(a) |  | Forward-Looking Statements
|--- |  | --------------------------



This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including
discussion and analysis of the financial condition of the Partnership, anticipated capital expenditures required to complete certain projects, amounts of cash distributions anticipated to be distributed to limited partners in the future, and certain
other matters. Readers of this Report should be aware that there are various factors that may cause actual results to differ materially from any forward-looking statements made in this Report, including construction costs which may exceed estimates,
construction delays, lease-up risks, inability to obtain new tenants upon the expiration of existing leases, and the potential need to fund tenant improvements or other capital expenditures out of operating cash flow or sales proceeds.



|(b) |  | Results of Operations
|--- |  | ---------------------



Gross Revenues



Gross revenues of the Partnership were $333,521 and $239,436 for the three months ended September 30, 2003 and 2002, respectively, and $853,214 and $728,754 for the nine months ended September 30, 2003 and 2002,



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respectively. The 2003 increase from 2002 resulted primarily from the corresponding increase in equity in income of Joint Ventures as described below.



Equity in Income of Joint Ventures



Gross Revenues of Joint Ventures



Gross revenues of the Joint Ventures decreased in 2003 from 2002 primarily
due to (i) the decline in occupancy of the Holcomb Bridge Property during the first two quarters of 2003; (ii) the decline in occupancy of the CH2M Hill Property during the second quarter of 2003; and (iii) a reduction in interest income earned by
Fund I-II-IIOW-VI-VII Associates as a result of liquidating this Joint Venture in the fourth quarter of 2002, partially offset by (iv) an increase in occupancy of the Holcomb Bridge Property in the third quarter of 2003, (v) the commencement of
rental billings for several new tenants at Stockbridge Village I Expansion in the third quarter of 2003, and (vi) an increase in estimated operating expense reimbursement billings to tenants of Tanglewood Commons in 2003. Tenants are billed for
operating expense reimbursements based on estimates, which are reconciled in the following calendar year based on actual costs incurred and the terms of the corresponding tenant leases.



Expenses of Joint Ventures



Expenses of Joint Ventures decreased in 2003 from 2002 primarily due to the following nonrecurring items: (i) the recovery of doubtful accounts
receivable from tenants of Stockbridge Village I Expansion in 2003; (ii) a decrease in depreciation expense recognized for the Holcomb Bridge Property, as the majority of its tenant improvements became fully depreciated during the second half of
2002; (iii) a decrease in depreciation expense recognized for the following properties, as each became classified as held for sale effective March 18, 2003: Stockbridge Village III, Stockbridge Village I Expansion, Hannover (see the Contractual
Obligations and Commitments section to follow additional information); (iv) HVAC and plumbing repair costs for the BellSouth Building incurred in 2002; and (v) reserving doubtful accounts receivable due from tenants at Hannover Center during the
second quarter of 2002, partially offset by increased administrative salaries allocated to the Marathon Building in 2003.



As a result of the decrease in expenses, partially offset by the decrease in gross revenues of Joint Ventures described above, equity in income of Joint
Ventures increased from $239,091 to $330,415 and from $727,303 to $845,688 for the three months and nine months ended September 30, 2003, as compared to the same periods in 2002, respectively.



Expenses



Total expenses of the Partnership were $25,606 and $21,314 for the three months ended September 30, 2003 and 2002, respectively, and $80,490
and $67,980 for the nine months ended September 30, 2003 and 2002, respectively. The increase recognized for the nine months ended September 30, 2003 is primarily due to (i) an increase in administrative costs incurred during 2003 in response to new
reporting and regulatory requirements; we anticipate additional increases related to implementing and adhering to such reporting and regulatory requirements on a going forward basis, and (ii) the evaluation of various re-leasing and liquidation
strategies for the Partnerships portfolio of properties during 2003, partially offset by a decline in legal and accounting fees due to additional costs incurred during 2002 in connection with changing independent public accountants.



Net Income



As a result of the factors described above, net income of the Partnership increased to
$307,915 from $218,122 and to $772,724 from $660,774 for the three months and nine months ended September 30, 2003, as compared to the same periods in 2002, respectively.



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|(c) |  | Liquidity and Capital Resources
|--- |  | -------------------------------



Cash Flows From Operating Activities



Net cash flows from operating activities were $(74,895) and $(67,287) for the nine months ended September 30, 2003 and 2002, respectively. The 2003 increase in operating
cash flows used is primarily attributable to the increase in partnership administration costs described above.



Cash Flows From Investing Activities



Net cash flows from investing activities were $1,366,654 and $1,435,551 for the nine months ended September 30, 2003 and 2002, respectively. Cash provided by investing activities decreased in 2003 primarily due to the decline in
distributions received from Fund II-III-VI-VII Associates, Fund VI-VII Associates, and Fund VII-VIII Associates in response to the corresponding declines in average occupancy of the Holcomb Bridge Property, Stockbridge Village III, Stockbridge
Village I Expansion, and CH2M Hill Property during the nine months ended September 30, 2003, as compared to the same period in 2002.



Cash Flows From Financing Activities



Net cash flows from financing activities were $(1,126,916) and $(1,319,316) for the nine months ended September 30, 2003 and 2002, respectively. Cash flows used in
financing activities, which represents distributions to partners, decreased in 2003 primarily as a result of funding leasing and tenant improvement costs for the Holcomb Bridge Property during the second and third quarters of 2003.



Distributions



The Partnership declared distributions to the limited partners holding Class A Units of $0.18 per unit and $0.21 per unit for the quarters
ended September 30, 2003 and 2002, respectively. The 2003 decrease from 2002 resulted from the decline in cash flows used for financing activities described above. Such distributions have been made from net cash from operations, and distributions
received from investments in Joint Ventures. Distributions accrued to the limited partners holding Class A Units for the third quarter of 2003 were paid in November 2003. No cash distributions were made to the limited partners holding Class B Units.



Sales Proceeds



The sales of the Cherokee Commons Property and the outparcel of land at Tanglewood Commons
generated total net sales proceeds of approximately $1,061,000, which is attributable to the Partnership. Upon evaluating the capital needs of the existing properties in which the Partnership holds an interest, the General Partners have determined
that reserves of approximately $326,000 will be required to increase the occupancy of the Holcomb Bridge Property and pursue the potential expansion of Tanglewood Commons. Thus, in accordance with the terms of the partnership agreement, the General
Partners intend to distribute the residual net sales proceeds of approximately $735,000 to the limited partners of record as of December 31, 2003 in early 2004.



Capital Resources



The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties and has invested all of its funds
available for investment. Accordingly, it is unlikely that the Partnership will acquire interests in any additional properties. In the fourth quarter of 2002, American Trust Bancorp entered into a 10-year lease agreement for approximately 13,000
square feet of the Holcomb Bridge Property at an estimated cost of $207,000 for tenant improvements and leasing costs. As of September 30, 2003, Fund II-III-VI-VII Associates has funded approximately $80,000 of these costs and anticipates funding
the



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remainder during the fourth quarter of 2003. Of the remainder to be funded, approximately, $64,000 is attributable to the Partnerships interest in Fund
II-III-VI-VII Associates.



Contractual Obligations and Commitments



On March 18, 2003, four Wells affiliated Joint Ventures
(collectively, the Seller, defined below) entered into an agreement (the Agreement) to sell five real properties (the Sale Properties, defined below) located in Stockbridge, Georgia, to an unrelated third party
(the Purchaser) for a gross sales price of $23,750,000. Contemporaneously with the Purchasers execution and delivery of the Agreement to the Seller, the Purchaser paid a fully refundable earnest money deposit of $250,000 to the
designated escrow agent. This transaction is currently subject to an extended due diligence period expiring on February 22, 2004. Accordingly, there are no assurances that this sale will close.



|                                                          
|----------------------------------------------------------
|(Collectively, the Seller) The Joint Ventures           
|                                                          
|Fund III and Fund IV Associates (Fund III-IV Associates)
|                                                          
|Fund V and Fund VI Associates (Fund V-VI Associates)    
|                                                          
|Fund VI-VII Associates                                    
|                                                          
|Fund VII-VIII Associates                                  
|                                                          



|(d) |  | Related Party Transactions
|--- |  | --------------------------



The Partnership and its Joint Ventures have entered into agreements with Wells Capital, L.P. and its affiliates, whereby the Partnership or its Joint Ventures pay certain
fees or reimbursements to Wells Partners, L.P., or its affiliates (e.g., property management and leasing fees, administrative salary reimbursements, etc.). See Note 4 to the Partnerships financial statements included in this report for a
discussion of the various related party transactions, agreements, and fees.



|(e) |  | Inflation
|--- |  | ---------



The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate. Most tenant leases include provisions designed to protect the lessor from the
impact of inflation and other increases in costs and operating expenses, including common area maintenance, real estate tax



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and insurance reimbursements from tenants either on a per-square-foot basis, or above a certain allowance per-square-foot annually. In addition, a number of
the Partnerships leases are for remaining terms of less than five years, which may allow the Partnership to enter into new leases at higher base rental rates in the event that market rental rates rise above the existing lease rates. There is
no assurance, however, that the Partnership would be able to replace existing leases with new leases at higher base rental rates.



|(f) |  | Application of Critical Accounting Policies
|--- |  | -------------------------------------------



The Partnerships accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management
to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses during the reporting periods. If managements judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible
that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of the Partnerships
results of operations to those of companies in similar businesses.



Below is a
discussion of the accounting policies that management considers to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. Additional discussion of accounting
policies that management considers to be significant, including further discussion of the critical accounting policies described below, is presented in Note 1 to the Partnerships financial statements included in this report.



Investment in Real Estate Assets



Management is required to make subjective assessments as to the useful lives of its
depreciable assets. Management considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Joint Ventures assets by
class are as follows:



|Building              |  | 25 years   
|--------------------- |  | -----------
|Building improvements |  | 10-25 years
|Land improvements     |  | 20-25 years
|Tenant improvements   |  | Lease term 



In the event that management uses
inappropriate useful lives or methods for depreciation, the Partnerships net income would be misstated.



Valuation of Real Estate Assets



Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in Joint
Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by
determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted
future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. Management



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has determined that there has been no impairment in the carrying value of real estate assets held by the Partnership to date.



Projections of expected future cash flows require management to estimate future market rental
income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property, and the number of years the property is held for investment. The use of
inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flows and fair value, and could result in the overstatement of the carrying value of real estate assets held by the
Joint Ventures and net income of the Partnership.



|ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|------- |  | -----------------------------------------------------------



Since the Partnership does not borrow any money, make any foreign investments, or invest in any market risk-sensitive instruments, it is not subject to risks relating to
interest rates, foreign current exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.



|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, Inc., the corporate general partner of one of
the General Partners of the Partnership, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnerships disclosure controls and procedures as of the end of the
period covered by this report pursuant to the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were
effective.



There were no significant changes in the Partnerships
internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.



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PART
II.    
OTHER INFORMATION



|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



|(a) |  | The Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.
|--- |  | ------------------------------------------------------------------------------------------------------



|(b) |  | During the third quarter of 2003, the Registrant filed a Current Report on Form 8-K dated September 12, 2003 disclosing the General Partners intentions with regard to
distributing the net proceeds from the sale of the Cherokee Commons property.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



| |  |  |  | WELLS REAL ESTATE FUND VII, L.P. (Registrant)
| |  |  |  | ---------------------------------------------



| |  |  |  | By: WELLS PARTNERS, L.P. (General Partner)
| |  |  |  | ------------------------------------------



| |  |  |  | By: WELLS CAPITAL, INC. (Corporate General Partner)
| |  |  |  | ---------------------------------------------------

|                 |  | 
|---------------- |  | 
|November 7, 2003 |  | 
|                 |  | 
|                 |  | 

|                 |  | 
|---------------- |  | 
|November 7, 2003 |  | 
|                 |  | 
|                 |  | 













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EXHIBIT INDEX

TO

THIRD QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND VII, L.P.



|Exhibit No. |  | Description                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002