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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934

For the quarterly period ended September 30, 2002
--------------------------------------------------------------------------

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
0-19140
---------------------------------------


CNL Income Fund VII, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)


Florida 59-2963871
- ----------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)


450 South Orange Avenue
Orlando, Florida 32801
- ----------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)


Registrant's telephone number
(including area code) (407) 540-2000
----------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 _________


CONTENTS



Page

Part I.

Item 1. Financial Statements:

Condensed Balance Sheets 1

Condensed Statements of Income 2

Condensed Statements of Partners' Capital 3

Condensed Statements of Cash Flows 4

Notes to Condensed Financial Statements 5-7

Item 2. Management's Discussion and Analysis of Financia
Condition and Results of Operations 8-11

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11

Item 4. Controls and Procedures 11

Part II.

Other Information 12-13


CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS




September 30, December 31,
2002 2001
------------------ -------------------

ASSETS

Land and buildings on operating leases, net $ 11,165,545 $ 11,333,419
Net investment in direct financing leases 2,372,710 2,452,964
Investment in joint ventures 9,161,609 8,212,208
Mortgage and other notes receivable 104,646 104,717
Cash and cash equivalents 822,816 1,747,363
Receivables -- 74,097
Due from related parties -- 12,968
Accrued rental income 1,048,460 1,058,589
Other assets 82,009 76,895
------------------ -------------------

$ 24,757,795 $ 25,073,220
================== ===================

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable $ 6,737 $ 12,306
Distributions payable 675,000 675,000
Due to related parties 22,244 21,837
Rents paid in advance and deposits -- 25,716
------------------ -------------------
Total liabilities 703,981 734,859

Minority interest 139,618 141,790

Partners' capital 23,914,196 24,196,571
------------------ -------------------

$ 24,757,795 $ 25,073,220
================== ===================

See accompanying notes to condensed financial statements.


CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME



Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- -------------- ---------------

Revenues:
Rental income from operating leases $ 409,378 $ 389,158 $ 1,119,767 $ 1,182,171
Earned income from direct financing leases 72,998 76,147 221,503 230,614
Interest and other income 4,275 5,845 27,420 94,611
------------- ------------- -------------- ---------------
486,651 471,150 1,368,690 1,507,396
------------- ------------- -------------- ---------------

Expenses:
General operating and administrative 54,815 41,297 188,212 226,187
Property expenses 39,943 10,454 53,906 42,950
State and other taxes -- -- 29,446 31,888
Depreciation 55,959 61,401 167,874 187,494
Provision for write-down of assets -- -- -- 279,862
------------- ------------- -------------- ---------------
150,717 113,152 439,438 768,381
------------- ------------- -------------- ---------------

Income Before Gain on Sale of Assets, Minority
Interest in Income of Consolidated Joint Venture
and Equity in Earnings of Unconsolidated Joint
Ventures 335,934 357,998 929,252 739,015

Gain on Sale of Assets -- -- -- 122,996

Minority Interest in Income of Consolidated
Joint Venture (4,646 ) (4,652 ) (13,891 ) (13,823 )

Equity in Earnings of Unconsolidated Joint Ventures 426,399 185,282 827,264 524,159
------------- ------------- -------------- ---------------

Net Income $ 757,687 $ 538,628 $ 1,742,625 $ 1,372,347
============= ============= ============== ===============

Net Income Per Limited Partner Unit $ 0.025 $ 0.018 $ 0.058 $ 0.046
============= ============= ============== ===============

Weighted Average Number of Limited Partner
Units Outstanding 30,000,000 30,000,000 30,000,000 30,000,000
============= ============= ============== ===============

See accompanying notes to condensed financial statements.


CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL




Nine Months Ended Year Ended
September 30, December 31,
2002 2001
--------------------- ------------------

General partners:
Beginning balance $ 230,931 $ 230,931
Net income -- --
--------------------- ------------------
230,931 230,931
--------------------- ------------------

Limited partners:
Beginning balance 23,965,640 24,450,070
Net income 1,742,625 2,215,570
Distributions ($0.068 and $0.090 per
limited partner unit, respectively) (2,025,000 ) (2,700,000 )
--------------------- ------------------
23,683,265 23,965,640
--------------------- ------------------

Total partners' capital $ 23,914,196 $ 24,196,571
===================== ==================

See accompanying notes to condensed financial statements.


CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS




Nine Months Ended
September 30,
2002 2001
-------------- ---------------

Increase (Decrease) in Cash and Cash Equivalents

Net Cash Provided by Operating Activities $ 1,921,428 $ 1,879,357
-------------- ---------------

Cash Flows from Investing Activities:
Increase in restricted cash -- 1,503,682
Collections on mortgage note receivable -- 1,101,865
Additions to land and buildings on operating leases -- (1,495,699 )
Investment in joint venture (934,800 ) (1,296,995 )
Return of capital from joint venture 129,888 --
-------------- ---------------
Net cash used in investing activities (804,912 ) (187,147 )
-------------- ---------------

Cash Flows from Financing Activities:
Distributions to limited partners (2,025,000 ) (2,025,000 )
Distributions to holder of minority interest (16,063 ) (15,525 )
-------------- ---------------
Net cash used in financing activities (2,041,063 ) (2,040,525 )
-------------- ---------------

Net Decrease in Cash and Cash Equivalents (924,547 ) (348,315 )

Cash and Cash Equivalents at Beginning of Period 1,747,363 1,454,025
-------------- ---------------

Cash and Cash Equivalents at End of Period $ 822,816 $ 1,105,710
============== ===============

Supplemental Schedule of Non-Cash Financing
Activities:

Distributions declared and unpaid at end of
period $ 675,000 $ 675,000
============== ===============


See accompanying notes to condensed financial statements.

CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001


1. Basis of Presentation:

The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2002, may not be
indicative of the results that may be expected for the year ending
December 31, 2002. Amounts as of December 31, 2001, included in the
financial statements, have been derived from audited financial
statements as of that date.

These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund VII, Ltd. (the "Partnership") for the year ended December
31, 2001.

The Partnership accounts for its 83% interest in San Antonio #849 Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partners' proportionate share of the equity
in the Partnership's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.

Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.

2. Reclassification:

Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.

3. Investment in Joint Ventures:

In June 2002, CNL Restaurant Investments II Joint Venture, in which the
Partnership owns an 18% interest, sold its property in Columbus, Ohio
to the tenant for a sales price of approximately $1,219,600 and
received net sales proceeds of approximately $1,215,700 resulting in a
gain of $448,300. In addition, in June 2002, CNL Restaurant Investments
II Joint Venture sold its property in Pontiac, Michigan to the tenant
for a sales price of $725,000 and received net sales proceeds of
approximately $722,600, resulting in a loss of $189,800. The
Partnership received $129,888 as a return of capital from the net sales
proceeds, and used approximately $63,900 to pay an additional
contribution to CNL Mansfield Joint Venture. The joint venture used the
proceeds from the sale of the property in Columbus, Ohio to acquire a
property in Dallas, Texas at an approximate cost of $1,147,400. The
joint venture acquired this property from CNL Funding 2001-A, LP, an
affiliate of the general partners (see Note 4). The financial results
for these properties are reflected as Discontinued Operations in the
condensed financial information presented below.

CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001


3. Investment in Joint Ventures - Continued:

In addition, in June 2002, the Partnership used a portion of the net
sales proceeds from the 2001 sale of its properties in Saddlebrook,
Gainesville and Daytona Beach, Florida to enter into a joint venture
arrangement, Arlington Joint Venture, with CNL Income Fund XVI, Ltd.,
an affiliate of the general partners, to hold one restaurant property.
The joint venture acquired this property from CNL Funding 2001-A, LP,
an affiliate of the general partners (see Note 4). As of September 30,
2002, the Partnership had contributed approximately $792,900 for a 79%
interest in the profits and losses of the joint venture.

In May 2002, CNL Mansfield Joint Venture, in which the Partnership owns
a 79% interest, entered into negotiations with the tenant to sell the
property in Mansfield, Texas. As a result, the joint venture
reclassified the assets relating to this property from land and
building on operating leases and accrued rental income to real estate
held for sale. The property was recorded at the lower of its carrying
amount or fair value less cost to sell. In addition, the joint venture
stopped recording depreciation and accrued rental income upon
identifying the property as held for sale. In August 2002, the joint
venture sold the property to the tenant for a sales price of $1,045,000
and received net sales proceeds of approximately $1,011,500, resulting
in a gain of approximately $269,800. The joint venture used the
proceeds from the sale of the property in Mansfield, Texas and an
additional contribution of approximately $63,900 received from the
Partnership, as described above, to acquire a property in Arlington,
Texas from CNL Net Lease Investors, L.P., at an approximate cost of
$1,089,900. CNL Net Lease Investors, L.P. is an affiliate of the
general partners (see Note 4). The financial results for this property
are reflected as Discontinued Operations in the condensed financial
information presented below.

As of September 30, 2002, CNL Restaurant Investments II Joint Venture
owns and leases five properties to operators of national fast-food or
family-style restaurants. Des Moines Joint Venture, CNL Mansfield Joint
Venture, Duluth Joint Venture, Pittsburgh Joint Venture, CNL VII & XVII
Lincoln Joint Venture, CNL VII, XV Columbus Joint Venture and Arlington
Joint Venture each own and lease one property to operators of national
fast-food or family-style restaurants. In addition, the Partnership and
affiliates, in four separate tenancy in common arrangements, each own
and lease one property to national fast-food or family-style
restaurants.

The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures and
properties held as tenants-in-common with affiliates at:



September 30, December 31,
2002 2001
------------------ ----------------

Land and buildings on operating leases, net $ 19,380,097 $ 16,405,484
Net investment in direct financing lease 1,749,558 1,765,740
Real estate held for sale -- 2,443,638
Cash 137,058 62,669
Receivables 1,816 146,025
Accrued rental income 404,718 355,752
Other assets 124 1,471
Liabilities 133,283 256,902
Partners' capital 21,540,088 20,923,877



CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001


3. Investment in Joint Ventures - Continued:



Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
` ------------- ------------ ------------- -------------

Revenues $ 668,519 $ 434,680 $1,689,271 $1,395,140
Expenses (106,187 ) (71,183 ) (334,605 ) (247,341 )
Provision for write-down of assets (65,755 ) -- (65,755 ) --
------------- ------------- ------------ -------------
Income from continuing operations 496,577 363,497 1,288,911 1,147,799
------------- ------------- ------------ -------------
Discontinued operations:
Revenues 22,889 78,379 166,000 234,498
Expenses -- (18,225 ) (25,973 ) (54,482 )
Gain on disposal of assets 269,791 -- 528,296 --
------------- ------------- ------------ -------------
292,680 60,154 668,323 180,016
------------- ------------- ------------ -------------

Net Income $ 789,257 $ 423,651 $1,957,234 $1,327,815
============= ============= ============ =============


The Partnership recognized income totaling $827,264 and $524,159 during
the nine months ended September 30, 2002 and 2001, respectively, from
these joint ventures and the properties held as tenants-in-common with
affiliates, of which $426,399 and $185,282 was earned during the
quarters ended September 30, 2002 and 2001, respectively.

4. Related Party Transactions:

In June 2002, the Partnership and CNL Income Fund XVI, Ltd. through a
joint venture arrangement, Arlington Joint Venture, acquired a
property, in Arlington, Texas, from CNL Funding 2001-A, LP, for a
purchase price of approximately $1,003,600 (see Note 3). In addition,
in June 2002, CNL Restaurant Investments II Joint Venture acquired a
property in Dallas, Texas from CNL Funding 2001-A, LP for a purchase
price of approximately $1,147,400 (see Note 3). CNL Funding 2001-A, LP
is an affiliate of the general partners. CNL Funding 2001-A, LP had
purchased and temporarily held title to the properties in order to
facilitate the acquisition of the properties by the joint ventures. The
purchase price paid by the joint ventures represented the costs
incurred by CNL Funding 2001-A, LP to acquire and carry the properties.

In September 2002, CNL Mansfield Joint Venture acquired a property in
Arlington, Texas from CNL Net Lease Investors, L.P. ("NLI"), at an
approximate cost of $1,089,900. During 2002, and prior to the joint
venture's acquisition of this property, CNL Financial LP Holding, LP
("CFN") and CNL Net Lease Investors GP Corp. ("GP Corp") purchased the
limited partner's interest and general partner's interest,
respectively, of NLI. Prior to this transaction, an affiliate of the
Partnership's general partners owned a 0.1% interest in NLI and served
as a general partner of NLI. The original general partners of NLI
waived their rights to benefit from this transaction. The acquisition
price paid by CFN for the limited partner's interest was based on the
portfolio acquisition price. The joint venture acquired the property in
Arlington, Texas at CFN's cost and did not pay any additional
compensation to CFN for the acquisition of the property. Each CNL
entity is an affiliate of the Partnership's general partners.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CNL Income Fund VII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 18, 1989, to acquire for cash, either
directly or through joint venture and tenancy in common arrangements, both newly
constructed and existing restaurants, as well as land upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains.
The leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of
September 30, 2001, the Partnership owned 22 Properties directly and owned 16
Properties indirectly through joint venture or tenancy in common arrangements.
As of September 30, 2002, the Partnership owned 18 Properties directly and owned
17 Properties indirectly through joint venture or tenancy in common
arrangements.

Capital Resources

Cash from operating activities (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses) was $1,921,428 and $1,879,357 for the
nine months ended September 30, 2002 and 2001, respectively. The increase in
cash from operating activities for the nine months ended September 30, 2002, as
compared to the nine months ended September 30, 2001, was primarily a result of
changes in the Partnership's working capital.

Other sources and uses of capital included the following during the
nine months ended September 30, 2002.

In August 2001, the Partnership entered into a joint venture
arrangement, CNL VII, XV Columbus Joint Venture, with CNL Income Fund XV, Ltd.,
a Florida limited partnership and an affiliate of the general partners, to
construct and hold one restaurant Property. During the nine months ended
September 30, 2002, the Partnership contributed approximately $76,700 to the
joint venture to pay for construction costs. Construction of the restaurant was
completed in February 2002 and, as of September 30, 2002 the Partnership owned a
68.75% interest in the profits and losses of the joint venture.

During the nine months ended September 30, 2002, the Partnership used
the proceeds from the sale of several of its Properties in 2001 to enter into a
joint venture arrangement, Arlington Joint Venture, with CNL Income Fund XVI,
Ltd., a Florida limited partnership and an affiliate of the general partners.
The joint venture acquired a Property in Arlington, Texas at an approximate cost
of $1,003,600. In addition, in June 2002, CNL Restaurants Investments II Joint
Venture, in which the Partnership owns an 18% interest, sold its Property in
Columbus, Ohio to the tenant for a sales price of approximately $1,219,600 and
received net sales proceeds of approximately $1,215,700 resulting in a gain of
$448,300. The joint venture used the proceeds from this sale to acquire a
Property in Dallas, Texas at an approximate cost of $1,147,400. The joint
ventures acquired these Properties from CNL Funding 2001-A, LP, a Delaware
limited partnership and an affiliate of the general partners. The purchase price
paid by the joint ventures represented the costs incurred by CNL Funding 2001-A,
LP to acquire the Properties. The transaction relating to the sale of the
Property in Columbus, Ohio and the reinvestment of the net sales proceeds was
structured to qualify as a like-kind exchange transaction for federal income tax
purposes. However, the Partnership anticipates that its distributions will be
sufficient to enable the limited partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the general partners), resulting from
the sale.

In June 2002, CNL Restaurant Investments II Joint Venture also sold its
Property in Pontiac, Michigan to the tenant for a sales price of $725,000 and
received net sales proceeds of approximately $722,600. The sale resulted in a
loss to the joint venture of approximately $189,800. As of September 30, 2002
the Partnership received $129,888, representing its pro rata share of the net
sales proceeds as a return of capital.

In August 2002, CNL Mansfield Joint Venture sold its property in
Mansfield, Texas to the tenant for a sales price of $1,045,000 and received net
sales proceeds of approximately $1,011,500 resulting in a gain of approximately
$296,800. In September 2002, CNL Mansfield Joint Venture used the proceeds from
the sale of the Property and an additional contribution of approximately $63,900
received from the Partnership to acquire a Property in Arlington, Texas from CNL
Net Lease Investors, L.P. ("NLI"), a California Limited Partnership, at an
approximate cost of $1,089,900. The sale of the Property and the reinvestment of
the net sales proceeds was structured to qualify as a like-kind exchange
transaction for federal income tax purposes. However, the Partnership
anticipates that its distributions will be sufficient to enable the limited
partners to pay federal and state income taxes, if any, (at a level reasonably
assumed by the general partners), resulting from the sale. During 2002, and
prior to the joint venture's acquisition of this Property, CNL Financial LP
Holding, LP ("CFN"), a Delaware limited partnership, and CNL Net Lease Investors
GP Corp. ("GP Corp"), a Delaware corporation, purchased the limited partner's
interest and general partner's interest, respectively, of NLI. Prior to this
transaction, an affiliate of the Partnership's general partners owned a 0.1%
interest in NLI and served as a general partner of NLI. The original general
partners of NLI waived their rights to benefit from this transaction. The
acquisition price paid by CFN for the limited partner's interest was based on
the portfolio acquisition price. The joint venture acquired the Property in
Arlington, Texas at CFN's cost and did not pay any additional compensation to
CFN for the acquisition of the Property. Each CNL entity is an affiliate of the
Partnership's general partners.

Currently, rental income from the Partnership's Properties, any net
sales proceeds held by the Partnership and any amounts collected from the
promissory note are invested in money market accounts or other short-term,
highly liquid investments such as demand deposit accounts at commercial banks,
money market accounts and certificates of deposit with less than a 90-day
maturity date, pending the Partnership's use of such funds to acquire additional
Properties, pay Partnership expenses or to make distributions to the partners.
At September 30, 2002, the Partnership had $822,816 invested in such short-term
investments, as compared to $1,747,363 at December 31, 2001. The decrease in
cash and cash equivalents at September 30, 2002 was primarily a result of the
Partnership investing the proceeds from Properties sold in 2001 in Arlington
Joint Venture, contributing amounts to pay construction costs related to CNL
VII, XV Columbus Joint Venture and contributing amounts toward the Property
acquired by CNL Mansfield Joint Venture. The funds remaining at September 30,
2002, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital needs.

Short-Term Liquidity

The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will generate net cash flow in
excess of operating expenses.

The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.

The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.

Total liabilities of the Partnership, including distributions payable,
were $703,981 at September 30, 2002, as compared to $734,859 at December 31,
2001. The decrease in liabilities was primarily a result of a decrease in
accounts payable and rents paid in advance and deposits at September 30, 2002,
as compared to December 31, 2001. The general partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.

The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, the Partnership
declared distributions to the limited partners of $2,025,000 for each of the
nine months ended September 30, 2002 and 2001 ($675,000 for each applicable
quarter). This represents distributions for each of the applicable nine months
of $0.068 per unit ($0.023 per unit for each applicable quarter). No
distributions were made to the general partners for the quarters and nine months
ended September 30, 2002 and 2001. No amounts distributed to the limited
partners for the nine months ended September 30, 2002 and 2001 are required to
be or have been treated by the Partnership as a return of capital for purposes
of calculating the limited partners' return on their adjusted capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to the limited partners on a quarterly basis.

Long-Term Liquidity

The Partnership has no long-term debt or other long-term liquidity
requirements.

Results of Operations

Total rental revenues for the Partnership and its consolidated joint
venture, San Antonio #849 Joint Venture, were $1,336,419 for the nine months
ended September 30, 2002, as compared to $1,408,994 in the comparable period of
2001, of which $444,819 and $463,846 were earned during the second quarter of
2002 and 2001, respectively. The decrease in rental revenues for the quarter and
nine months ended September 30, 2002, as compared to the same periods of 2001,
was primarily due to the sales of several of the Partnership's Properties during
2001. The decrease in rental revenues during the quarter and nine months ended
September 30, 2002 was partially offset by the fact that in January 2001, the
Partnership reinvested a portion of these net sales proceeds in a Property in
Baton Rouge, Louisiana. The increase in rental revenues in the current quarter
is the result of a reclassification of a rental allowance granted to a tenant in
the previous quarter for Property renovations, as described below.

During the nine months ended September 30, 2002 and 2001, the
Partnership also earned $27,420 and $94,611, respectively, in interest and other
income of which $4,275 and $5,845 were earned during the quarters ended
September 30, 2002 and 2001, respectively. The decrease in interest and other
income during the quarter and nine months ended September 30, 2002 was primarily
due to a decrease in the average cash balance as a result of the reinvestment of
sales proceeds in additional Properties through joint venture arrangements
during 2002 as well as a decline in interest rates.

During the nine months ended September 30, 2002 and 2001, the
Partnership earned $827,264 and $524,159, respectively, attributable to net
income earned by unconsolidated joint ventures, $426,399 and $185,282 of which
was earned during the quarters ended September 30, 2002 and 2001, respectively.
The increase in net income earned by joint ventures during the quarter and nine
months ended September 30, 2002, as compared to the same periods of 2001, was
primarily due to the fact that in June 2002, CNL Restaurant Investments II Joint
Venture, in which the Partnership owns an 18% interest, sold its Properties in
Columbus, Ohio and Pontiac, Michigan to the tenant. The Partnership recorded its
pro-rata share of the gains resulting from the sales of these Properties. The
increase was also attributable to earnings received from the new joint venture
arrangements with affiliates of the general partners, CNL VII & XVII Lincoln
Joint Venture and CNL VII, XV Columbus Joint Venture acquired in April and
August 2001, respectively, and Arlington Joint Venture acquired in June 2002.
The increase in net income earned by joint ventures during the quarter and nine
months ended September 30, 2002 was partially offset by the fact that the tenant
of the Property owned by Duluth Joint Venture, in which the Partnership owns a
56% interest, experienced financial difficulties and ceased making rental
payments to the joint venture. As a result, Duluth Joint Venture stopped
recording rental revenues during the quarter ended March 31, 2002. During the
second quarter of 2002, the tenant began making rental payments to the joint
venture and the joint venture recognized these amounts as rental revenues. In
addition, during the quarter and nine months ended September 30, 2002, the joint
venture recorded a provision for write-down of assets of approximately $65,800
consisting of the accumulated accrued rental income balance relating to the
Property.

Operating expenses, including depreciation expense and provision for
write-down of assets, were $439,438 and $768,381 for the nine months ended
September 30, 2002 and 2001, respectively, of which $150,717 and $113,152 was
incurred during the quarters ended September 30, 2002 and 2001, respectively.
Operating expenses were higher during the nine months ended 2001, as compared to
the same period of 2002, due to the fact that the Partnership recorded a
provision for write-down of assets of $279,862 for the Property in Saddlebrook,
Florida in June 2001. The tenant ceased restaurant operations and vacated the
Property. The provision represented the difference between the carrying value of
the Property and its fair value at June 30, 2001. In addition, the Partnership
incurred expenses such as repairs and maintenance and real estate taxes during
2001 in connection with this Property. The Partnership sold this Property in
December 2001.

The decrease in operating expenses during the quarter and nine months
ended September 30, 2002, as compared to the same periods of 2001, was partially
offset by the fact that during the nine months ended September 30, 2002, the
Partnership elected to reimburse the tenant of the Properties in El Paso,
Harlingen, and Odessa, Texas for certain renovation costs.

The decrease in operating expenses during the nine months ended
September 30, 2002, as compared to the same period of 2001, was partially due to
a decrease in the costs incurred for administrative expenses for servicing the
Partnership and its Properties and due to the Partnership incurring less
depreciation expense during 2002 as a result of the sale of several Properties
in 2001.

In connection with the sale of its Property in Florence, South
Carolina, in August 1995, the Partnership recognized a gain of $122,996 during
the nine months ended September 30, 2001. The Partnership recorded the sale of
the Property using the installment sales method. As such, the gain on the sale
was deferred, and was recognized as income proportionally as payments under the
mortgage note were collected. The gain recognized during 2001 was due to the
fact that during the nine months ended September 30, 2001, the Partnership
collected the outstanding balance of the mortgage note collaterized by this
Property.

Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.

During the nine months ended September 30, 2002, CNL Restaurant
Investments II Joint Venture and CNL Mansfield Joint Venture identified and sold
three Properties that each met the criteria of this standard. The financial
results of these Properties are reflected as Discontinued Operations in the
condensed joint venture financial information presented in the footnotes to the
accompanying financial statements. The tenants exercised their option to
purchase the Properties under the terms of their respective leases and the
proceeds from the sales were reinvested in additional income producing
Properties.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material changes in the Partnership's market risk occurred from
December 31, 2001 through September 30, 2002. Information regarding the
Partnership's market risk at December 31, 2001 is included in its Annual Report
on Form 10-K for the year ended December 31, 2001.


ITEM 4. CONTROLS AND PROCEDURES

The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.

Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


PART II. OTHER INFORMATION


Item 1. Legal Proceedings. Inapplicable.

Item 2. Changes in Securities. Inapplicable.

Item 3. Default upon Senior Securities. Inapplicable.

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

Item 5. Other Information. Inapplicable.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)

4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)

4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund VII, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein
by reference.)

10.1 Management Agreement between CNL Income Fund VII,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)

10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)

10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)

10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 10, 2001, and
incorporated herein by reference.)

10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)

99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)

99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter
ended September 30, 2002.

SIGNATURES


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

DATED this 11th day of November, 2002


CNL INCOME FUND VII, LTD.

By:CNL REALTY CORPORATION
General Partner


By:/s/ James M. Seneff, Jr.
-----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)


By:/s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)


CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER

PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund VII, Ltd. (the
"registrant"), certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant;

2. Based on my knowledge, this quarterly 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 quarterly 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 officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a. designed such disclosure controls and procedures 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 quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: November 11, 2002


/s/ James M. Seneff, Jr.
- ------------------------------
James M. Seneff, Jr.
Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER

PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund VII, Ltd. (the "registrant")
certify that:

1. I have reviewed this quarterly report on Form 10-Q of the registrant;

2. Based on my knowledge, this quarterly 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 quarterly 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 officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a. designed such disclosure controls and procedures 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 quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.


Date: November 11, 2002


/s/ Robert A. Bourne
- -----------------------------
Robert A. Bourne
President and Treasurer

EXHIBIT INDEX


Exhibit Number

(c) Exhibits

3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)

4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)

4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund VII, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)

10.1 Management Agreement between CNL Income Fund VII, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)

10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)

10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)

10.5 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 10, 2001, and
incorporated herein by reference.)

10.6 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2002, and
incorporated herein by reference.)

99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)

99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)





EXHIBIT 99.1






EXHIBIT 99.2