<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period MARCH 31, 1996
ended ---------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number 0-17620
-----------------------------------------------
CORPORATE PROPERTY ASSOCIATES 8, L.P., A DELAWARE LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3469700
-------- -----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 492-1100
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(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.
[X] Yes [_] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] Yes [_] No
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
INDEX
Page No.
--------
PART I
- ------
Item 1.-Financial Information*
Balance Sheets, December 31, 1995 and
March 31, 1996 2
Statements of Income for the three
months ended March 31, 1996 and 1995 3
Statements of Cash Flows for the three
months ended March 31, 1995 and 1996 4
Notes to Financial Statements 5-8
Item 2. - Management's Discussion of Operations 9-10
PART II
- -------
Item 6. - Exhibits and Reports on Form 8-K 11
Signatures 12
*The summarized financial information contained herein is unaudited; however in
the opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included.
-1-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
PART I
------
Item 1. - FINANCIAL INFORMATION
-------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land, buildings and personal property,
net of accumulated depreciation of
$10,386,418 at December 31, 1995 and
$9,223,435 at March 31, 1996 $ 59,362,502 $ 49,364,665
Net investment in direct financing leases 47,095,414 47,095,414
Real estate held for sale 9,532,030
Equity investments 1,234,480 1,148,272
Cash and cash equivalents 5,119,385 5,274,340
Accrued interest and rents receivable 378,096 379,041
Other assets 1,699,830 1,729,011
------------ ------------
Total assets $114,889,707 $114,522,773
============ ============
LIABILITIES:
Mortgage notes payable $ 52,685,656 $ 51,821,539
Note payable 5,102,144 5,102,144
Accrued interest payable 610,754 603,480
Accounts payable and accrued expenses 522,575 463,195
Accounts payable to affiliates 127,994 117,891
Prepaid and deferred rental income and
security deposits 1,015,946 904,818
------------ ------------
Total liabilities 60,065,069 59,013,067
============ ============
PARTNERS' CAPITAL:
General Partners (412,915) (344,408)
Limited Partners (67,582 Limited
Partnership Units issued and outstanding
at December 31, 1995 and March 31, 1996) 55,237,553 55,854,114
------------ ------------
Total partners' capital 54,824,638 55,509,706
------------ ------------
Total liabilities and
partners' capital $114,889,707 $114,522,773
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
-2-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995 March 31, 1996
------------------ --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $2,363,625 $2,224,072
Interest income from direct financing leases 1,396,127 1,604,469
Other interest income 57,945 59,573
---------- ----------
3,817,697 3,888,114
---------- ----------
Expenses:
Interest 1,515,356 1,361,328
Depreciation 498,664 469,732
General and administrative 185,899 146,386
Property expenses 40,366 77,387
Amortization 9,277 9,277
---------- ----------
2,249,562 2,064,110
---------- ----------
Income before loss from equity investments
and earnings from discontinued operations 1,568,135 1,824,004
Loss from equity investments 17,856 15,008
---------- ----------
Income from continuing operations 1,550,279 1,808,996
Earnings from discontinued operations 470,967 500,293
---------- ----------
Net income $2,021,246 $2,309,289
---------- ----------
Net income allocated to
General Partners $ 202,125 $ 230,929
---------- ----------
Net income allocated to
Limited Partners $1,819,121 $2,078,360
========== ==========
Net income per Unit
(67,749 and 67,582 Limited Partnership
Units at March 31, 1995 and 1996)
Income from continuing operations $20.59 $24.09
Discontinued operations 6.26 6.66
---------- ----------
$26.85 $30.75
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,021,246 $ 2,309,289
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 507,941 479,009
Other noncash items 63,000 73,590
Loss from equity investments 17,856 15,008
Net change in operating assets and liabilities (77,878) (300,878)
----------- -----------
Net cash provided by operating activities 2,532,165 2,576,018
----------- -----------
Cash flows from investing activities:
Distributions from equity investments 59,938 71,200
Additional capitalized costs 24,925 (3,925)
----------- -----------
Net cash provided by investing activities 84,863 67,275
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,594,367) (1,624,221)
Payment of mortgage principal (768,950) (864,117)
Repurchase of Limited Partnership Units (30,000)
----------- -----------
Net cash used by financing activities (2,393,317) (2,488,338)
----------- -----------
Net increase in cash and
cash equivalents 223,711 154,955
Cash and cash equivalents, beginning of period 4,680,685 5,119,385
----------- -----------
Cash and cash equivalents, end of period $ 4,904,396 $ 5,274,340
----------- -----------
Supplemental disclosure of cash flows information:
Interest paid $ 1,493,413 $ 1,368,602
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. For further information, refer
to the financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1995.
Note 2. Distributions to Partners:
-------------------------
Distributions declared and paid to partners during the three months ended
March 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partnership Unit
------------- ---------------- ---------------- ----------------------------
<S> <C> <C> <C>
December 31, 1995 $162,422 $1,461,799 $21.63
======== ========== ======
</TABLE>
A distribution of $21.75 per Limited Partner Unit for the quarter ended
March 31, 1996 was declared and paid in April 1996.
Note 3. Transactions with Related Parties:
---------------------------------
For the three-month periods ended March 31, 1995 and 1996, the Partnership
incurred leasing fees of $10,648 and $3,048, respectively, and general and
administrative expense reimbursements of $24,508 and $22,846, respectively,
payable to an affiliate.
The Partnership, in conjunction with certain affiliates, is a participant
in a cost sharing agreement for the purpose of renting and occupying office
space. Under the agreement, the Partnership pays its proportionate share
of rent and other costs of occupancy. Net expenses incurred for the three
months ended March 31, 1995 and 1996 were $60,339 and $48,182,
respectively.
-5-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Note 4. Industry Segment Information:
----------------------------
The Partnership's operations consist of the direct and indirect investment
in and the leasing of industrial and commercial real estate and operating a
hotel business. For the three-month periods ended March 31, 1996 and 1995,
the Partnership earned its real estate leasing revenues (rental income plus
interest income from financing leases) from its directly owned real estate
investments as follows:
<TABLE>
<CAPTION>
1995 % 1996 %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Lease Obligor:
--------------
Advanced System Applications, Inc. $ 778,523 21% $ 778,523 20%
Sybron Acquisition Company 622,980 17 622,980 16
Dr Pepper Bottling Company of Texas 499,750 13 499,750 13
Amerisig, Inc. (formerly ASG Acquisition Corp.) 349,491 9 348,723 9
High Voltage Engineering Corporation 288,470 8 295,812 8
Orbital Sciences Corporation 244,345 7 244,345 6
Furon Company 204,861 5 207,482 5
United Stationers Supply Co. 160,250 4 203,177 5
Detroit Diesel Corporation 166,405 4 182,269 5
AutoZone, Inc. 131,098 3 131,098 3
NVRyan L.P. 123,879 3 123,879 3
Mayfair Molded Products Corporation 115,189 3 115,189 3
Winn-Dixie Stores, Inc. 33,625 1 33,625 1
Other 26,711 1 27,514 1
Federal Express Corporation 14,175 1 14,175 1
---------- --- ---------- ---
$3,759,752 100% $3,828,541 100%
---------- --- ---------- ---
</TABLE>
Note 5. Discontinued Operations:
-----------------------
The Partnership and Corporate Property Associates 4 ("CPA/(R)/:4"), an
affiliate, own a hotel property in Kenner, Louisiana as tenants-in-common
with 53.617% and 46.383% interests, respectively. On April 17, 1996, the
Investment Committee of the Corporate General Partners of the Partnership
and CPA/(R)/:4 approved a proposal to transfer ownership of the hotel
property to the operating partnership of a newly-formed real estate
investment trust formed by an affiliate of American General Hospitality
Corp. ("AGH"), the hotel management company which is currently engaged by
the Partnership and CPA/(R)/:4 to manage the hotel property. In exchange
for the contribution of the hotel to the operating partnership, the
Partnership and CPA/(R)/:4 will receive an equity interest in the operating
partnership with an expected initial value of approximately $18,000,000, of
which the Partnership's share would be approximately $9,650,000. In
addition, the operating partnership will assume the existing mortgage loan
obligation on the property of approximately $7,365,000, of which the
Partnership's share is currently approximately $3,950,000. The value of
the consideration received by the Partnership and CPA/(R)/:4 will be
dependent upon the price of the stock issued by AGH in its initial public
offering. The Partnership and CPA/(R)/:4 purchased the property in June
1988 for $17,500,000 (of which the Partnership contributed equity of
approximately $4,020,000) including $10,000,000 of mortgage financing, and
assumed operating control of the hotel in 1992 when they evicted the lessee
due to its financial difficulties.
The exchange transaction is subject to the ability of AGH to complete an
initial public offering for the newly-formed real estate investment trust.
It is intended that the exchange of the hotel property for securities
initially be treated as a noncash exchange for tax and financial reporting
purposes and that the Partnership retain the funds included in the hotel
furniture, fixture and equipment reserves. After one year, the Partnership
will have the right to convert its equity interest in the operating
partnership to shares of the publicly-traded real estate investment trust.
The Partnership does not anticipate incurring any significant costs in
connection with
-6-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
the proposed exchange. In connection with the proposed transaction, the
$9,111,232 carrying value of the hotel property has been reclassified as
real estate held for sale.
Operating results of the hotel business for the three-month periods ended
March 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Revenues $1,152,370 $1,183,802
Fees paid to hotel management
company (42,105) (45,089)
Other operating expenses (639,298) (638,420)
---------- ----------
Hotel operating income $ 470,967 $ 500,293
========== ==========
</TABLE>
Note 6. Properties leased to ASG Acquisition Corp.:
------------------------------------------
The Partnership owns a 100% interest in a property in Olive Branch,
Mississippi and a 26.43% interest as a tenant-in-common with Corporate
Property Associates 9 ("CPA(R):9"), an affiliate, which owns the remaining
interest in a property in Dekalb County, Georgia, which had been leased to
ASG Acquisition Corp. ("ASG"). The Partnership and CPA(R):9 entered into
litigation against Heller Financial, Inc. ("Heller"), a creditor of ASG,
asserting that in 1992, the assets of ASG and certain subsidiaries were
transferred to newly-formed operating companies controlled by Heller in
lieu of foreclosure. The newly-formed subsidiaries entered into short-term
subleases for the properties. The Partnership and CPA(R):9 informed Heller
at that time that its actions were contrary to the lease, and, therefore,
not permissible. The Partnership's offer to allow the operating companies
formed by Heller to assume the lease obligation and for Heller to provide a
guaranty of the lease obligations was rejected. The Partnership and
CPA(R):9 also alleged that the subleases were made with the intent of
defrauding the Partnership and CPA(R):9.
On May 2, 1996, the Partnership and CPA(R):9 reached a settlement with
Heller and its wholly-owned subsidiary, Amerisig, Inc. ("Amerisig"), the
successor company to ASG. Under the settlement agreement, all parties have
agreed to mutual releases which will result in the withdrawal of all
litigation among the parties. New lease agreements were executed for both
properties, and Amerisig executed a guaranty and suretyship agreement which
unconditionally guarantees the lease obligations of both leases.
The annual rent for the Olive Branch property will remain at the current
amount of $980,643; however, rent increases based on a formula indexed to
the Consumer Price Index ("CPI") have been replaced with stated increases
in July 1998 and July 2003 to $1,078,707 and $1,186,578, respectively. To
the extent that interest expense on the new mortgage loan on the Olive
Branch property, as described below, varies from what interest would have
been on the retired loan, such difference will be applied as an adjustment
to the Olive Branch rent. In addition, Amerisig will relinquish its
interest in a security deposit of $224,000 held by the Partnership. The
annual rent on the Dekalb property will remain at an amount equal to
$797,011 (of which the Partnership's share is approximately $210,650) plus
debt service on the mortgage loan; however, there will be no rent increases
until January 2005. The initial lease terms for the Olive Branch and
Dekalb properties expire in 2008 and 2009, respectively, which were the
expiration dates under the prior ASG leases. Both leases provide Amerisig
a purchase option which is exercisable upon 60 days written notice. The
exercise price for Olive Branch property is the greater of (i) the
Partnership's purchase cost for the property (including the cost of any
subsequent improvements) or (ii) fair market value as encumbered by the
lease based on a discount rate of 10%. The exercise price for the Dekalb
property is the greater of (i) purchase cost or (ii) fair market value as
encumbered by the lease.
Also on May 2, 1996, the Partnership refinanced the existing mortgage loan
of $3,901,431 on the Olive Branch property, which matured on May 1, 1996
with a $4,000,000 limited recourse mortgage obligation collateralized by a
deed of trust on the Olive Branch property and a lease assignment. The
loan provides for monthly principal payments $7,528 along with interest
which is payable at an annual interest rate of the London Inter-
-7-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Bank Offered Rate ("LIBOR") plus 3% and matures in April 2001, at which
time a balloon payment for the entire unpaid principal balance will be due.
The lender has provided a commitment of up to $2,450,000 toward an
expansion of the Olive Branch facility with the total costs of such
expansion estimated to amount to $3,500,000. The lender's commitment
expires in June 1998. The retired loan had been a recourse obligation of
the Partnership.
In addition, the lender which holds the note on the Dekalb property
extended the maturity on that loan through April 2001. The loan had been
scheduled to mature in January 1997. As restated, the loan provides for
monthly principal installments of $12,234 along with interest payable at an
annual rate of LIBOR plus 3%. The loan currently has a balance of
$6,397,435 (of which the Partnership's share is $1,690,842).
Note 7. Properties leased to Furon Company:
----------------------------------
In January 1990, the Partnership and CPA(R):9 purchased nine properties as
tenants-in-common with 32.28% and 67.72% ownership interests, respectively,
and entered into a master lease with Furon Company ("Furon"). In August
1993, the Partnership and CPA(R):9 consented to Furon's sublease of two
properties in Liverpool and Twinsburg, Ohio to IER Industries, Inc. ("IER")
through July 2007, the end of Furon's initial lease term. In connection
with consenting to the sublease, the Partnership granted IER a purchase
option on the two subleased properties in consideration for an irrevocable
payment of $75,000 (of which the Partnership's share was $24,210). The
$75,000 paid in 1993 would be credited to the IER's purchase price for the
properties if the option were exercised.
On February 15, 1996, IER notified the Partnership and CPA(R):9 that it was
exercising its option and would seek to complete the purchase on or about
July 8, 1996. The sublease provides that the purchase price will be the
greater of fair market value determined pursuant to an appraisal process or
the sum of (i) $1,450,000 and (ii) any prepayment premium resulting from
any mandatory prepayment to the lender on the mortgage loan collateralized
by the nine Furon properties. The appraisal process has been started;
however, no determination has yet been made as to fair market value. In
the event that the properties are sold, the Partnership's share of Furon's
rent will be reduced by $55,290. In connection with the proposed
transaction, the $420,798 carrying value of the Twinsburg and Liverpool
properties has been reclassified as real estate held for sale.
Note 8. Properties leased Advanced System Applications, Inc.:
----------------------------------------------------
The Partnership and Corporate Property Associates 7 ("CPA(R):7") own
property in Bloomingdale, Illinois, as tenants-in-common with 66.36% and
33.64% ownership interests, respectively which is leased to Advanced System
Applications, Inc. ("ASA"). In July 1994 the Partnership and CPA(R):7
entered into a lease modification agreement, annual rent increased to
$5,200,000 (of which the Partnership's share is $3,450,000) from $1,850,000
(of which the Partnership's share was $1,227,660). In consenting to the
modification, the mortgage loan payments were substantially increased so
that the loan fully amortized on March 1, 1996. Although ASA is obligated
to make is lease payments through June 1997, it is in the process of
vacating the property. To the extent that the Partnership and CPA(R):7
enter into new leases for any vacated space, ASA is entitled to one-third
of all rentals received, net of any landlord costs, during the remaining
term of its lease.
On January 31, 1996, the Partnership and CPA(R):7 entered into a lease with
the United States Postal Service (the "Postal Service") for approximately
35% of the leasable space at the ASA property. The lease has a 10-year
term commencing May 1, 1996 with annual rentals of $722,800 (of which the
Partnership's share will be $479,650), increasing to $822,800 after five
years. The Partnership and CPA(R):7 retain the obligation to provide
maintenance and support services to the lessee. The lease provides for
rent escalations in 1998 based on increases in certain operating costs of
the property incurred by the Partnership and CPA(R):7. In addition, the
Postal Service will reimburse the Partnership and CPA(R):7 for its pro rata
share of real estate taxes. The Postal Service has an option to terminate
the lease after five years and right of first refusal on space vacated by
ASA.
The Partnership and CPA(R):7 will provide the Postal Service a tenant
improvement allowance of up to $600,000 (of which the Partnership's share
is $398,160).
-8-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
-----------------------------------------------
Results of Operations:
---------------------
Both net income and income from continuing operations for the three-
month period ended March 31, 1996 reflected substantial increases in
earnings as compared with the prior year. The 17% increase in income from
continuing operations was due to an increase in lease revenues and
decreases in interest and general and administrative expenses. The
increase in lease revenues was due to the July 1995 rent increase on the
Detroit Diesel Corporation lease and the March 1995 restructuring of the
Partnership's lease with United Stationers Supply Co., at which time an
annual rent increase of $177,000 was negotiated. The decrease in interest
expense was due to the full amortization in March 1996 of the mortgage loan
collateralized by the Advanced System Applications, Inc. ("ASA") property.
The decrease in general and administrative expenses was primarily due to
lower estimates for partnership level state franchise taxes. The benefit
from the increase in lease revenues and decreases in interest and general
and administrative costs was partially offset by an increase in property
expenses. Such increase was primarily due to certain costs incurred in
connection with extending the Partnership's lease with Allied Plywood, Inc.
("Allied"), for an additional five years through 2002. Allied is a lessee
of a property formerly leased to NV Ryan, L.P..
Income from the hotel operation, which the Partnership has made formal
plans to dispose of, increased by 6%. The increase was entirely due to an
increase in revenues as hotel operating expenses were unchanged for the
comparable periods. The hotel realized the revenue increase even though
the occupancy rate for the quarter decreased by 2%. Higher average room
rates were realized as a result of the hotel's ability to increase rates
and changes in usage. In 1996, corporate rates represented 39% of
available rooms versus 34% in 1995, while group business decreased to 11%
from 19% of available rooms. This change in usage was beneficial to
earnings as the average room rate for corporate business is substantially
higher than the rates negotiated by groups.
Financial Condition:
-------------------
There has been no material change in the Partnership's financial
condition since December 31, 1995. The Partnership's cash provided from
operations and equity investments was sufficient to fund distributions to
partners and pay scheduled mortgage principal payments.
The Partnership will benefit from its agreements with Amerisig, Inc.
("Amerisig") whereby the Partnership and Amerisig have resolved their
differences resulting in the withdrawal of all outstanding litigation. In
connection with the settlement, short-term subleases, which the Partnership
asserted were not permissible, were eliminated. Amerisig has provided an
unconditional guarantee of the leases that had been provided by its
predecessor company. In addition, the Partnership was able to refinance a
mortgage loan that had matured on one of the Amerisig properties and extend
a mortgage loan on the other Amerisig property which had been scheduled to
mature in 1997. Both loans, which are limited recourse obligations, are
now scheduled to mature in 2001. The matured loan had been a recourse
obligation of the Partnership. The Partnership has a commitment for up to
$3,500,000 to fund an expansion of the Amerisig facility in Olive Branch,
Mississippi by no later than March 1998, with up to $2,450,000 of such
funding to be provided by limited recourse mortgage financing.
The Partnership will benefit from the commencement in May 1996 of the
Partnership's lease with the United States Postal Service (the "Postal
Service") and the satisfaction of the ASA loan. Annual rent from the
Postal service lease will be approximately $480,000 before operating costs;
however, until June 1997, the Partnership is obligated to share one-third
of Postal Service rentals, net of expenses, with ASA in lieu of reducing
ASA's rent for relinquishing its space. With the satisfaction of the ASA
loan, the Partnership's annual cash flow will increase by approximately
$2,650,000 until the expiration of the ASA lease in June 1997. Based on
current cash balances, the Partnership has the ability to fully fund from
cash reserves its 398,000 tenant improvement allowance for the Postal
Service and other costs which may be necessary to retrofit the ASA property
for multi-tenant use.
-9-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS, Continued
----------------------------------------------------------
Financial Condition (continued):
-------------------------------
If the exchange of the Kenner, Louisiana hotel property and related
assumption of the mortgage loan obligation for equity interests in the
operating partnership of a real estate investment trust is completed, the
Partnership would expect to receive a relatively stable cash flow from such
investment as the objective of the real estate investment trust and the
underlying partnership is to distribute at least 95% of its taxable income
so that it can maintain its tax status as a real estate investment trust.
With this investment, the Partnership will eliminate the uncertainty
related to operating a hotel business with a single hotel and replace such
uncertainty with a stable cash flow from the operating partnership's
distributions which comprise of the operation of many hotels which are
initially estimated to be approximately $825,000 annually. Although cash
flow from the hotel operations when combined with debt service on the
property mortgage was approximately $1,150,000 in 1995, the Partnership
funded improvements of nearly $1,000,000 in the prior year. Funding major
capital improvements at the hotel property are needed to remain
competitive; therefore, if ownership of the hotel were retained, the
Partnership would be required to use funds for additional improvements in
the future. Accordingly, cash flow from the hotel could vary significantly
from year to year. The Partnership had operated the hotel since 1992,
subsequent to evicting the lessee. At that time, the Partnership's
objectives were to generate positive cash flow from the hotel operation and
enhance the underlying property value. If the proposed transaction is
consummated, the Partnership may realize these objectives of having
enhanced the property's value.
-10-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
PART II
-------
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 1996 the Partnership was
not required to file any reports on Form 8-K.
-11-
<PAGE>
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigend thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
By: EIGHTH CAREY CORPORATE PROPERTY, INC.
5/13/96 By: /s/ Claude Fernandez
-------------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
5/13/96 By: /s/ Michael D. Roberts
-------------- -------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,274,340
<SECURITIES> 0
<RECEIVABLES> 379,041
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,729,011
<PP&E> 115,215,644
<DEPRECIATION> 9,223,435
<TOTAL-ASSETS> 114,522,773
<CURRENT-LIABILITIES> 2,089,384
<BONDS> 56,923,683
0
0
<COMMON> 0
<OTHER-SE> 55,509,706
<TOTAL-LIABILITY-AND-EQUITY> 114,522,773
<SALES> 0
<TOTAL-REVENUES> 3,888,114
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 702,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,361,328
<INCOME-PRETAX> 2,309,289
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,808,996
<DISCONTINUED> 500,293
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,309,289
<EPS-PRIMARY> 30.75
<EPS-DILUTED> 30.75
</TABLE>
