<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 1996
-------------------------------------------------
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
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CORPORATE PROPERTY ASSOCIATES 8, L.P., A DELAWARE LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3469700
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
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(Address of principal executive offices) (Zip Code)
(212) 492-1100
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(Registrant's telephone number, including area code)
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(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.
Yes No
--- ---
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I
<S> <C>
Item 1. - Financial Information*
Balance Sheets, December 31, 1995 and
September 30, 1996 2
Statements of Income for the three and nine
months ended September 30, 1995 and 1996 3
Statements of Cash Flows for the nine
months ended September 30, 1995 and 1996 4
Notes to Financial Statements 5-7
Item 2. - Management's Discussion of Operations 8-9
PART II
Signatures 10
</TABLE>
*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> 3
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
PART I
Item 1. - FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ ------------
(Note) (Unaudited)
ASSETS:
<S> <C> <C>
Land, buildings and personal property,
net of accumulated depreciation of
$10,386,418 at December 31, 1995 and
$9,936,022 at September 30, 1996 $ 59,362,502 $ 49,056,874
Net investment in direct financing leases 47,095,414 47,095,414
Equity investments 1,234,480 982,699
Investment in operating partnership 5,599,688
Cash and cash equivalents 5,119,385 6,948,876
Other assets 2,077,926 1,527,302
------------ ------------
Total assets $114,889,707 $111,210,853
============ ============
LIABILITIES:
Mortgage notes payable $ 52,685,656 $ 47,099,334
Note payable 5,102,144 5,102,144
Accrued interest payable 610,754 497,868
Accounts payable and accrued expenses 522,575 254,584
Accounts payable to affiliates 127,994 300,822
Prepaid and deferred rental income and
security deposits 1,015,946 666,978
------------ ------------
Total liabilities 60,065,069 53,921,730
------------ ------------
PARTNERS' CAPITAL:
General Partners (412,915) (166,465)
Limited Partners (67,582 Limited
Partnership Units issued and outstanding) 55,237,553 57,455,588
------------ ------------
Total partners' capital 54,824,638 57,289,123
------------ ------------
Total liabilities and
partners' capital $114,889,707 $111,210,853
============ ============
</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> 4
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1996 September 30, 1995 September 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income from
operating leases $2,422,024 $2,289,688 $ 6,990,486 $ 6,783,408
Interest from direct
financing leases 1,374,526 1,654,333 4,369,904 4,862,920
Other interest income 81,164 53,733 196,934 197,106
Other income 109,059 353,401
---------- ---------- ----------- -----------
3,877,714 4,106,813 11,557,324 12,196,835
---------- ---------- ----------- -----------
Expenses:
Interest on mortgages
and note payable 1,474,358 1,251,324 4,474,298 3,959,651
Depreciation 469,889 358,141 1,441,582 1,182,318
General and administrative 117,963 192,506 424,475 538,335
Property expense 13,735 39,137 329,619 249,512
Amortization 9,277 9,277 27,831 27,831
---------- ---------- ----------- -----------
2,085,222 1,850,385 6,697,805 5,957,647
---------- ---------- ----------- -----------
Income before
(loss) income from equity
investments and gain
on sales of real estate 1,792,492 2,256,428 4,859,519 6,239,188
Hotel operating income 357,504 70,269 1,243,309 1,003,300
(Loss) income from equity
investments (16,524) 129,865 (47,663) 100,753
---------- ---------- ----------- -----------
Income before gain on
sales of real estate 2,133,472 2,456,562 6,055,165 7,343,241
Gain on sale of real estate 21,697 21,697
---------- ---------- ---------- ----------
Net income $2,133,472 $2,478,259 $ 6,055,165 $ 7,364,938
========== ========== =========== ===========
Net income allocated
to General Partners $ 213,347 $ 247,826 $ 605,516 $ 736,494
========== ========== =========== ===========
Net income allocated
to Limited Partners $1,920,125 $2,230,433 $ 5,449,649 $ 6,628,444
========== ========== =========== ===========
Net income per weighted
average Unit: $28.41 $33.00 $80.52 $98.08
====== ====== ====== ======
Weighted average units 67,582 67,582 67,682 67,582
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,055,165 $ 7,364,938
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,469,413 1,210,149
Other noncash items 228,215 166,952
Loss from equity investments 47,663
Gain on sale (21,697)
Net change in operating assets and liabilities (552,207) (227,641)
----------- -----------
Net cash provided by operating activities 7,248,249 8,492,701
----------- -----------
Cash flows from investing activities:
Proceeds from sale of real estate 442,496
Distributions from equity investments in excess of equity income 211,693 109,886
Additional capitalized costs (122,438) (414,256)
Purchase of interest in operating partnership and related costs (230,000)
----------- -----------
Net cash provided by (used in) investing activities 89,255 (91,874)
----------- -----------
Cash flows from financing activities:
Distributions to partners (4,799,460) (4,900,453)
Retirement of Limited Partner Units (179,670)
Proceeds from issuance of mortgage 4,000,000
Prepayment of mortgage payable (4,189,427)
Payments on mortgage principal (2,362,883) (1,481,456)
----------- -----------
Net cash used by financing activities (7,342,013) (6,571,336)
----------- -----------
Net (decrease) increase in cash and
cash equivalents (4,509) 1,829,491
Cash and cash equivalents, beginning of period 4,680,685 5,119,385
----------- -----------
Cash and cash equivalents, end of period $ 4,676,176 $ 6,948,876
=========== ===========
Supplemental disclosure of noncash investing and financing activities:
In July 1996, the Partnership exchanged its interest in a hotel property and
related assets and liabilities for 493,664 units in the operating partnership of
a publicly-traded real estate investment trust. The assets and liabilities
transferred are as follows:
Real estate, net of accumulated depreciation $ 9,116,767
Mortgage note payable (3,915,439)
Other assets and liabilities transferred, net 26,465
-----------
$ 5,227,793
===========
Supplemental disclosure of cash flows information:
Interest paid $ 4,460,878 $ 4,072,537
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 6
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 nine months ended
September 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1995 $162,422 $1,461,799 $21.63
======== ========== ======
March 31, 1996 $163,323 $1,469,909 $21.75
======== ========== ======
June 30, 1996 $164,299 $1,478,701 $21.88
======== ========== ======
</TABLE>
A distribution of $21.95 per Limited Partner Unit for the quarter ended
September 30, 1996 was declared and paid in October 1996.
Note 3. Transactions with Related Parties:
For the three-month and nine-month periods ended September 30, 1995, the
Partnership incurred leasing fees of $4,293 and $23,454, respectively, and
general and administrative expense reimbursements of $26,948 and $68,333,
respectively, payable to an affiliate. For the three-month and nine-month
periods ended September 30, 1996, the Partnership incurred leasing fees of
$3,046 and $9,240, respectively, and general and administrative expense
reimbursements of $25,375 and $86,710, 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 nine months ended
September 30, 1995 and 1996 were $99,521 and $122,345, respectively.
-5-
<PAGE> 7
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 (see Note 5). For the nine-month periods ended September 30, 1995 and
1996, 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 %
---- ---- ---- --
Lease Obligor:
<S> <C> <C> <C> <C>
Advanced System Applications, Inc. $ 2,335,568 21% $ 2,290,961 20%
Sybron Acquisition Company 1,868,940 17 1,868,940 16
Dr Pepper Bottling Company of Texas 1,499,250 13 1,499,250 13
Amersig, Inc. 1,050,772 9 1,052,667 9
High Voltage Engineering Corporation 872,342 8 887,435 8
Orbital Sciences Corporation 733,034 6 733,034 6
Furon Company 614,583 5 621,239 5
United Stationers Supply Co. 566,500 5 609,427 5
Detroit Diesel Corporation 512,435 5 546,808 5
AutoZone, Inc. 393,293 3 393,293 3
NVRyan L.P. 344,304 3 371,638 3
Mayfair Molded Products Corporation 345,566 3 345,566 3
U.S. Postal Service 199,854 2
Winn-Dixie Stores, Inc. 100,875 1 100,875 1
Other 80,403 1 82,816 1
Federal Express Corporation 42,525 42,525
----------- ---- ----------- ----
$11,360,390 100% $11,646,328 100%
=========== ==== =========== ====
</TABLE>
Note 5. Hotel Property in Kenner, Louisiana:
The Partnership and Corporate Property Associates 4 ("CPA(R):4"), an affiliate,
purchased a hotel property in Kenner, Louisiana, in June 1988 as
tenants-in-common with 53.617% and 46.383% interests, respectively. The
Partnership and CPA(R):4 assumed operating control of the hotel in 1992 after
evicting the lessee due to its financial difficulties. On July 30, 1996, the
Partnership and CPA(R):4 completed a transaction with American General
Hospitality Operating Partnership L.P. (the "Operating Partnership"), the
operating partnership of a newly-formed real estate investment trust, American
General Hospitality, Inc. ("AGH") in which the Partnership and CPA(R):4 received
920,672 limited partnership units (of which the Partnership's share was 493,664
units) in exchange for the hotel property and its operations, a cash
contribution of $388,331 (of which the Partnership's share was $208,211) and the
Operating Partnership's assumption of the Partnership's and CPA(R):4's mortgage
loan obligation collateralized by the hotel property (of which the Partnership's
share was $3,915,439).
The exchange of the hotel property for limited partnership units will initially
be treated as a nonmonetary exchange for tax and financial reporting purposes.
After one year, the Partnership will have the right to convert its equity
interest in the operating partnership to shares of common stock in AGH, which
recently completed an initial public offering, with such shares registered with
the Securities and Exchange Commission. The Partnership's carrying value for the
limited partnership units of $5,457,793 is based on the historical basis of
assets transferred, net of liabilities assumed by the Operating Partnership
($5,227,793); cash contributed ($208,211) and costs incurred to complete the
exchange ($21,789). The Partnership's interest in the limited partnership is
being accounted for under the equity method.
-6-
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
Operating results of the hotel business for the nine-month periods ended
September 30, 1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revenues $ 3,314,418 $ 2,672,477
Fees paid to hotel management
company (109,855) (96,016)
Other operating expenses (1,961,254) (1,573,161)
----------- -----------
Hotel operating income $ 1,243,309 $ 1,003,300
=========== ===========
</TABLE>
Note 6. Sale of Real Estate:
In January 1990, the Partnership and Corporate Property Associates 9, L.P.
("CPA(R):9"), an affiliate, 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 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 purchase option. The
sublease provided that the option 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 charges resulting from any mandatory prepayment to the
lender on the mortgage loan collateralized by the nine Furon properties.
On September 9, 1996, the Partnership and CPA(R):9 sold the two properties to
IER for $1,465,495. Net of its share of the option payment received in 1993,
prepayment charges and other costs, the Partnership's share of net proceeds from
the sale was $442,496 of which $287,996 was used to pay a mandatory prepayment
on the mortgage. In connection with the sale, the Partnership recognized a gain
of $21,697. As a result of the sale and the related mortgage prepayment, annual
rent from Furon and debt service on the Furon properties mortgage loan will
decrease by approximately $55,000 and $38,400, respectively.
-7-
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
Results of Operations:
Net Income for the three-month and nine-month periods ended September 30,
1996 increased by $344,000 and $1,309,000, respectively, as compared with the
same periods ended September 30, 1995. Included in results for the current
three-month and nine-month periods are the benefit from certain nonrecurring
other income items totalling $109,000 and $353,000, respectively. The increase,
as adjusted, was due to increases in lease revenues and income from equity
investments, and decreases in hotel operating income and interest, depreciation
and property expenses. The increase in lease revenues was due to rent increases
on the properties leased to Detroit Diesel Corporation in July 1995 and Furon
Company ("Furon") in January 1996, the restructuring of the United Stationers
Supply Co. lease in March 1995 and the commencement of the lease with the United
States Postal Service (the "Postal Service") in May 1996. The increase in equity
income was due to $142,000 earned from the new investment in American General
Hospitality Operating L.P. (the "Operating Partnership"). The Partnership
acquired this investment on July 30, 1996 when it exchanged an interest in its
hotel property in Kenner, Louisiana (and related assets and liabilities
including the transfer of a mortgage loan obligation on the property) for
limited partnership units in the Operating Partnership. Hotel operating income
decreased as a result of the exchange as the Partnership ceased having a direct
investment in the hotel after the exchange. The decrease in interest expense was
due to the satisfaction of the mortgage loan collateralized by the Advanced
System Applications, Inc. ("ASA") property which fully amortized in March 1996,
the transfer of the debt obligation on the hotel property to the Operating
Partnership and the continuing principal amortization of other mortgage debt.
The decrease in depreciation was due to lower charges as a result of the sale of
the Furon properties and the transfer of the Kenner hotel property. The decrease
in property expense for the nine-month period was due to the successful
resolution in the second quarter of 1996 of the Partnership's dispute relating
to the Amerisig, Inc. ("Amerisg") property. With the sale of two properties,
annual rent under the Furon lease will decrease by $55,000; however, cash flow
(rental less debt service on the related mortgage debt) from the Furon
properties will decrease by only $16,600 as annual debt service on the loan
collateralized by the Furon properties will be reduced by $38,400 as the debt
service schedule was reamortized after a partial prepayment on the Furon
mortgage loan was paid from the proceeds of the sale of two Furon properties.
Net income was not fully comparable as the disposition of the hotel
operation occurred on July 30, 1996; such operations were not in effect for the
full current periods. As a result of the transaction with the Operating
Partnership, the Partnership expects to realize cash flow of approximately
$805,000 per year from distributions. Although the Partnership's income will
decrease as income from the hotel operation exceeded projected income from the
the Operating Partnership investment, Management believes that the Partnership
would have had to continue to invest significant resources to periodically fund
the capital improvements needed to remain competitive in operating the hotel.
For instance, the Partnership realized cash flow after debt service from the
hotel in 1995 of $1,184,000; however, the Partnership funded improvements in
excess of $867,000 in 1994. Management hopes that the exchange will eliminate
the uncertainty and fluctuation in cash flow relating to operating a single
hotel as the Operating Partnership owns a diversified portfolio of hotel
properties. The Partnership has an option after July 30, 1997 to exchange its
limited partnership units for shares of American General Hospitality, Inc.
("AGH"), a publicly traded real estate investment trust, which holds the
majority interest in the Operating Partnership.
Under its agreement with the Partnership, ASA, whose lease expires in June
1997, had been entitled to share one-third of all rents from lessees for space
it had relinquished. Under a separate agreement, the Partnership is not sharing
any of the Postal Service's rent with ASA and is receiving all the rents of an
ASA subtenant in consideration for a reduction of ASA's monthly rent by
approximately $46,100 to $241,500 and releasing ASA from its lease obligations
for bearing the costs of repair and maintenance, insurance and real estate
taxes. Such costs are now the responsibility of the Partnership. Monthly rentals
from the Postal Service and the ASA subtenant are $77,000.
-8-
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
Item 2. - MANAGEMENT'S DISCUSSION OF OPERATIONS
Other income consisted of $244,000 relating to release from a security
deposit obligation in the second quarter and a $109,000 payment received in the
third quarter from the bankruptcy trustee administering the bankruptcy of the
former lessee of the hotel property in Livonia, Michigan in the third quarter.
While there may be additional distributions made on the Partnership's claim
against the former lessee, the Partnership recognizes income from any settlement
as distributions are received. There can be no assurance that the Partnership
will receive additional amounts under its claim against the former lessee.
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
distributions from equity investments totalling $8,603,000 was sufficient to
fund distributions to partners of $4,900,000 and pay scheduled mortgage
principal payments of $1,481,000. While the Partnership has substantially funded
a tenant improvement allowance which was required under the Postal Service
lease, the Partnership expects to incur additional costs in retrofitting the ASA
property for multi-tenant use. A significant portion of such costs may not be
incurred until after ASA fully vacates the property at the end of its lease. The
Partnership is committed to fund up to $3,500,000 for an expansion of the
Amerisg facility in Olive Branch, Mississippi by no later than March 1998. The
mortgage lender on the Olive Branch property has a commitment to supply
$2,400,000 of financing for the expansion. Based on current projections, the
Partnership should be able to fund the $1,100,000 of equity on the expansion
project from cash reserves.
As a real estate investment trust, the Operating Partnership has an
obligation to distribute 95% of its taxable income in order to retain its
special Federal income tax status. Since the Operating Partnership owns a
majority of the Operating Partnership limited partnership units, the Operating
Partnership has a fiduciary obligation to use its best efforts for the Operating
Partnership to receive distributions which can be passed through to the
Operating Partnership shareholders in order to meet the tax distribution
objective. Accordingly, with the exchange, the Partnership should achieve less
fluctuation in cash flow and has eliminated the need for allocating funds for
capital improvements. Further, with the option to exchange the Operating
Partnership units for the Operating Partnership shares, the Partnership will
have the opportunity to sell its interests at a readily determinable market
value.
The General Partners are currently investigating ways to provide liquidity
for limited partners on a tax-effective basis.
-9-
<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
PART II
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
By: EIGHTH CAREY CORPORATE PROPERTY, INC.
04/10/97 By: /s/ Claude Fernandez
-------- ----------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
04/10/97 By: /s/ Michael D. Roberts
-------- ----------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-10-
