<PAGE> 1
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 ended MARCH 31, 1997
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 of (I.R.S. Employer Identification No.)
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.
[ ] Yes [ ] No
<PAGE> 2
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I
Item 1. - Financial Information*
Balance Sheets, December 31, 1996 and
March 31, 1997 2
Statements of Income for the three
months ended March 31, 1996 and 1997 3
Statements of Cash Flows for the three
months ended March 31, 1996 and 1997 4
Notes to Financial Statements 5-6
Item 2. - Management's Discussion of Operations 7
PART II
Item 6. - Exhibits and Reports on Form 8-K 8
Signatures 9
</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, March 31
1996 1997
---- ----
(Note) (Unaudited)
<S> <C> <C>
ASSETS:
Land, buildings and personal property,
net of accumulated depreciation of
$10,293,440 at December 31, 1996 and
$10,650,857 at March 31, 1997 $ 48,699,455 $ 48,342,038
Net investment in direct financing leases 47,095,414 47,095,414
Equity investments 6,513,068 6,399,642
Cash and cash equivalents 4,850,145 5,463,916
Other assets 1,471,121 1,934,312
------------ ------------
Total assets $108,629,203 $109,235,322
============ ============
LIABILITIES:
Mortgage notes payable $ 44,139,958 $ 43,852,041
Note payable 5,102,144 5,102,144
Accrued interest payable 473,317 469,591
Accounts payable and accrued expenses 274,822 235,522
Accounts payable to affiliates 209,112 269,332
Prepaid and deferred rental income and
security deposits 698,443 687,185
------------ ------------
Total liabilities 50,897,796 50,615,815
----------- ------------
PARTNERS' CAPITAL:
General Partners (103,774) (14,964)
Limited Partners (67,582 Limited
Partnership Units issued and outstanding) 57,835,181 58,634,471
------------ ------------
Total partners' capital 57,731,407 58,619,507
------------ ------------
Total liabilities and
partners' capital $108,629,203 $109,235,322
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Note: The balance sheet at December 31, 1996 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
March 31, 1996 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income from operating leases $2,224,072 $2,323,237
Interest income from direct financing leases 1,604,469 1,614,048
Other interest income 59,573 49,975
Other income 213,155
---------- ----------
3,888,114 4,200,415
---------- ----------
Expenses:
Interest 1,361,328 1,148,522
Depreciation 469,732 357,417
General and administrative 146,386 185,693
Property expenses 77,387 120,439
Amortization 9,277 7,644
---------- ----------
2,064,110 1,819,715
---------- ----------
Income before (loss) income
from equity investments, 1,824,004 2,380,700
Earnings from hotel operation 500,293
(Loss) income from equity investments (15,008) 159,404
---------- ----------
Net income $2,309,289 $2,540,104
========== ==========
Net income allocated to
General Partners $ 230,929 $ 254,010
========== ==========
Net income allocated to
Limited Partners $2,078,360 $2,286,094
========== ==========
Net income per Unit
(67,582 Limited Partnership
Units)
$30.75 $33.83
====== ======
</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>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,309,289 $ 2,540,104
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 479,009 365,061
Other noncash items 73,590 41,300
Loss from equity investments 15,008
Net change in operating assets and liabilities (300,878) (506,199)
----------- -----------
Net cash provided by operating activities 2,576,018 2,440,266
----------- -----------
Cash flows from investing activities:
Distributions from equity investments in excess
of equity income 71,200 113,426
Additional capitalized costs (3,925)
----------- -----------
Net cash provided by investing activities 67,275 113,426
----------- -----------
Cash flows from financing activities:
Distributions to partners (1,624,221) (1,652,004)
Payments of mortgage principal (864,117) (287,917)
----------- -----------
Net cash used by financing activities (2,488,338) (1,939,921)
----------- -----------
Net increase in cash and
cash equivalents 154,955 613,771
Cash and cash equivalents, beginning of period 5,119,385 4,850,145
----------- -----------
Cash and cash equivalents, end of period $ 5,274,340 $ 5,463,916
=========== ===========
Supplemental disclosure of cash flows information:
Interest paid $ 1,368,602 $ 1,152,248
=========== ===========
</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, 1996.
Note 2. Distributions to Partners:
Distributions declared and paid to partners during the three months ended March
31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended General Partners Limited Partners Per Limited Partner Unit
------------- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
December 31, 1996 $165,200 $1,486,804 $22.00
======== ========== ======
</TABLE>
A distribution of $22.02 per Limited Partner Unit for the quarter ended March
31, 1997 was declared and paid in April 1997.
Note 3. Transactions with Related Parties:
For the three-month periods ended March 31, 1996 and 1997, the Partnership
incurred leasing fees of $3,048 and $5,615, respectively, and general and
administrative expense reimbursements of $22,846 and $57,521, 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, 1996 and 1997 were $48,182 and $41,580, 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. For the three-month
periods ended March 31, 1996 and 1997, 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>
1996 % 1997 %
---- ---- ---- --
<S> <C> <C> <C> <C>
Lease Obligor:
Advanced System Applications, Inc. $ 778,523 20% $ 751,636 19%
Sybron Acquisition Company 622,980 16 622,980 16
Dr Pepper Bottling Company of Texas 499,750 13 499,750 13
Amerisig, Inc. 348,723 9 376,125 9
High Voltage Engineering Corporation 295,812 8 295,812 7
Orbital Sciences Corporation 244,345 6 244,345 6
United Stationers Supply Co. 203,177 5 203,177 5
Furon Company 207,482 5 194,975 5
Detroit Diesel Corporation 182,269 5 182,269 5
AutoZone, Inc. 131,098 4 131,098 3
NVRyan L.P. 123,879 3 123,879 3
U.S. Postal Service 119,913 3
Mayfair Molded Products Corporation 115,189 3 115,189 3
Winn-Dixie Stores, Inc. 33,625 1 33,625 1
Other 27,514 1 28,337 1
Federal Express Corporation 14,175 1 14,175 1
----------- ---- ----------- ---
$ 3,828,541 100% $ 3,937,285 100%
=========== ==== =========== ====
</TABLE>
Note 5. Investment in Operating Partnership:
The Partnership owns 493,664 limited partnership units in American General
Hospitality Operating Partnership, L.P., the operating partnership of American
General Hospitality Corporation ("AGH"), a publicly-traded real estate
investment trust. The Partnership's investment in the operating partnership is
accounted for under the equity method.
AGH's audited financial statements reported total assets of $243,115,000 and
shareholders' equity of $127,461,000 as of December 31, 1996 and total revenues
of $13,496,000 and net income of $5,129,000 for the period from July 31, 1996
through December 31, 1996.
-6-
<PAGE> 8
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 period ended March 31, 1997 increased by
$231,000 as compared with net income for three-month period ended March 31,
1996. The increase in net income was primarily due to nonrecurring other income
of $213,000. Excluding this nonrecurring item, income for the period reflected a
modest increase of $18,000 as increases in general and administrative expenses
offset increases in lease revenues and decreases in interest and depreciation
expenses. The nonrecurring other consists of a distribution on the Partnership's
bankruptcy claim against the former lessee of the New Orleans hotel. A
distribution on the claim was also received by the Partnership in 1996.
The increase in lease revenues was due to the commencement of the lease
with the United States Postal Service in May 1996. Interest expense decreased
due to the full amortization of the mortgage loan on the Advanced System
Applications, Inc. in March 1996, satisfaction of the mortgage loan on the New
Orleans hotel property in connection with exchanging its interest in the hotel
for limited partnership units in the operating partnership of a real estate
investment trust, American General Hospitality Corporation, in July 1996 and the
prepayment of the loan on the AutoZone, Inc. properties in December 1996. The
decrease in depreciation was due to the disposition of the hotel property. The
increase in general and administrative expense was due, in part, to certain
nonrecurring administrative reimbursements. Property expenses increased due to
costs incurred by the Partnership at the ASA property as such costs are now
being paid by the Partnership. The lease agreement with the Postal Service at
the ASA property is not a net lease so that the Partnership is required to pay
certain property-related expenses. The ASA lease was modified in the second
quarter of 1996 at which time the Partnership agreed to absorb property-related
expenses in exchange for the assignment of sublease rents which had previously
been received by ASA.
Although equity income of $171,000 from the investment in the operating
partnership was lower than earnings from the hotel operation, the decrease in
cash flow resulting from the exchange was approximately $241,000. As more fully
described in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996, the General Partners believe that overall cash flow will
significantly benefit as the Partnership periodically was required to use
substantial resources to maintain and upgrade the hotel property to remain
competitive. As of May 6, 1997, the quoted market value of the common stock of
American General Hospitality was $25 -1/2 per share. As the limited partnership
units will ultimately be convertible to shares of American General Hospitality
on a one-for-one basis, the underlying value of the Company's investment is
approximately $12,588,000 as of that date.
Financial Condition:
There has been no material change in the Partnership's financial condition
since December 31, 1996. Cash flow from operating activities of $2,440,000 was
sufficient to fund distributions to partners of $1,652,000 and scheduled
mortgage principal payments of $288,000. The maturity of the mortgage loan
collateralized by the Furon properties has been extended through June 1, 1997.
The General Partners believe the Partnership will be able to refinance the loan,
in part because there are more than ten years remaining on the Furon lease.
However, the lender's due diligence process has not been completed.
The Postal Service has a right of first refusal on the space being vacated
by ASA in June 1997. The Partnership and the Postal Service have entered into
discussions regarding leasing the additional space. There is no assurance that
the Postal Service will agree to lease all or a portion of the space being
vacated.
The General Partners are currently investigating ways to provide liquidity
for limited partners on a tax-effective basis.
-7-
<PAGE> 9
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, 1997 the Partnership
was not required to file any reports on Form 8-K.
-8-
<PAGE> 10
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
undersigned thereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
By: EIGHTH CAREY CORPORATE PROPERTY, INC.
5/13/97 By: /s/ Claude Fernandez
------- ------------------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Financial Officer)
5/13/97 By: /s/ Michael D. Roberts
------- ------------------------------
Date Michael D. Roberts
First Vice President and Controller
(Principal Accounting Officer)
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,463,916
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,463,916
<PP&E> 106,088,309
<DEPRECIATION> 10,650,857
<TOTAL-ASSETS> 109,235,322
<CURRENT-LIABILITIES> 1,661,630
<BONDS> 48,954,185
0
0
<COMMON> 0
<OTHER-SE> 58,619,507
<TOTAL-LIABILITY-AND-EQUITY> 109,235,322
<SALES> 0
<TOTAL-REVENUES> 4,200,415
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 663,549
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,148,522
<INCOME-PRETAX> 2,540,104
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,540,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,540,104
<EPS-PRIMARY> 33.83
<EPS-DILUTED> 33.83
</TABLE>
