<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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
of incorporation or organization) Identification No.)
50 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 492-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of Class)
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of
Registrant: There is no active market for Limited Partnership Units.
<PAGE> 2
PART II
Item 8. Financial Statements and Supplementary Data.
(i) Report of Independent Accountants.
(ii) Balance Sheets as of December 31, 1995 and 1996.
(iii) Statements of Income for the years ended December 31, 1994, 1995 and
1996.
(iv) Statements of Partners' Capital for the years ended December 31, 1994,
1995 and 1996.
(v) Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996.
(vi) Notes to Financial Statements.
-10-
<PAGE> 3
REPORT of INDEPENDENT ACCOUNTANTS
To the Partners of
Corporate Property Associates 8, L.P.:
We have audited the accompanying balance sheets of Corporate
Property Associates 8, L.P., a Delaware limited partnership, as of December 31,
1995 and 1996, and the related statements of income, partners' capital, and cash
flows for each of the three years in the period ended December 31, 1996. We have
also audited the financial statement schedule included on pages 23 to 25 of this
Annual Report. These financial statements and financial statement schedule are
the responsibility of the General Partners. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the General Partners, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Corporate
Property Associates 8, L.P., a Delaware limited partnership, as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
Schedule of Real Estate and Accumulated Depreciation as of December 31, 1996,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the financial information required to
be included therein pursuant to Securities and Exchange Commission Regulation
S-X Rule 12-28.
/s/ Coopers & Lybrand L.L.P.
New York, New York
March 21, 1997
- 6 -
<PAGE> 4
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
BALANCE SHEETS
December 31, 1995 and 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
ASSETS:
Real estate leased to others:
Accounted for under the
operating method:
Land $ 16,215,476 $ 16,102,755
Buildings 42,873,222 42,890,140
------------ ------------
59,088,698 58,992,895
Accumulated depreciation 8,945,959 10,293,440
------------ ------------
50,142,739 48,699,455
Net investment in direct financing leases 47,095,414 47,095,414
------------ ------------
Real estate leased to others 97,238,153 95,794,869
Equity investments 1,234,480 6,513,068
Operating real estate, net of accumulated
depreciation of $1,440,459 in 1995 9,219,763
Cash and cash equivalents 5,119,385 4,850,145
Accrued interest and rents receivable 378,096 370,648
Other assets, net of accumulated amortization
of $118,651 in 1995 and $155,759 in 1996 1,699,830 1,100,473
------------ ------------
Total assets $114,889,707 $108,629,203
============ ============
LIABILITIES:
Mortgage notes payable $ 52,685,656 $ 44,139,958
Note payable 5,102,144 5,102,144
Accrued interest payable 610,754 473,317
Accounts payable and accrued expenses 522,575 274,822
Accounts payable to affiliates 127,994 209,112
Security deposits 264,312 8,488
Prepaid and deferred rental income 751,634 689,955
------------ ------------
Total liabilities 60,065,069 50,897,796
------------ ------------
Commitments and contingencies
PARTNERS' CAPITAL:
General Partners (412,915) (103,774)
Limited Partners (67,582 Limited Partnership
Units issued and outstanding) 55,237,553 57,835,181
------------ ------------
Total partners' capital 54,824,638 57,731,407
------------ ------------
Total liabilities and
partners' capital $114,889,707 $108,629,203
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 7 -
<PAGE> 5
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of INCOME
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $ 8,495,117 $ 8,979,476 $ 9,108,093
Interest income from direct financing leases 5,635,602 6,244,145 6,452,577
Other interest income 184,936 229,928 293,329
Other income 873,387 353,401
----------- ----------- -----------
15,189,042 15,453,549 16,207,400
----------- ----------- -----------
Expenses:
Interest 6,266,275 5,799,127 5,232,928
Depreciation 1,997,946 1,912,503 1,539,737
General and administrative 488,110 576,717 626,400
Property expenses 461,623 381,606 579,147
Amortization 35,555 37,108 37,108
Writedown to net realizable value 1,104,219
----------- ----------- -----------
10,353,728 8,707,061 8,015,320
----------- ----------- -----------
Income before (loss) income from equity
investments, gain on sale
and extraordinary item 4,835,314 6,746,488 8,192,080
Hotel operating income 1,260,151 1,653,696 986,339
(Loss) income from equity investments (83,436) (62,359) 253,061
----------- ----------- -----------
Income before gain on sale,
and extraordinary item 6,012,029 8,337,825 9,431,480
Gain on sale of real estate 21,697
----------- ----------- -----------
Income before extraordinary item 6,012,029 8,337,825 9,453,177
Extraordinary charge on extinguishment
of debt 120,000
------------ ----------- -----------
Net income $ 5,892,029 $ 8,337,825 $ 9,453,177
=========== =========== ===========
Net income allocated to:
Individual General Partner $ 58,920 $ 83,378 $ 96,484
=========== =========== ===========
Corporate General Partner $ 530,283 $ 750,405 $ 868,361
=========== =========== ===========
Limited Partners $ 5,302,826 $ 7,504,042 $ 8,488,332
=========== =========== ===========
Net income per weighted average Limited Partnership
Units):
Income before extraordinary item $79.86 $ 110.93 $125.60
Extraordinary item (1.59)
------ -------- -------
$78.27 $110.93 $125.60
====== ======= =======
Weighted average units 67,749 67,645 67,582
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 8 -
<PAGE> 6
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of PARTNERS' CAPITAL
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Partners' Capital Accounts
--------------------------
Limited
Partners'
General Limited Amount Per
Total Partners Partners Unit(a)
----- -------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 53,546,280 $ (558,716) $ 54,104,996 $ 799
Distributions (6,357,899) (635,791) (5,722,108) (84)
Net income, 1994 5,892,029 589,203 5,302,826 78
------------ ------------ ------------ ------------
Balance, December 31, 1994 53,080,410 (605,304) 53,685,714 793
Purchase of Limited Partnership Units (179,670) (179,670) (3)
Distributions (6,413,927) (641,394) (5,772,533) (85)
Net income, 1995 8,337,825 833,783 7,504,042 111
------------ ------------ ------------ ------------
Balance, December 31, 1995 54,824,638 (412,915) 55,237,553 816
Distributions (6,549,558) (655,704) (5,893,854) (87)
Adjustment to purchase of Limited
Partnership Units 3,150 3,150
Net income, 1996 9,453,177 964,845 8,488,332 126
------------ ------------ ------------ ------------
Balance, December 31, 1996 $ 57,131,407 $ (103,774) $ 57,835,181 $ 855
============ ============ ============ ============
</TABLE>
(a) Based on weighted average Units issued and outstanding.
The accompanying notes are an integral part of the financial statements.
- 9 -
<PAGE> 7
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of CASH FLOWS
For the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,892,029 $ 8,337,825 $ 9,453,177
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,033,501 1,949,611 1,576,845
Cash receipts on operating leases (less than)
greater than straight-line adjustments (30,116) 274,471 244,698
Loss from equity investments 83,436 62,359
Restructuring fees received 1,227,779
Amortization of deferred income (59,892) (36,446) (36,446)
Deferred rental income recognized on
disposition of properties (835,636)
Writedown to net realizable value 1,104,219
Extraordinary charge on extinguishment of debt 120,000
Gain on sale (21,697)
Net change in operating assets and liabilities (907,884) (316,586) (268,906)
----------- ----------- ------------
Net cash provided by operating activities 8,627,436 10,271,234 10,947,671
----------- ----------- ------------
Cash flows from investing activities:
Distributions from equity investments in excess
of equity (loss) income 289,805 282,992 161,795
Additional capitalized costs (977,868) (163,752) (414,256)
Proceeds from sales of real estate 1,287,454 442,495
Purchase of interest in operating partnership and
related costs (230,278)
----------- ----------- ------------
Net cash provided by (used in) investing activities 599,391 119,240 (40,244)
----------- ----------- -------------
Cash flows from financing activities:
Distributions to partners (6,357,899) (6,413,927) (6,549,558)
Purchase of Limited Partnership Units (179,670) 3,150
Proceeds from mortgages 5,000,000 4,000,000
Prepayment of mortgage payable (5,771,250) (6,860,859)
Deferred financing costs (28,997)
Payment of mortgage principal (969,439) (3,358,177) (1,769,400)
Payment made on extinguishment of debt (120,000)
----------- ----------- ------------
Net cash used in financing activities (8,247,585) (9,951,774) (11,176,667)
----------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents 979,242 438,700 (269,240)
Cash and cash equivalents, beginning of year 3,701,443 4,680,685 5,119,385
----------- ----------- ------------
Cash and cash equivalents, end of year $ 4,680,685 $ 5,119,385 $ 4,850,145
=========== =========== ============
</TABLE>
(Continued)
- 10 -
<PAGE> 8
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
STATEMENTS of CASH FLOWS, Continued
Supplemental Schedule of noncash investing and financing activity:
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:
<TABLE>
<S> <C>
Real estate, net of accumulated depreciation $ 9,116,767
Mortgage note payable (3,915,439)
Other assets and liabilities transferred, net 8,777
-----------
Equity investment $ 5,210,105
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 11 -
<PAGE> 9
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Real Estate Leased to Others:
Real estate is leased to others on a net lease basis, whereby the
tenant is generally responsible for all operating expenses
relating to the property, including property taxes, insurance,
maintenance, repairs, renewals and improvements.
Corporate Property Associates 8, L.P. (the "Partnership")
diversifies its real estate investments among various corporate
tenants engaged in different industries and by property type
throughout the United States.
The leases are accounted for under either the direct financing or
operating methods. Such methods are described below:
Direct financing method - Leases accounted for under the
direct financing method are recorded at their net
investment (Note 5). Unearned income is deferred and
amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's
net investment in the lease.
Operating method - Real estate is recorded at cost,
revenue is recognized as rentals are earned and expenses
(including depreciation) are charged to operations as
incurred. When scheduled rentals vary during the lease
term, income is recognized on a straight-line basis so as
to produce a constant periodic rent.
The Partnership assesses the recoverability of its real estate
assets, including residual interests, based on projections of
undiscounted cash flows over the life of such assets. In the
event that such cash flows are insufficient, the assets are
adjusted to their estimated net realizable value.
Substantially all of the Partnership's leases provide for either
scheduled rent increases, increases based on increases to the
Consumer Price Index or Producer Price Index or sales overrides.
Operating Real Estate:
Land, building and personal property are carried at cost. Major
renewals and improvements are capitalized to the property
accounts, while replacements, maintenance and repairs which do
not improve or extend the lives of the respective assets are
expensed currently. As more fully described in Note 16, the
Partnership transferred its operating real estate in 1996 in
connection with an exchange transaction.
Depreciation:
Depreciation is computed using the straight-line method over the
estimated useful lives of the properties - 5 to 30 years.
Cash Equivalents:
The Partnership considers all short-term, highly liquid investments
that are both readily convertible to cash and have a maturity of
generally three months or less at the time of purchase to be cash
equivalents. Items classified as cash equivalents include
commercial paper and money market funds. Substantially all of the
Partnership's cash and cash equivalents at December 31, 1995 and
1996 were held in the custody of three financial institutions.
Continued
- 12 -
<PAGE> 10
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
Equity Investments:
The Partnership's 50% interests in a joint venture and a limited
partnership and its ownership interest in the operating
partnership of a real estate investment trust are accounted for
under the equity method, i.e. at cost, increased or decreased by
the Partnership's share of earnings or losses, less
distributions.
Other Assets:
Included in other assets are deferred rental income, deferred
charges and a furniture, fixture and equipment reserve for the
hotel property. Deferred rental income is the aggregate
difference for operating method leases between scheduled rents
which vary during the lease term and income recognized on a
straight-line basis. Deferred charges are costs incurred in
connection with mortgage note financings and refinancings and are
deferred and amortized on a straight-line basis over the terms of
the mortgages.
Deferred Rental Income:
Deferred rental income recognized in connection with the amendment
of one of the Partnership's leases is being amortized on a
straight-line basis from the date of the amendment through the
end of the initial term of the lease (20.5 years).
Income Taxes:
A partnership is not liable for Federal income taxes as each
partner recognizes his proportionate share of the partnership
income or loss in his tax return. Accordingly, no provision for
income taxes is recognized for financial statement purposes.
2. Partnership Agreement:
The Partnership was organized on October 20, 1987 under the Delaware
Revised Uniform Limited Partnership Act for the purpose of
engaging in the business of investing in and owning industrial
and commercial real estate. The Corporate General Partner
purchased 100 Limited Partnership Units in connection with the
Partnership's public offering. The Partnership will terminate on
December 31, 2011, or sooner, in accordance with the terms of the
Amended Agreement of Limited Partnership (the "Agreement").
The Agreement provides that the General Partners are allocated 10%
(1% to the Individual General Partner, William P. Carey, and 9%
to the Corporate General Partner, Eighth Carey Corporate Property
("Carey Property")) and the Limited Partners are allocated 90% of
the profits and losses as well as distributions of Distributable
Cash From Operations, as defined. The partners are also entitled
to receive net proceeds from the sale of the Partnership
properties as defined in the Agreement. The General Partners may
be entitled to receive a subordinated preferred return, measured
based upon the cumulative proceeds arising from the sale of
Partnership assets. Pursuant to the subordination provisions of
the Agreement, the preferred return may be paid only after the
limited partners receive 100% of their initial investment from
the proceeds of asset sales and a cumulative annual return of 8%
since the inception of the Partnership. The General Partners
interest in such preferred return amounts to $53,055 based upon
the cumulative proceeds from the sale of assets since the
inception of the Partnership through December 31, 1996. The
Partnership's ability to satisfy the subordination provisions of
the Agreement may not be determinable until liquidation of a
substantial portion of the Partnership's assets has been made,
formal plans of liquidation are adopted or limited partnership
units are converted to other
Continued
- 13 -
<PAGE> 11
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
securities which provide the security holder with greater
liquidity than a limited partnership unit. Management believes
that as of the report date, ultimate payment of the preferred
return is reasonably possible but not probable, as defined
pursuant to Statement of Financial Accounting Standards No. 5.
3. Transactions with Related Parties:
Under the Agreement, Carey Property is entitled to receive a
property leasing fee and reimbursement of certain expenses
incurred in connection with the Partnership's operations. General
and administrative expense reimbursements consist primarily of
the actual cost of personnel needed in providing administrative
services necessary to the operation of the Partnership. Property
leasing fee and general and administrative expense reimbursements
are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Property leasing fee $199,664 $ 26,777 $ 22,037
General and administrative
expense reimbursements 101,761 87,856 135,221
-------- -------- --------
$301,425 $114,633 $157,258
======== ======== ========
</TABLE>
In 1994, 1995 and 1996, fees aggregating $86,196, $69,691 and
$79,385, respectively, were incurred for legal services performed
by a law firm in which the Secretary of the Corporate General
Partner and other affiliates is a partner.
The Partnership is a participant in an agreement with W.P. Carey &
Co., Inc. ("W.P. Carey") and other affiliates for the purpose of
leasing office space used for the administration of real estate
entities and W.P. Carey and for sharing the associated costs.
Pursuant to the terms of the agreement, the Partnership's share
of rental, occupancy and leasehold improvement costs is based on
adjusted gross revenues, as defined. Net expenses incurred in
1994, 1995 and 1996 were $88,753, $145,341 and $143,404,
respectively.
The Partnership's ownership interests in certain properties are
jointly held with affiliated entities. The interests are held as
tenants-in-common and joint venture interests with such interests
ranging from 20% to 75.26%. The Partnership accounts for its
assets and liabilities relating to tenants-in-common interests on
a proportional basis.
4. Real Estate Leased to Others Accounted for Under the Operating
Method and Operating Real Estate:
A. Real Estate Leased to Others:
Scheduled future minimum rents, exclusive of renewals, under
noncancellable operating leases amount to approximately
$7,340,000 in 1997, $5,586,000 in 1998, $5,580,000 in 1999,
$5,575,000 in 2000, $5,255,000 in 2001 and aggregate
approximately $68,722,000 through 2014.
Contingent rent was approximately $222,000 in 1994, $497,000 in 1995
and $417,000 in 1996.
Continued
- 14 -
<PAGE> 12
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
B. Operating Real Estate:
Operating real estate, at cost, as of December 31, 1995 is
summarized as follows:
<TABLE>
<S> <C>
Land $ 1,717,967
Building 7,520,834
Personal property 1,421,421
-----------
10,660,222
Less: Accumulated depreciation 1,440,459
-----------
$ 9,219,763
===========
</TABLE>
The Partnership disposed of its operating real estate in 1996 (see
Note 15).
5. Net Investment in Direct Financing Leases:
Net investment in direct financing leases is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1995 1996
---- ----
Minimum lease payments
<S> <C> <C>
receivable $105,522,285 $ 99,526,391
Unguaranteed residual value 47,095,414 47,095,414
------------ ------------
152,617,699 146,621,805
Less: Unearned income 105,522,285 99,526,391
------------ ------------
$ 47,095,414 $ 47,095,414
============ ============
</TABLE>
Scheduled future minimum rents, exclusive of renewals, under
noncancellable direct financing leases amount to approximately
$5,996,000 in each of the years 1997 to 2001 and aggregate
approximately $99,526,000 through 2014.
Contingent rent was approximately $415,000 in 1995 and $457,000 in
1996. There was no contingent rent in 1994.
6. Mortgage Notes Payable and Note Payable:
A. Mortgage Notes Payable:
Mortgage notes payable are collateralized by the lease assignments
and by real property with a carrying amount of approximately
$79,055,000 before accumulated depreciation. The mortgage loans
are limited recourse obligations of the Partnership. As of
December 31, 1996, mortgage notes payable bear interest at rates
varying from 7.16% to 11.85% per annum and mature from 1997 to
2010.
Scheduled principal payments during each of the next five years
following December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C> <C>
1997 $ 4,978,050
1998 1,006,998
1999 20,686,934
2000 627,592
2001 5,633,578
Thereafter 11,206,806
-----------
Total $44,139,958
===========
</TABLE>
Continued
- 15 -
<PAGE> 13
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
B. Note Payable:
The $5,102,144 note payable is a recourse obligation of the
Partnership and provides for quarterly payments of interest at an
annual interest rate equivalent to the London Inter-Bank Offered
Rate ("LIBOR") plus 4.25% (9.81% at December 31, 1996). The note
payable matures in July 1999, at which time a balloon payment for
the entire outstanding principal balance will be due.
Covenants under the note payable restrict the Partnership from
incurring additional debt; however, new limited recourse mortgage
financing may be obtained for the purpose of replacing existing
mortgage debt. The Partnership must maintain a net worth of
$20,000,000, aggregate appraised property value of $15,000,000
and a ratio of operating cash flow to debt service on the note
payable of from 3:1 to 3.4:1 over the term of the loan. The
Partnership is in compliance with such terms. In addition, the
Partnership must offer the lender the proceeds of any asset
disposition as a loan prepayment. Under limited circumstances,
the Partnership may prepay the loan in whole or in part.
Interest paid on the mortgage note payable and the note payable was
$6,189,016, $5,798,935 and $5,370,365 in 1994, 1995 and 1996,
respectively.
7. Distributions to Partners:
Distributions are declared and paid to partners quarterly and are
summarized as follows:
<TABLE>
<CAPTION>
Limited
Year Ending Distributions Paid to Distributions Paid to Partners' Per
December 31, General Partners Limited Partners Unit Amount
------------ ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
1994 $635,791 $5,722,108 $84.46
======== ========== ======
1995 $641,394 $5,772,533 $85.31
======== ========== ======
1996 $655,704 $5,893,854 $87.21
======== ========== ======
</TABLE>
Distributions of $165,200 to the General Partners and $1,486,804 to
the Limited Partners for the quarter ended December 31, 1996 were
declared and paid in January 1997.
8. Income for Federal Tax Purposes:
Income for financial statement purposes differs from income for
Federal income tax purposes because of the difference in the
treatment of certain items for income tax purposes and financial
statement purposes. A reconciliation of the accounting
differences is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net income per Statements of Income $ 5,892,029 $ 8,337,825 $ 9,453,177
Writedown to net realizable value 1,104,219
Excess tax depreciation (906,755) (1,335,846) (1,518,852)
Other (1,524,377) 473,199 (91,589)
----------- ----------- ------------
Income for Federal
income tax purposes $ 4,565,116 $ 7,475,178 $ 7,842,736
=========== =========== ===========
</TABLE>
Continued
- 16 -
<PAGE> 14
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
9. Industry Segment Information:
The Partnership's operations consist of the investment in and the
leasing of industrial and commercial real estate.
In 1994, 1995 and 1996, the Partnership earned its total leasing
revenues (rental income plus interest income from financing
leases) from the following lease obligors:
<TABLE>
<CAPTION>
1994 % 1995 % 1996 %
---- --- ---- --- ---- --
<S> <C> <C> <C> <C> <C> <C>
Advanced System Applications, Inc. $2,258,692 16% $ 3,114,091 21% $ 3,042,597 20%
Sybron Acquisition Company 2,491,920 18 2,491,920 17 2,491,920 16
Dr Pepper Bottling Company
of Texas 1,999,000 14 1,999,000 13 1,999,000 13
Amersig, Inc. 1,332,653 9 1,400,166 9 1,409,700 9
High Voltage Engineering
Corporation 1,140,100 8 1,167,744 8 1,179,019 8
Orbital Sciences Corporation 916,484 6 977,378 6 977,378 6
Furon Company 819,443 6 819,443 5 816,217 5
United Stationers Supply, Inc. 635,283 5 769,625 5 812,708 5
Detroit Diesel Corporation 699,024 5 699,114 5 729,078 5
AutoZone, Inc. 526,781 4 529,748 3 525,003 3
NVRyan L.P. 528,391 4 495,518 3 495,518 3
Mayfair Molded Products Corporation 460,755 3 460,755 3 460,755 3
U.S. Postal Service 319,423 2
Winn-Dixie Stores, Inc. 134,500 1 134,500 1 134,500 1
Other lease obligors 131,218 1 107,919 1 111,154 1
Federal Express Corporation 56,475 56,700 56,700
----------- ---- ----------- ---- ----------- ----
$14,130,719 100% $15,223,621 100% $15,560,670 100%
=========== ==== =========== ==== =========== ====
</TABLE>
Continued
- 17 -
<PAGE> 15
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
10. Equity Investments:
The Partnership owns a 50% equity interest in CPA(R):8-CPA(R):9
Joint Venture I ("GE") with Corporate Property Associates 9, L.P.
("CPA(R):9"), an affiliate, and a 50% interest in Carey Topeka
Associates, L.P. ("HCA") with Corporate Property Associates 7
("CPA(R):7"), an affiliate. GE owns land and a building located
in King of Prussia, Pennsylvania, leased to General Electric
Company. HCA owns a leasehold interest in a hotel property in
Topeka, Kansas subleased to the Hotel Corporation of America.
Summarized combined financial information of GE and HCA is as
follows:
(In thousands)
<TABLE>
<CAPTION>
December 31,
1995 1996
---- ----
Assets, net of accumulated depreciation
<S> <C> <C>
and amortization $14,682 $13,790
Liabilities 12,211 11,989
Capital 2,471 1,801
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
-------------- --------------- -------------
<S> <C> <C> <C>
Revenues $1,575 $1,597 $1,597
Expenses 1,740 1,721 1,707
Net loss (165) (124) (110)
</TABLE>
The Partnership's share of GE and HCA scheduled future minimum
rentals, exclusive of renewals, under its noncancellable
operating lease are approximately $905,000 in 1997, $692,000 in
1998, $421,000 in 1999, $540,000 in 2000, $412,000 in 2001 and
aggregate approximately $3,722,000 through 2003.
The Partnership's share of scheduled principal payments on the GE
and HCA mortgage loans for the five years following December 31,
1996 are approximately $117,000 in 1997, $1,739,000 in 1998,
$93,000 in 1999, $100,000 in 2000, $109,000 in 2001 and
$3,753,000, thereafter.
The Partnership owns an equity interest in the operating partnership
of a real estate investment trust (see Note 15).
Continued
- 18 -
<PAGE> 16
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
11. Writedown to Net Realizable Value:
In August 1994, the Partnership and CPA(R):7 sold a vacant property
in Jefferson, Georgia for $844,778 (of which the Partnership's
share was $531,898), net of costs. No gain or loss was recognized
on the sale of the Jefferson property as the value of the
property was written down to the sales price prior to the sale
resulting in a charge of $823,447 in 1994.
In June 1994, the Partnership and CPA(R):7 entered into a contract
to sell a vacant property in Fredricksburg, Virginia for $728,500
(of which the Partnership's share was $458,686), net of costs.
Subsequently, the potential buyer withdrew its offer to buy the
property. Although the transaction was not consummated, the net
realizable value of the Partnership's interest in the property
was written down to the anticipated net sales price of $458,686,
resulting in a charge of $280,772.
Both properties had been leased to NVRyan L.P. ("NVRyan") until
September 1993, at which time the lease was restructured. In
agreeing to sever four properties from the NVRyan lease,
including the Jefferson and Fredricksburg properties, the
Partnership received $1,637,038 of which $1,227,779 was received
in 1994.
12. Extraordinary Charge on Extinguishment of Debt:
On June 15, 1990, the Partnership and CPA(R):9 purchased, as
tenants-in-common with 20% and 80% interests, respectively, 129
acres of land and six industrial buildings in Detroit and
Redford, Michigan and entered into a net lease with Detroit
Diesel Corporation ("Detroit Diesel"). The mortgage loan provided
for quarterly interest only payments at an annual rate of 11.28%
with payments of principal commencing on December 15, 1995.
On May 25, 1994, the Partnership and CPA(R):9 prepaid the existing
$24,000,000 mortgage loan and obtained $25,000,000 of new
mortgage financing. The refinanced mortgage loan bears interest
at the rate of 7.16% per annum and provided for quarterly
interest only payments of $447,500 (of which the Partnership's
share is $89,500) through December 15, 1995 at which time
quarterly interest and principal payments of $689,601 (of which
the Partnership's share is $137,920) commenced and which are
payable through June 15, 2010 at which time the loan will be
fully amortized. In connection with paying off the original
mortgage loan, the Partnership incurred an extraordinary charge
on the extinguishment of debt as a result of paying a prepayment
charge of $120,000 on its $4,800,000 share of such debt.
Continued
- 19 -
<PAGE> 17
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued
13. Gain on Sale of Real Estate:
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 properties in
Liverpool, Pennsylvania and Twinsburg, Ohio to IER Industries,
Inc. ("IER") through July 2007, the end of Furon's initial lease
term. On February 15, 1996, IER notified the Partnership and
CPA(R):9 that it was exercising a purchase option which had been
granted at the time the sublease was agreed to.
On September 9, 1996, the Partnership and CPA(R):9 sold the two
properties to IER for $1,465,495, a purchase price determined
pursuant to an appraisal process provided for in the lease. Net
of its share of $24,210 of consideration received in 1993 in
granting the purchase option and other costs of the transaction,
the Partnership's share of net proceeds from the sale was
$442,495 of which $287,996 was used to pay a mandatory prepayment
on the mortgage loan. In connection with the sale, the
Partnership recognized a gain of $21,697. As a result of the sale
and the reamortization of the mortgage loan, annual rent from
Furon and debt service on the Furon properties mortgage loan have
decreased by approximately $55,000 and $34,000, respectively.
14. Properties Leased to Advanced System Applications, Inc.:
The Partnership and 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 agreed to
a lease modification agreement. Under the modification agreement,
the scheduled expiration of the lease was changed to June 1997
from June 2003 in exchange for an increase in the commercial rent
to $5,200,000 from $1,850,000. As this modification required the
mortgage lender's consent, the mortgage loan payments were
substantially increased so that the loan fully amortized on March
1, 1996. Although ASA is obligated to make its lease payments
through June 1997, it is in the process of vacating the property.
ASA had been entitled to one-third of all rentals received for
any new leases on space ASA had vacated; however, under a
subsequent agreement, the Partnership and CPA(R):7 agreed to
reduce ASA's annual rent by $833,333 in exchange for assigning
the rents of a subtenant to the Partnership and CPA(R):7 and
relinquishing its rights to any of the rents on the United State
Postal Service (the "Postal Service") lease. ASA was also
released from bearing the costs of insurance, maintenance and
real estate taxes on the property.
The Postal Service lease has a 10-year term which commenced May 1,
1996 at an annual rent of $722,800 (of which the Partnership's
share is $479,650), increasing to $822,800 after five years. The
Partnership and CPA(R):7 bear the obligation to provide
maintenance and support services to the lessee. The lease also
provides for rent escalations in 1998 based on increases in
certain operating costs 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.
As provided for under the lease, the Partnership and CPA(R):7 funded
$600,000 (of which the Partnership's share is $398,160) of
improvements to the space occupied by the Postal Service.
Continued
- 20 -
<PAGE> 18
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
15. 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):8 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
Corporation, ("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. In connection with the exchange, the
Partnership and CPA(R):4 paid a cash contribution of $391,221 (of
which the Partnership's share was $209,761) and the Operating
Partnership assumed the mortgage loan obligation collateralized
by the hotel property (of which the Partnership's share was
$3,915,439). AGH owns an 81.3% equity interest in the Operating
Partnership.
The exchange of the hotel property for limited partnership units was
treated as a nonmonetary exchange for tax and financial reporting
purposes. The Partnership's interest in the limited partnership
is being accounted for under the equity method. 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 on a one-for-one basis. AGH completed an initial public
offering during 1996. The Partnership's carrying value for the
limited partnership units at the time of the exchange of
$5,440,110 was based on the historical basis of assets
transferred, net of liabilities assumed by the Operating
Partnership; cash contributed and costs incurred to complete the
exchange.
As of September 30, 1996, the audited consolidated financial
statements of AGH reported total assets of $187,870,000 and
shareholders' equity of $127,408,000 and for the period from
inception (July 31, 1996) through September 30, 1996 revenues of
$5,251,000, income before minority interest of $2,850,000 and net
income of $2,302,000. As of March 15, 1997, AGH's quoted per
share market value was $28 resulting in an aggregate value of
approximately $13,823,000. The carrying value of the equity
interest in the Operating Partnership as of December 31, 1996 was
approximately $5,612,000. For the period from July 31, 1996 to
December 31, 1996, the Partnership's share of the Operating
Partnership's earnings was $306,807.
Between January 1995 and July 1996, the Partnership and CPA(R):4 had
engaged an affiliate of AGH to manage the operations of Kenner on
their behalf.
Summarized operating results of the Partnership's share of the hotel
operation through the date of disposal (July 30, 1996) were as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues $ 3,615,727 $ 4,432,735 $ 2,675,555
Fees paid to hotel management company (101,154) (130,293) (96,017)
Other operating expenses (2,254,422) (2,648,746) (1,593,199)
----------- ----------- -----------
Hotel operating income $ 1,260,151 $ 1,653,696 $ 986,339
=========== =========== ===========
</TABLE>
Continued
- 21 -
<PAGE> 19
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
NOTES to FINANCIAL STATEMENTS, Continued
16. Disclosures About Fair Value of Financial Instruments:
The carrying amounts of cash, receivables and accounts payable and
accrued expenses approximate fair value because of the short
maturity of these items.
The Partnership estimates that the fair value of mortgage notes
payable approximates the carrying value of such mortgage notes at
December 31, 1996. The fair value of debt instruments was
evaluated using a discounted cash flow model with discount rates
which take into account the credit of the tenants and interest
rate risk.
The Partnership's note payable is a variable rate obligation indexed
to the LIBOR. Accordingly, the carrying amount of the note
payable approximates fair value as of December 31, 1996.
- 22 -
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
09/3/97 BY: /s/ Steven M. Berzin
------- --------------------
Date Claude Fernandez
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
09/3/97 BY: /s/ Claude Fernandez
------- --------------------
Date Claude Fernandez
Executive Vice President and
Chief Administrative Officer
(Principal Accounting Officer)
- 23 -
