10-Q 1 dsiviii-906.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /_x_/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2006 /___/ Transition report pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from ______________ to ________________. Commission File Number 2-90168 DSI REALTY INCOME FUND VIII, A California Limited Partnership (Exact name of registrant as specified in its charter) California_______________________________________95-0050204 (State or other jurisdiction of (I.R.S. Employer incorporation) Identification No.) 6700 E. Pacific Coast Hwy., Long Beach, California 90803 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code-(562)493-8881 _________________________________________________________________ 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. Yes _x_. No__. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DSI REALTY INCOME FUND VIII (A California Real Estate Limited Partnership) BALANCE SHEETS(UNAUDITED) SEPTEMBER 30, 2006 AND DECEMBER 31, 2005 September 30, December 31, 2006 2005 ASSETS CASH AND CASH EQUIVALENTS $ 845,018 $ 599,338 ASSET HELD FOR SALE, Net (NOTE 6) 343,111 PROPERTY, Net 2,028,544 2,391,773 INVESTMENT IN REAL ESTATE JOINT VENTURE 183,527 182,220 OTHER ASSETS 70,246 70,246 ---------- ---------- TOTAL $3,470,446 $3,243,577 ========== ========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES Distribution to Partners $ 272,727 $ 272,727 Capital lease obligation 58,650 75,831 Other liabilities 239,767 215,931 ---------- ---------- Total liabilities 571,144 564,489 ---------- ---------- PARTNERS' EQUITY (DEFICIT): General Partners (78,788) (80,991) Limited Partners 2,978,090 2,760,079 ---------- ---------- Total partners' equity 2,899,302 2,679,088 ---------- ---------- TOTAL $3,470,446 $3,243,577 ========== ========== See accompanying notes to financial statements(unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 September 30, September 30, 2006 2005 REVENUES: Rental $ 532,876 $ 533,437 ---------- ---------- EXPENSES: Operating 215,547 182,139 General and administrative 49,751 52,856 ---------- ---------- Total expenses 265,298 234,995 ---------- ---------- OPERATING INCOME 267,578 298,442 OTHER INCOME Interest 187 188 ---------- ---------- INCOME BEFORE EQUITY IN INCOME OF REAL ESTATE JOINT VENTURE 267,765 298,630 EQUITY IN INCOME OF REAL ESTATE JOINT VENTURE 29,577 30,634 ---------- ---------- INCOME FROM OPERATIONS BEFORE DISCONTINUED OPERATIONS 297,342 329,264 NET INCOME FROM OPERATIONS OF DISCONTINUED OPERATIONS 47,219 44,507 ---------- ---------- NET INCOME $ 344,561 $ 373,771 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $ 341,115 $ 370,033 General Partners 3,446 3,738 ---------- ---------- TOTAL $ 344,561 $ 373,771 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 14.21 $ 15.42 ========== ========== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 ====== ====== See accompanying notes to financial statements(unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 September 30, September 30, 2006 2005 REVENUES: Rental $1,608,921 $1,584,915 ---------- ---------- EXPENSES: Operating 593,357 564,404 General and Administrative 200,399 195,614 ---------- ---------- Total Expenses 793,756 760,018 ---------- ---------- OPERATING INCOME 815,165 824,897 OTHER INCOME Interest 560 557 ---------- ---------- INCOME BEFORE EQUITY IN INCOME OF REAL ESTATE JOINT VENTURE 815,725 825,454 EQUITY IN INCOME OF REAL ESTATE JOINT VENTURE 83,807 82,758 ---------- ---------- INCOME FROM OPERATIONS BEFORE DISCONINUED OPERATIONS 899,532 908,212 NET INCOME FROM OPERATIONS OF DISCONTINUED OPERATIONS 138,863 125,665 ---------- ---------- NET INCOME $1,038,395 $1,033,877 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $1,028,011 $1,023,538 General Partners 10,384 10,339 ---------- ---------- TOTAL $1,038,395 $1,033,877 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $42.83 $42.65 ====== ====== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENT OF CHANGES IN PARTNERS' EQUITY (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2006 ($80,991) $2,760,079 $2,679,088 NET INCOME 10,384 1,028,011 1,038,395 DISTRIBUTIONS (8,181) (810,000) (818,181) -------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2006 ($78,788) $2,978,090 $2,899,302 ======== ========== ========== See accompanying notes to consolidated financial statements(unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 September 30, September 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,038,395 $1,033,877 Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations): Depreciation 20,118 15,760 Equity in earnings of real estate joint venture (83,807) (82,758) Distributions from real estate joint venture 82,500 80,400 Changes in assets and liabilities: Increase in other liabilities 23,836 40,937 --------- --------- Net cash provided by operating activities 1,081,042 1,088,216 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (818,181) (818,181) Payments on capital lease obligations (17,181) --------- --------- Net cash used in financing activities (835,362) (818,181) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 245,680 270,035 CASH AND CASH EQUIVALENTS: At beginning of period 599,338 620,452 --------- --------- At end of period $ 845,018 $ 890,487 ========= ========= See accompanying notes to financial statements(unaudited). DSI REALTY INCOME FUND VIII (A California Real Estate Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund VIII (the "Partnership"), a limited partnership, has two general partners (DSI Properties, Inc., and Diversified Investors Agency) and limited partners owning 24,000 limited partnership units. The Partnership was formed under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership has acquired five mini-storage facilities located in Stockton, Pittsburg, El Centro, Huntington Beach, and Lompoc, California. The Partnership has also entered into a joint venture with DSI Realty Income Fund IX, through which the Partnership has a 30% interest in a mini-storage facility in Aurora, Colorado (see Note 3). All facilities were acquired from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc. is a general partner. The mini-storage facilities are operated for the Partnership by Dahn under various agreements that are subject to renewal annually. Under the terms of the agreements, the Partnership is required to pay Dahn a property management fee equal to 5% of gross revenue from operations, defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. The accompanying financial information is unaudited. Such financial information includes all adjustments considered necessary by the Partnership's management for a fair presentation of the results for the periods indicated. 2. PROPERTY Properties owned by the Partnership are all mini-storage facilities. Depreciation is calculated using the straight line method over the estimated useful life of 15 years. The total cost of property and accumulated depreciation is as follows: September 30, 2006 December 31, 2005 Land $ 1,969,877 $ 2,287,427 Buildings and improvements 6,035,669 7,184,426 Rental trucks under capital lease 70,046 105,069 ------------ ------------ Total 8,075,592 9,576,922 Less: Accumulated Depreciation ( 6,047,048) ( 7,185,149) ------------ ------------ Property - Net $ 2,028,544 $ 2,391,773 ============ ============ 3. INVESTMENT IN REAL ESTATE JOINT VENTURE The Partnership is involved in a joint venture with DSI Realty Income Fund IX through which the Partnership has a 30% interest in a mini-storage facility in Aurora, Colorado. Under the terms of the joint venture agreement, the Partnership is entitled to 30% of the profits and losses of the venture and owns 30% of the mini-storage facility with DSI Realty Income Fund IX, which has the remaining 70% interest in the venture. Summarized income statement information for the nine months ended September 30, 2006, and 2005 is as follows: September 30, 2006 September 30, 2005 Revenue $490,959 $461,730 Operating Expenses 211,602 185,871 -------- -------- Net Income $279,357 $275,859 ======== ======== The Partnership accounts for its investment in the real estate joint venture under the equity method of accounting. 4. NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is calculated by dividing the net income allocated to the limited partners by the number of limited partnership units outstanding during the period. 5. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE MANAGEMENT FEE Under the Agreement of limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations, and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The General Partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition or refinancing of the project. In addition, the General Partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 9% per annum of the cash available for distribution on a cumulative basis, calculated as cash generated from operations less capital expenditures. 6. DISCONTINUED OPERATIONS In accordance with Statement of Financial Accounting Standards No. 144, the net income of a mini-storage facility located in Pittsburg, California is reflected in the statement of income as discontinued operations for all periods presented. On July 20, 2006, a sales agreement was signed with the Department of Transportation, State of California, whereby it would acquire the Partnerships' mini-storage facility in Pittsburg, California for a gross sales price of $3,285,000. This transaction will result in a gain of approximately $2,942,000 to the Partnership. Escrow closed on October 20, 2006 and funds were transferred to the Partnership on that date. Proceeds will be distributed to the limited partners on November 15, 2006. The following table summarizes the revenue and expense components that comprise discontinued operations: FOR THE THREE MONTHS ENDED 9/30/06 9/30/05 ------- ------- REVENUE $95,883 $94,752 EXPENSES Operating 48,664 50,245 ------- ------- NET OPERATING INCOME FROM DISCONTINUED OPERATIONS $47,219 $44,507 ======= ======= FOR THE NINE MONTHS ENDED 9/30/06 9/30/05 ------- ------- REVENUE $287,288 $271,917 EXPENSES Operating 148,425 146,252 ------- ------- NET OPERATING INCOME FROM DISCONTINUED OPERATIONS $138,863 $125,665 ======== ======== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. DSI REALTY INCOME FUND VIII (A California Real Estate Limited Partnership) We are pleased to enclose the Partnership's unaudited financial statements for the period ended September 30, 2006. The following is Management's discussion and analysis of the Partnership's financial condition and results of its operations. For the three-month periods ended September 30, 2006 and 2005, total revenues increased 0.1% from $628,189 to $628,759 and total expenses increased 10.1% from $285,240 to $313,962 and other income decreased from $188 to $187. Equity in income of the real estate joint venture decreased 3.5% from $30,634 to $29,577. As a result, net income decreased 7.8% from $373,771 to $344,561 for the three-month period ended September 30, 2006, as compared to the same period in 2005. Rental revenue remained constant as higher unit rental rates were offset by lower occupancy rates. Occupancy levels for the Partnership's five mini-storage facilities averaged 81.4% for the three-month period ended September 30, 2006 as compared to 85.7% for the same period in 2005. The Partnership is continuing its marketing efforts to attract and keep new ten- ants in its various mini-storage facilities. Operating expenses increased approximately $31,800 (13.7%) as a result of increases in repairs and main- tenance, legal and salaries and wages expenses. General and administrative expenses decreased approximately $3,100 (5.9%) primarily as a result of de- creases in incentive management fee and equipment and computer lease expenses, partially offset by an increase in legal and professional expense. Equity in income from the real estate joint venture remained constant as higher rental revenues were offset by an increase in operating expenses at that facility. For the nine-month periods ended September 30, 2006 and 2005, total revenues increased 2.1% from $1,856,832 to $1,896,209 and total expenses increased 4.0% from $906,270 to $942,181 and other income increased from $557 to $560. Equity in income for the real estate joint venture increased 1.3% from $82,758 to $83,807. As a result net income increased 0.4% from $1,033,877 to $1,038,395 for the nine-month period ended September 30, 2006, as compared to the same period in 2005. Rental revenue increased as a result of higher unit rental rates. Operating expenses increased approximately $31,100 (4.4%) primarily as a result of increases in repairs and maintenance, real estate tax, salaries and wages and depreciation expenses, partially offset by decreases in adver- tising, purchase of locks and packing materials, office supplies, workers' compensation, insurance and truck maintenance expenses. General and admin- istrative expenses increased approximately $4,800 (2.5%) primarily as a result of an increase in legal and professional expense, partially offset by a de- crease in equipment and computer lease expense. Equity in income from the real estate joint venture remained relatively constant as discussed above. On July 20, 2006, a sales agreement was signed with the Department of Trans- portation, State of California, whereby it would acquire the Partnerships' mini-storage facility in Pittsburg, California for a gross sales price of $3,285,000. Escrow closed on October 20, 2006. It is anticipated that the proceeds will be distributed sometime in November 2006. The General Partners will continue their policy of funding improvements and maintenance of Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs. The General Partners anticipate distributions to the Limited Partners to remain at the current level for the foreseeable future. Item 3. Quantative and Qualitative Disclosures About Market Risk NONE Item 4. CONTROLS AND PROCEDURES Within 90 days prior to the date of this report, the Partnership evaluated the effectiveness of its disclosure controls and procedures. This evaluation was performed by the Partnership's Controller with the assistance of the President and Chief Executive Officer. These disclosure controls and pro- cedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Ex- change Commission (the Commission) is recorded, processed, summarized and reported, within the time periods specified by the Commissions rules and forms and that the information is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could signifi- cantly affect the internal controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings Registrant is not a party to any material pending legal proceedings. Item 1A. Risk Factors Please refer to the risk factors disclosed by the partnership in response to Item 1A, part I of the Form 10-K filed on March 27, 2006. There has been no material change to the risk factors disclosed therein. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE Item 6. Exhibits and Reports on Form 8K. (a) Attached hereto as Exhibit "20" is Registrant's Quarterly Report to Limited Partners for the period ended September 30, 2006. (b) Registrant did not file any reports on Form 8-K for the period reported upon. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: October 31, 2006 DSI REALTY INCOME FUND VIII A California Limited Partnership (Registrant) By____\s\ Robert J. Conway_____ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: October 31, 2006 DSI REALTY INCOME FUND VIII A California Limited Partnership (Registrant) By__\s\ Robert J. Conway________ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer CERTIFICATIONS I, Robert J. Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VIII; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our super- vision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and general partners (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls over financial reporting. Date: October 31, 2006 Robert J. Conway Chief Executive Officer CERTIFICATIONS I, Richard P. Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VIII; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period cover- ed by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our super- vision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls over financial reporting. Date: October 31, 2006 Richard P. Conway Vice President CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VIII (the "Partnership") on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Robert J. Conway Chief Executive Officer October 31, 2006 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VIII (the "Partnership") on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certif y, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Richard P. Conway Vice President October 31, 2006