October 31, 1998
QUARTERLY REPORT TO THE LIMITED PARTNERS
OF DSI REALTY INCOME FUND VIII
DEAR LIMITED PARTNERS:
We are pleased to enclose the Partnership's unaudited financial
statements for the period ended September 30, 1998. 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, 1998 and 1997, total
revenues increased 11.6% from $430,542 to $480,504 and total expenses increased
7.7% from $285,306 to $307,377. Equity in income of the real estate joint
venture increased 28.8% from $24,611 to $31,688. As a result, net income
increased 20.6% from $169,847 to $204,815 for the three-month period ended
September 30, 1998, as compared to the same period in 1997. Rental revenue
increased as a result of higher unit rental rates. Occupancy levels for the
Partnership's five mini-storage facilities averaged 85.3% for the three month
period ended September 30, 1998 as compared to 86.8% for the same period in
1997. The Partnership is continuing its marketing efforts to attract and keep
new tenants in its various mini-storage mini-storage facilities. Operating
expenses increased approximately $18,200 (7.3%) primarily as a result of higher
real estate tax expenses and property management fees, partially offset by
lower yellow pages advertising costs. Property management fees, which are
based on rental income, increased as a result of the increase in rental revenue.
General and administrative expenses increased approximately $3,900 (10.4%)
primarily as a result of higher incentive management. Incentive management
fees, which are based on cash available for distribution, increased as a result
of the increase in net income. Equity in income from the real estate joint
venture increased primarily as a result of higher rental revenue.
For the nine-month periods ended September 30, 1998, and 1997, total revenues
increased 12.6% from $1,273,012 to $1,433,539 and total expenses increased 2.3%
from $923,026 to $944,571. Equity in income of the real estate joint venture
increased 25.7% from $66,421 to $83,512. As a result, net income increased
37.5% from $416,407 to $572,480 for the nine-month period ended September 30,
1998, as compared to the same period in 1997. Rental revenue increased as a
result of higher unit rental rates. Operating expenses increased approximately
$3,100 (0.4%) primarily as a result of increases in real estate tax expenses
and property management fees, partially offset by decreases yellow pages
advertising costs and legal expenses. Property management fees, which are
based on rental income, increased as a result of the increase in rental
revenue. General and administrative expenses increased approximately $18,400
(13.0%) primarily as a result of higher incentive management fees, which was
discussed above. Equity in income from the real estate joint venture increased
as a result of higher rental revenue and lower yellow pages advertising costs
and salaries and wage expenses.
The City of Stockton acquired 6,089 square feet or 5.4% of the Stockton
property in 1997. In April 1998 the Partnership received $65,000 as
compensation for the acquisition. A gain on sale of land was recorded in
the amount of $46,974, and the cost of land was reduced by $18,026. Based
on operations since the disposition, neither cash flow from nor the value
of the remaining property appears materially impaired.
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 Limited
Partners to remain at the current level for the foreseeable future.
The Year 2000 issue refers to the inability of certain computer systems to
recognize a date using "00" as the Year 2000. The Partnership has implemented
a Year 2000 program, which has three phases: (1) identification;
(2) remediation; and (3) testing and verification. The Partnership, as well
as the property management company and the Partnership's warehouse facilities
have completed those phases. Computer programs have been upgraded and tested
to function properly with respect to the dates in the Year 2000 and thereafter.
Year 2000 compliance costs are nominal and have been expensed in the regular
course of business. The Partnership provides no assurance that third-party
suppliers and customers will be compliant. Nevertheless, the Partnership does
not beiieve that the Year 2000 issue will have a material adverse effect on
its financial condition or results of operations.
We are not enclosing a copy of the Partnership Form 10-Q as filed with the
Securities and Exchange Commission since all the information set forth
therein is contained either in this letter or in the attached financial
statements. However, if you wish to receive a copy of said report, please
send a written request to DSI Realty Income Fund VIII, P.O. Box 357, Long
Beach, California 90801.
Very truly yours,
DSI REALTY INCOME FUND VIII
By: DSI Properties, Inc., as
General Partner
By /s/ Robert J. Conway
____________________________
ROBERT J. CONWAY, President