<PAGE>
UNITED STATES
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 period ended September 30, 1995
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File Number 0-8667
------
PUBLIC STORAGE PROPERTIES, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3196921
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 N. Brand Boulevard
Glendale, California 91203
- - ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
---------------------
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
----- -----
<PAGE>
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 1995
and December 31, 1994 2
Condensed statements of operations for the three and nine
months ended September 30, 1995 and 1994 3
Condensed statement of partners' deficit for the
nine months ended September 30, 1995 4
Condensed statements of cash flows for the
nine months ended September 30, 1995 and 1994 5
Notes to condensed financial statements 6-7
Management's discussion and analysis of
financial condition and results of operations 8-9
PART II. OTHER INFORMATION 10-11
<PAGE>
PUBLIC STORAGE PROPERTIES , LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 81,000 $ 162,000
Marketable securities of affiliate
at market value (cost of $347,000) 743,000 574,000
Rent and other receivables 40,000 63,000
Real estate facilities at cost:
Building, land improvements and equipment 7,464,000 7,149,000
Land 2,511,000 2,511,000
----------- ------------
9,975,000 9,660,000
Less accumulated depreciation (4,548,000) (4,288,000)
----------- ------------
5,427,000 5,372,000
----------- ------------
Other assets 222,000 247,000
----------- ------------
Total assets $ 6,513,000 $ 6,418,000
----------- ------------
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Accounts payable $ 168,000 $ 30,000
Deferred revenue 115,000 136,000
Notes payable 17,217,000 17,995,000
Partners' deficit:
Limited partners' deficit, $500 per
unit, 20,000 units authorized, issued
and outstanding (8,452,000) (8,888,000)
General partners' deficit (2,931,000) (3,082,000)
Unrealized gain on marketable
securities 396,000 227,000
------------ ------------
Total partners' deficit (10,987,000) (11,743,000)
------------ ------------
Total liabilities and partners' deficit $ 6,513,000 $ 6,418,000
------------ ------------
</TABLE>
see accompanying notes.
2
<PAGE>
PUBLIC STORAGE PROPERTIES , LTD.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1995 1994 1995 1994
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $976,000 $ 913,000 $2,873,000 $2,691,000
Gain on sale of marketable
securities - 479,000 - 479,000
Dividends and other income
(including dividends from marketable
securities of affiliate) 8,000 27,000 26,000 80,000
-------- ---------- ---------- ----------
984,000 1,419,000 2,899,000 3,250,000
-------- ---------- ---------- ----------
COSTS AND EXPENSES:
Costs of operations 213,000 207,000 670,000 634,000
Management fees paid to an affiliate 58,000 55,000 172,000 162,000
Depreciation and amortization 92,000 73,000 260,000 221,000
Administrative 13,000 5,000 60,000 55,000
Interest expense 379,000 396,000 1,150,000 1,270,000
-------- ---------- ---------- ----------
755,000 736,000 2,312,000 2,342,000
-------- ---------- ---------- ----------
NET INCOME $229,000 $ 683,000 $ 587,000 $ 908,000
======== ========== ========== ==========
Limited partners' share of net income
($29.05 per unit in 1995 and
44.95 per unit in 1994) $ 581,000 $ 899,000
General partners' share of net income 6,000 9,000
---------- ----------
$ 587,000 $ 908,000
========== ==========
</TABLE>
see accompanying notes.
3
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED STATEMENT OF PARTNERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Gain on Total
Limited General Marketable Partners
Partners Partners Securities Deficit
------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $(8,888,000) $(3,082,000) $227,000 $(11,743,000)
Change in unrealized gain on
marketable Securities - - 169,000 169,000
Net income 581,000 6,000 - 587,000
Equity transfer (145,000) 145,000 - -
----------- ----------- -------- ------------
Balance at September 30, 1995 $(8,452,000) $(2,931,000) $396,000 $(10,987,000)
=========== =========== ======== ============
</TABLE>
see accompanying notes.
4
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PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1995 1994
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 587,000 $ 908,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 260,000 221,000
Gain on sale of marketable securities - (479,000)
Decrease (increase) in rent and other receivables 23,000 (10,000)
Decrease in prepaid loan fees 24,000 24,000
Decrease (increase) in other assets 1,000 (9,000)
Increase in accounts payable 138,000 22,000
Decrease in deferred revenue (21,000) (11,000)
---------- -----------
Total adjustments 425,000 (242,000)
---------- -----------
Net cash provided by operating activities 1,012,000 666,000
---------- -----------
Cash flows from investing activities:
Proceeds from the sale of marketable equity securities - 1,265,000
Additions to real estate facilities (315,000) (49,000)
---------- -----------
Net cash used in investing activities (315,000) 1,882,000
---------- -----------
Cash flows from financing activities:
Proceeds from note payable - (5,600,000)
Proceeds from note payable to affiliate - 3,000,000
Principal payment on note payable to affiliate - 1,250,000
Principal payments on note payable (778,000) (404,000)
---------- -----------
Net cash used in financing activities (778,000) (1,754,000)
---------- -----------
Net (decrease) increase in cash and cash equivalents (81,000) 128,000
Cash and cash equivalents at the beginning of the period 162,000 136,000
---------- -----------
Cash and cash equivalents at the end of the period $ 81,000 $ 264,000
========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Increase in fair value of marketable securities $ (169,000) $ -
========== ===========
Unrealized gain on marketable securities $ 169,000 $ -
========== ===========
</TABLE>
see accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures contained
herein are adequate to make the information presented not misleading. These
unaudited condensed financial statements should be read in conjunction with
the financial statements and related notes appearing in the Partnership's
Form 10-K for the year ended December 31, 1994.
2. In the opinion of management, the accompanying unaudited condensed financial
statements reflect all adjustments, consisting of only normal accruals,
necessary to present fairly the Partnership's financial position at
September 30, 1995, the results of its operations for the three and nine
months ended September 30, 1995 and 1994 and its cash flows for the nine
months then ended.
3. The results of operations for the three and nine months ended September 30,
1995 are not necessarily indicative of the results expected for the full
year.
4. Marketable securities at September 30, 1995 consist of 39,911 common shares
of Storage Equities, Inc. ("SEI"), a publicly traded real estate investment
trust, whose investment advisor is an affiliate of Public Storage, Inc. (a
general partner of the Partnership). FASB Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires marketable
securities to be classified as trading or available for sale. The
Partnership has designated its portfolio of marketable securities as
available for sale. Accordingly, at September 30, 1995, the Partnership has
recorded the marketable securities at fair value and, based upon the closing
quoted price of the securities at September 30, 1995, recorded a
corresponding unrealized gain totaling $396,000 as a credit to Partnership
equity.
6
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5. Substantially all of the Partnership's facilities were acquired prior to the
time that it was customary to conduct environmental investigations in
connection with property acquisitions. During the six month period ended
June 30, 1995, the Partnership completed environmental assessments on its
properties. Those assessments indicated that the Partnership's property
sites do not have any significant environmental issues which would have a
materially adverse effect on the Company's financial position. Included in
administrative expenses on the statements of operations for nine months
ended September 30, 1995 is approximately $24,000 incurred in connection
with the environmental assessments.
6. PSI, a general partner of the Partnership, and Public Storage Management,
Inc. ("PSMI"), the Partnership's mini-warehouse property manager, have
entered into an Agreement and Plan of Reorganization by and among PSI, PSMI
and SEI, dated as of June 30, 1995, pursuant to which PSMI would be merged
into SEI. Prior to the merger, substantially all of the United States real
estate interests of PSI, together with Public Storage Commercial Properties
Group, Inc. and Public Storage Advisers, Inc. (SEI's investment adviser),
will be combined with PSMI. Upon completion of the merger, which is
scheduled to occur in November 1995, SEI would replace PSI as a general
partner of the Partnership. After the merger, B. Wayne Hughes would continue
as a general partner of the Partnership. The merger is subject to a number
of conditions.
In November 1995, the Management Agreement with PSMI was amended to provide
that upon demand from PSMI or SEI made prior to December 15, 1995, the
Partnership agrees to prepay (within 15 days after such demand) up to 12
months of management fees (based on the management fees for the calendar
year immediately preceding such prepayment) discounted at the rate of 14%
per year to compensate for early payment.
7
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1994:
The Partnership's net income for the nine months ended September 30, 1995
was $587,000 compared to $908,000 for the nine months ended September 30, 1994,
representing a decrease of $321,000, or 35%. The Partnership's net income for
the three months ended September 30, 1995 was $229,000 compared to $683,000 for
the three months ended September 30, 1994, representing a decrease of $454,000,
or 66%. These decreases are primarily a result of a $479,000 gain on the sale of
marketable securities realized in the three months ended September 30, 1994. The
decreases in net income due to the gain have been offset by increases in
property operations combined with decreased interest expense due to lower
outstanding loan balances in 1995 compared to 1994.
Rental income was $2,873,000 compared to $2,691,000 for the nine months
ended September 30, 1995 and 1994, respectively, representing an increase of
$182,000. Rental income was $976,000 compared to $913,000 for the three months
ended September 30, 1995 and 1994, respectively, representing an increase of
$63,000. These increases are primarily attributable to increased occupancy
levels and increased rental rates. The weighted average occupancy levels at the
mini-warehouse facilities were 91% and 86% for the nine months ended September
30, 1995 and 1994, respectively. Realized rent for the nine months ended
September 30, 1995 increased to $.70 per occupied square foot from $.68 per
occupied square foot for the nine months ended September 30, 1994.
Cost of operations (including management fees paid to affiliate)
increased $9,000 and $46,000 for the three and nine month periods ended
September 30, 1995 and 1994 respectively. These increases are mainly
attributable to increases in payroll and management fees paid to an affiliate.
Administrative expenses increased $5,000 for the nine months ended
September 30, 1995 compared to the same period in 1994 primarily as the result
of cost incurred on environmental assessments on the Partnership's properties
offset by legal costs incurred in 1994. Substantially all of the Partnership's
facilities were acquired prior to the time that it was customary to conduct
extensive environmental investigations in connection with the property
acquisitions. During the first quarter of 1995, the Partnership commenced
8
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environmental assessments on its properties. The result of those assessments
have been completed. However, the Partnership is not presently aware of any
significant environmental matters with respect to any of its properties which
would have a materially adverse effect on the Company's financial position.
Administrative expenses increased $8,000 for the three months ended September
30, 1995 over the same period in 1994, due to a decrease in professional fees in
1994.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Cash generated from operations ($1,012,000 for the nine months ended
September 30, 1995) has been sufficient to meet all current obligations of
the Partnership.
At September 30, 1995 the Partnership held 39,911 shares of common stock
(marketable securities) with a fair value totaling $743,000 (cost basis of
$347,000 at September 30, 1995) in Storage Equities, Inc. ("SEI"), a publicly
traded real estate investment trust, whose investment advisor is an affiliate of
Public Storage, Inc. (a general partner of the Partnership). The Partnership
recognized $8,000 and $24,000 in dividends for the three and nine months ended
September 30, 1995 and included these amounts in other income on the condensed
Statements of Operations. As of September 30, 1995, SEI's stock price per share
has increased $9.93 over the Partnership's cost resulting in a $396,000 increase
in the aggregate value of these securities.
In the fourth quarter of 1990, quarterly distributions were discontinued
to enable the Partnership to increase its cash reserves for principal payments
that commenced in 1993. Future distribution rates may be adjusted to levels
supported by operating cash flow after capital improvements and scheduled debt
service.
9
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 4 are inapplicable.
ITEM 5. Other Information
-----------------
In September 1995, Public Storage, Inc. completed a cash tender offer for
9,000 of the 20,000 outstanding limited partnership units in the Partnership at
$171 per unit.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are included herein:
(10) Amendment to Management Agreement among Public
Storage Management, Inc., Storage Equities, Inc.
and the Partnership, dated as of November 13,
1995.
(27) Financial Data Schedule
(b) Form 8 - K
None.
10
<PAGE>
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.
DATED: November 13, 1995
PUBLIC STORAGE PROPERTIES, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner, Jr.
----------------------------
Ronald L. Havner, Jr.
Vice President and Chief
Financial Officer
(principal accounting and
financial officer)
11
<PAGE>
EXHIBIT 10
AMENDMENT TO MANAGEMENT AGREEMENTS
This Amendment to Management Agreements is executed as of November 13,
1995, by and among Public Storage Management, Inc. ("PSMI"), Storage Equities,
Inc. ("SEI") and each of the entities whose name appears on the signature pages
hereof under the designation "Owners" (collectively, the "Owners" and
individually, an "Owner").
A. At various dates between May 1976 and May 1978, PSMI and each of
the Owners entered into Management Agreements (collectively, the "Management
Agreements") providing for the management by PSMI of the mini-warehouses owned
by the Owners and monthly payments of management fees equal to 6% of the gross
revenues generated by Owners' mini-warehouses.
B. SEI and PSMI have entered into an Agreement and Plan of
Reorganization dated as of June 30, 1995 pursuant to which PSMI would be merged
with and into SEI. Upon completion of the merger, SEI will manage the mini-
warehouses owned by the Owners.
C. The general partners of the Owners believe that the Owners'
prepayment of management fees on the terms set forth in this Amendment is
financially beneficial to the Owners, and the parties hereto desire to modify
each of the Management Agreements to provide for such prepayment.
Now, therefore, the parties agree as follows:
1. The following shall be added as the last two sentences of the first
paragraph of Section 4 of each of the Management Agreements:
"Upon demand from SEI or PSMI made prior to December 15, 1995, each
of the Owners agrees to pay within 15 days after such demand in advance up
to 12 months of management fees discounted at the rate of 14% per year
(based on the management fees for the comparable period during the calendar
year immediately preceding such prepayment). The property manager shall be
deemed to have earned such prepayments at the time of payment thereof, and
Owners shall not be entitled to a return of such prepayment, or any portion
thereof, under any circumstances. In addition, the property manager shall
not be entitled to any further or additional payment of management fees for
a period with respect to which a prepayment is made hereunder because the
actual gross revenues for such period would have resulted in a higher
management fee had such prepayment not been made."
2. Other than as set forth in this Amendment, all of the provisions
contained in each of the Management Agreements are hereby ratified and approved.
1
<PAGE>
In witness whereof, the undersigned have executed this Amendment, as of
the day and year first above written.
"PSMI"
PUBLIC STORAGE MANAGEMENT, INC.
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
"SEI"
STORAGE EQUITIES, INC.
By: /s/ B. Wayne Hughes
-------------------
B. Wayne Hughes,
Chairman of the Board
"Owners"
PUBLIC STORAGE PARTNERS, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PARTNERS II, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
2
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PROPERTIES IV, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
PUBLIC STORAGE PROPERTIES V, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.,
Vice President
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 81,000
<SECURITIES> 743,000
<RECEIVABLES> 40,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 864,000
<PP&E> 9,975,000
<DEPRECIATION> (4,548,000)
<TOTAL-ASSETS> 6,513,000
<CURRENT-LIABILITIES> 283,000
<BONDS> 17,217,000
<COMMON> 0
0
0
<OTHER-SE> (10,987,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,513,000
<SALES> 0
<TOTAL-REVENUES> 2,899,000
<CGS> 0
<TOTAL-COSTS> 1,102,000
<OTHER-EXPENSES> 60,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,150,000
<INCOME-PRETAX> 587,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 587,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 587,000
<EPS-PRIMARY> 29.05
<EPS-DILUTED> 0
</TABLE>
