UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
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Commission File Number 0-8667
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PUBLIC STORAGE PROPERTIES, LTD.
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(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)
701 Western Avenue
Glendale, California 91201
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(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.
Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K 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 the form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
ITEM 1. BUSINESS.
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General
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Public Storage Properties, Ltd. (the "Partnership") is a publicly held
limited partnership formed under the California Uniform Limited Partnership Act
in November 1976. The Partnership raised $10,000,000 in gross proceeds by
selling 20,000 units of limited partnership interest ("Units") in an interstate
offering, which commenced in October, 1977 and was completed in January, 1978.
The Partnership was formed to engage in the business of developing and operating
storage space for personal and business use ("mini-warehouses").
In 1995, there were a series of mergers among Public Storage Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
(which was one of the Partnership's general partners)("old PSI") and their
affiliates (collectively, "PSMI"), culminating in the November 16, 1995 merger
(the "PSMI Merger") of PSMI into Storage Equities, Inc., a real estate
investment trust ("REIT") organized as a California corporation. In the PSMI
Merger, Storage Equities, Inc. was renamed Public Storage, Inc. ("PSI") and PSI
acquired substantially all of PSMI's United States real estate operations and
became a co-general partner of the Partnership and the operator of the
Partnership's mini-warehouse properties.
The Partnership's general partners are PSI and B. Wayne Hughes ("Hughes")
(collectively referred to as the "General Partners"). Hughes has been a general
partner of the Partnership since its inception. Hughes is chairman of the board
and chief executive officer of PSI, and Hughes and members of his family (the
"Hughes Family") is the major shareholder of PSI.
The Partnership is managed, and its investment decisions are made by Hughes
and the executive officers and directors of PSI. The limited partners of the
Partnership have no right to participate in the operation or conduct of its
business and affairs.
The Partnership's objectives are to (i) maximize the potential for
appreciation in value of the Partnership's properties and (ii) generate
sufficient cash flow from operations to pay all expenses, including the payment
of interest to Noteholders. All of the properties were financed in September
1987.
The term of the Partnership is until all properties have been sold and, in
any event, not later than December 31, 2035.
Investment in Facilities
- ------------------------
At December 31, 1996, the Partnership owned nine properties. The
Partnership purchased its last property in June 1978.
The Partnership believes that its operating results have benefited from
favorable industry trends and conditions. Notably, the level of new
mini-warehouse construction has decreased since 1988 while consumer demand has
increased. In addition, in recent years consolidation has occurred in the
fragmented mini-warehouse industry.
Mini-warehouses are designed to offer accessible storage space for personal
and business use at a relatively low cost. A user rents a fully enclosed space
which is for the user's exclusive use and to which only the user has access on
an unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
mini-warehouses also include rentable uncovered parking areas for vehicle
storage. Leases for mini-warehouse space may be on a long-term or short-term
basis, although typically spaces are rented on a month-to-month basis. Rental
rates vary according to the location of the property and the size of the storage
space.
Users of space in mini-warehouses include both individuals and large and
small businesses. Individuals usually employ this space for storage of, among
other things, furniture, household appliances, personal belongings, motor
vehicles, boats, campers, motorcycles and other household goods. Businesses
normally employ this space for storage of excess inventory, business records,
seasonal goods, equipment and fixtures.
2
<PAGE>
Mini-warehouses in which the Partnership has invested generally consist of
three to seven buildings containing an aggregate of between 350 to 750 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
The Partnership experiences minor seasonal fluctuations in the occupancy
levels of mini-warehouses with occupancies higher in the summer months than in
the winter months. The Partnership believes that these fluctuations result in
part from increased moving activity during the summer.
The Partnership's mini-warehouses are geographically diversified and are
generally located in heavily populated areas and close to concentrations of
apartment complexes, single family residences and commercial developments.
However, there may be circumstances in which it may be appropriate to own a
property in a less populated area, for example, in an area that is highly
visible from a major thoroughfare and close to, although not in, a heavily
populated area. Moreover, in certain population centers, land costs and zoning
restrictions may create a demand for space in nearby less populated areas.
As with most other types of real estate, the conversion of mini-warehouses
to alternative uses in connection with a sale or otherwise would generally
require substantial capital expenditures. However, the Partnership does not
intend to convert its mini-warehouses to other uses.
Operating Strategies
- --------------------
The Partnership's mini-warehouses are operated by PSI under the "Public
Storage" name, which the Partnership believes is the most recognized name in the
mini-warehouse industry. The major elements of the Partnership's operating
strategies are as follows:
* CAPITALIZE ON "PUBLIC STORAGE'S" NAME RECOGNITION. PSI, together with its
predecessor, has more than 20 years of operating experience in the
mini-warehouse business, and is the largest operator of mini-warehouses in
the United States. PSI believes that its marketing and advertising programs
improve its competitive position in the market. PSI's in-house Yellow Pages
staff designs and places advertisements in approximately 700 directories.
Commencing in early 1996, PSI began to experiment with a telephone
reservation system designed to provide added customer service. Customers
calling either PSI's toll-free telephone referral system, (800) 44-STORE,
or a mini-warehouse facility are directed to PSI's reservation system where
a trained representative discusses with the customer space requirements,
price and location preferences and also informs the customer of other
products and services provided by PSI. As of December 31, 1996, the
telephone reservation system was supporting rental activity at all of the
Partnership's properties. PSI's toll-free telephone referral system
services approximately 120,000 calls per month from potential customers
inquiring as to the nearest Public Storage mini-warehouse.
* MAINTAIN HIGH OCCUPANCY LEVELS AND INCREASE REALIZED RENTS. Subject to
market conditions, the Partnership generally seeks to achieve average
occupancy levels in excess of 90% and to eliminate promotions prior to
increasing rental rates. Average occupancy for the Partnership's
mini-warehouses has increased from 91% in 1995 to 92% in 1996. Realized
monthly rents per square foot increased from $0.70 in 1995 to $0.72 in
1996. The Partnership has increased rental rates in many markets where it
has achieved high occupancy levels and eliminated or minimized promotions.
* SYSTEMS AND CONTROLS. PSI has an organizational structure and a property
operation system, "CHAMP" (Computerized Help and Management Program), which
links its corporate office with each mini-warehouse. This enables PSI to
obtain daily information from each mini-warehouse and to achieve
efficiencies in operations and maintain control over its space inventory,
rental rates, promotional discounts and delinquencies. Expense management
is achieved through centralized payroll and accounts payable systems and a
comprehensive property tax appeals department, and PSI has an extensive
internal audit program designed to ensure proper handling of cash
collections.
* PROFESSIONAL PROPERTY OPERATION. In addition to the approximately 150
support personnel at the Public Storage corporate offices, there are
approximately 2,700 on-site personnel who manage the day-to-day operations
of the mini-warehouse in the Public Storage system. These on-site personnel
are supervised by approximately 110 district managers, 15 regional managers
and three divisional managers (with an average of 13 years' experience in
the mini-warehouse industry) who report to the president of the
mini-warehouse property operator (who has 12 years of experience with the
Public Storage organization). PSI carefully selects and extensively trains
the operational and support personnel and offers them a progressive career
path. See "Mini-warehouse Property Operator."
3
<PAGE>
Mini-warehouse Property Operator
- --------------------------------
The Partnership's mini-warehouses are managed by PSI (as
successor-in-interest to PSMI) under a Management Agreement. PSI has informed
the Partnership that it is the largest mini-warehouse facility operator in the
United States in terms of both number of facilities and rentable space operated.
Under the supervision of the Partnership, PSI coordinates the operation of
the facilities, establishes rental policies and rates, directs marketing
activity and the purchase of equipment and supplies, maintenance activity, and
the selection and engagement of all vendors, supplies and independent
contractors.
PSI engages, at the expense of the Partnership, employees for the operation
of the Partnership's facilities, including resident managers, assistant
managers, relief managers, and billing and maintenance personnel. Some or all of
these employees may be employed on a part-time basis and may also be employed by
other persons, partnerships, real estate investment trusts or other entities
owning facilities operated by PSI.
In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, PSI attempts to achieve economies by combining
the resources of the various facilities that they operate. Facilities operated
by PSI have historically carried comprehensive insurance, including fire,
earthquake, liability and extended coverage.
PSI has developed systems for space inventory, accounting and handling
delinquent accounts, including a computerized network linking PSI operated
facilities. Each project manager is furnished with detailed operating procedures
and typically receives facilities management training from PSI. Form letters
covering a variety of circumstances are also supplied to the project managers. A
record of actions taken by the project managers when delinquencies occur is
maintained.
The Partnership's facilities are typically advertised via signage, yellow
pages, flyers and broadcast media advertising (television and radio) in
geographic areas in which many of the Partnership's facilities are located.
Broadcast media and other advertising costs are charged to the Partnership's
facilities located in geographic areas affected by the advertising. From time to
time, PSI adopts promotional programs, such as temporary rent reductions, in
selected areas or for individual facilities.
For as long as the Management Agreement is in effect, PSI has granted the
Partnership a non-exclusive license to use two PSI service marks and related
designs, including the "Public Storage" name, in conjunction with rental and
operation of facilities managed pursuant to the Management Agreement. Upon
termination of the Management Agreement, the Partnership would no longer have
the right to use the service marks and related designs except as described
below. The General Partners believe that the loss of the right to use the
service marks and related designs could have a material adverse effect on the
Partnership's business.
The Management Agreement between the Partnership and PSI provides that the
Management Agreement may be terminated without cause upon 60 days' written
notice by either party.
Competition
- -----------
Competition in the market areas in which the Partnership operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Partnership's facilities. Competition may be
accelerated by any increase in availability of funds for investment in real
estate. Recent increases in plans for development of mini-warehouses is expected
to further intensify competition among mini-warehouse operators in certain
market areas. In addition to competition from mini-warehouses operated by PSI,
there are three other national firms and numerous regional and local operators.
The Partnership believes that the significant operating and financial experience
of PSI, and the "Public Storage" name, should enable the Partnership to continue
to compete effectively with other entities.
4
<PAGE>
Other Business Activities
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A corporation owned by the Hughes Family reinsures policies against losses
to goods stored by tenants in the Partnership's mini-warehouses. The Partnership
believes that the availability of insurance reduces the potential liability of
the Partnership to tenants for losses to their goods from theft or destruction.
This corporation receives the premiums and bears the risks associated with the
insurance.
A corporation, in which PSI has a 95% economic interest and the Hughes
Family has a 5% economic interest, sells locks, boxes and tape to tenants to be
used in securing their spaces and moving their goods. PSI believes that the
availability of locks, boxes and tape for sale promotes the rental of spaces.
Employees
- ---------
There are 9 persons who render services on behalf of the Partnership on a
full-time basis, and 21 persons who render services on a part-time basis. These
persons include resident managers, assistant managers, relief managers, area
managers, and administrative and maintenance personnel. Some employees may be
employed on a part-time basis and may be employed by other persons,
Partnerships, REITs or other entities owning facilities operated by PSI.
ITEM 2. PROPERTIES.
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The following table sets forth information as of December 31, 1996 about
properties owned by the Partnership:
<TABLE>
<CAPTION>
Net Number Date of Completion
Location Size of Parcel Rentable Area of Spaces Purchase Date
- ---------------- -------------- ---------------- ------------ -----------------
CALIFORNIA
- ----------
<S> <C> <C> <C> <C> <C>
Corona 2.82 acres 52,000 sq. ft. 471 June 29, 1978 Dec. 1978
Fremont 3.00 acres 53,000 sq. ft. 481 Mar. 21, 1978 Nov. 1978
Milpitas 3.46 acres 54,000 sq. ft 436 May 8, 1978 Nov. 1978
Norco 1.66 acres 29,000 sq. ft 257 July 19, 1978 Dec. 1978
North Hollywood 2.06 acres 38,000 sq. ft. 343 Mar. 17, 1978 Dec. 1979
Pasadena 1.84 acres 38,000 sq. ft. 385 Feb. 24, 1978 Aug. 1978
Sun Valley 2.72 acres 53,000 sq. ft. 477 May 30, 1978 Oct. 1978
Wilmington 6.32 acres 133,000 sq. ft. 1,093 Apr. 18, 1978 Aug. 1978
Whittier -
El Monte 4.06 acres 58,000 sq. ft. 537 Nov. 29, 1977 July 1978
</TABLE>
The weighted average occupancy levels for the mini-warehouse facilities
were 92% and 91% in 1996 and 1995, respectively.
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 fourth quarter of 1995, the
Partnership completed environmental assessments of its properties to evaluate
5
<PAGE>
the environmental condition of, and potential environmental liabilities of such
properties. These assessments were performed by an independent environmental
consulting firm. Based on the assessments, the Partnership expensed $22,000 in
1995 for known environmental remediation requirements.
The properties are held subject to encumbrances which are described in this
report under Note 7 of the Notes to the Financial Statements included in Item
14(a).
ITEM 3. LEGAL PROCEEDINGS.
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No material legal proceeding is pending against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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The Partnership has no common stock.
The Units are not listed on any national securities exchange or quoted on
the NASDAQ System, and there is no established public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic. The
General Partners monitor transfers of the Units (a) because the admission of the
transferee as a substitute limited partner requires the consent of the General
Partners under the Partnership's Amended and Restated Certificate and Agreement
of Limited Partnership, (b) in order to ensure compliance with safe harbor
provisions to avoid treatment as a "publicly traded partnership" for tax
purposes, and (c) because the General Partners (and their
predecessor-in-interest) have purchased Units. However, the General Partners do
not have information regarding the prices at which all secondary sale
transactions in the Units have been effectuated. Various organizations offer to
purchase and sell limited partnership interests (including securities of the
type such as the Units) in secondary sales transactions. Various publications
such as The Stanger Report summarize and report information (on a monthly,
bimonthly or less frequent basis) regarding secondary sales transactions in
certain limited partnership interests, including the prices at which such
secondary sales transactions are effectuated.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1996, there were approximately 963 record holders of Units.
Distributions to the general and limited partners of all cash available for
distribution (as defined) are made quarterly. Cash available for distribution is
generally funds from operations of the Partnership, without deductions for
depreciation, but after deducting funds to pay or establish reserves for all
other expenses (other than incentive distributions to the General Partners) and
capital improvements, plus net proceeds from any sale or financing of the
Partnership's properties. In the fourth quarter of 1990, quarterly distributions
were discontinued to enable the Partnership to increase its reserves for
principal repayments on the Partnership's note payable that commenced in 1992.
Reference is made to Item 6 and 7 hereof for information on the amount of
such distributions.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1996 1995 1994 1993 1992
------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues (3) $4,007,000 $4,235,000 $4,181,000 $3,672,000 $3,717,000
Depreciation and
amortization 402,000 356,000 296,000 304,000 299,000
Interest expense 1,358,000 1,520,000 1,658,000 2,171,000 2,232,000
Net income 1,008,000 1,125,000 1,075,000 101,000 99,000
Limited partners' share 998,000 1,114,000 1,064,000 100,000 98,000
General partners' share 10,000 11,000 11,000 1,000 1,000
Limited partners'
per unit data (1):
Net income 49.90 55.70 53.20 5.00 4.90
As of December 31,
---------------------
Cash and cash equivalents $69,000 $89,000 $162,000 $136,000 $617,000
Total assets $5,503,000 $5,845,000 $6,418,000 $7,117,000 $7,906,000
Notes payable (2) $15,217,000 $16,351,000 $17,995,000 $20,005,000 $20,850,000
</TABLE>
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(1) Per unit data is based on the weighted average number of the limited
partnership units (20,000) outstanding during the period.
(2) At December 31, 1993, notes payable included $4,350,000 due to an
affiliate, which was discharged in June, 1994.
(3) Revenues for the year ended December 31, 1995 and 1994, include a gain on
sale of marketable securities of an affiliate of $361,000 and $479,000
($18.05 and $23.95 per Unit).
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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Results of Operations
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:
The Partnership's net income in 1996 was $1,008,000 compared to $1,125,000
in 1995, representing a decrease of $117,000. This decrease is primarily due to
a gain on sale of marketable securities recognized in 1995 partially offset by
an increase in property net operating income and a decrease in interest
expense.
During 1996, property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense)
increased $84,000 from $2,329,000 in 1995 to $2,413,000 in 1996. This increase
is primarily attributable to an increase in rental revenues at the Partnership's
mini-warehouse facilities partially offset by increases in cost of operations
and depreciation expense.
Rental income was $4,002,000 in 1996 compared to $3,848,000 in 1995,
representing an increase of $154,000, or 4%. This increase was primarily
attributable to increased occupancies and rental rates at the Partnership's real
estate facilities. Weighted average occupancy levels at the mini-warehouses were
92% and 91% in 1996 and 1995, respectively. The average monthly realized rent
per square foot at the mini-warehouses was $.72 in 1996 compared to $.70 in
1995.
Other income decreased from $26,000 in 1995 to $5,000 in 1996 as a result
of a decrease in dividend income earned on marketable securities sold in
November 1995 and lower invested cash balances in 1996 compared to 1995.
Cost of operations (including management fees paid to an affiliate) was
$1,187,000 and $1,163,000 in 1996 and 1995, respectively, representing an
increase of $24,000, or 2%. This increase was primarily attributable to
increases in payroll cost.
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations (based on the management fees for the comparable
period during the calendar year immediately preceding the prepayment) discounted
at the rate of 14% per year to compensate for early payment. The Partnership has
expensed the prepaid management fees during 1996. The amount is included in
management fees paid to affiliate in the statements of income. As a result of
the prepayment, the Partnership saved approximately $20,000 in management fees,
based on the management fees that would have been payable on rental income
generated during 1996 compared to the amount prepaid.
Interest expense was $1,358,000 and $1,520,000 in 1996 and 1995,
respectively, representing a decrease of $162,000, or 11%. The decrease was
primarily a result of a reduction in the average outstanding debt balance in
1996 compared to 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income in 1995 was $1,125,000 compared to $1,075,000
in 1994, representing an increase of $50,000. This increase is primarily due to
an increase in property net operating income combined with a decrease in
interest expense offset by a decrease in other income and environmental cost
incurred in 1995.
During 1995, property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense)
increased $93,000 from $2,236,000 in 1994 to $2,329,000 in 1995. This increase
is primarily attributable to an increase in rental revenues at the Partnership's
mini-warehouse facilities partially offset by increases in cost of operations
and depreciation expense.
Rental income was $3,848,000 in 1995 compared to $3,611,000 in 1994,
representing an increase of $237,000, or 7%. This increase was primarily
attributable to increased occupancies and rental rates at the Partnership's real
estate facilities. Weighted average occupancy levels at the mini-warehouses were
91% and 87% in 1995 and 1994, respectively. The average monthly realized rent
per square foot at the mini-warehouses was $.70 in 1995 compared to $.68 in
1994.
In November 1995 the Partnership sold its 39,911 shares of PSI common stock
for $708,000 and realized a gain on the sale of $361,000.
8
<PAGE>
Other income decreased from $91,000 in 1994 to $26,000 in 1995 as a result
of a decrease in dividend income earned on its marketable securities sold in
November 1995 and lower invested cash balances in 1995 compared to 1994.
Cost of operations (including management fees paid to an affiliate) was
$1,163,000 and $1,079,000 in 1995 and 1994, respectively, representing an
increase of $84,000, or 8%. This increase was primarily attributable to
increases in payroll cost, and management fees paid to an affiliate as a result
of an increase in rental revenues.
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 fourth quarter of 1995, the
Partnership completed environmental assessments of its properties to evaluate
the environmental condition of, and potential environmental liabilities of such
properties. These assessments were performed by an independent environmental
consulting firm. Based on the assessments, the Partnership expensed $22,000 in
1995 for known environmental remediation requirements. Although there can be no
assurance, the Partnership is not aware of any environmental contamination of
any of its property sites which individually or in the aggregate would be
material to the Partnership's overall business, financial condition or results
of operations.
Interest expense was $1,520,000 and $1,658,000 in 1995 and 1994,
respectively, representing a decrease of $138,000, or 8%. The decrease was
primarily a result of a reduction in the average outstanding debt balance in
1995 compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow from operating activities ($1,472,000 in 1996) has been
sufficient to meet all current obligations of the Partnership. During 1997, the
Partnership anticipates approximately $289,000 of capital improvements compared
to $228,000 in 1996, $344,000 in 1995 and $150,000 in 1994.
In January 1996, the Partnership obtained an $1,500,000 loan from PSI to
repay and terminate an unsecured note payable to Wells Fargo Bank. The PSI loan
bears interest at the prime rate plus 1%, payable monthly, in addition to
monthly principal payments of $50,000.
In November 1995, the Management Agreement with PSMI was amended to provide
that upon demand from PSI or PSMI made prior to December 15, 1995, the
Partnership agreed to prepay (within 15 days after such demand) up to 12 months
of management fees (based on the management fees for the comparable period
during the calendar year immediately preceding such prepayment) discounted at
the rate of 14% per year to compensate for early payment. In December 1995, the
Partnership prepaid, to PSI, 8 months of 1996 management fees at a cost of
$138,000. The amount has been amortized as management fees paid to affiliate
during 1996.
9
<PAGE>
In the fourth quarter of 1990, quarterly distributions were discontinued to
enable the Partnership to increase its reserves for principal payments that
commenced in 1992.
The distributions in the aggregate to limited and general partners for each
of the prior years were as follows:
1978 427,000
1979 1,025,000
1980 1,098,000
1981 1,427,000
1982 1,592,000
1983 1,785,000
1984 2,076,000
1985 2,477,000
1986 2,828,000
1987 21,751,000
1988 421,000
1989 521,000
1990 404,000
1991 -
1992 -
1993 -
1994 -
1995 -
1996 -
During 1987, the Partnership financed all of its facilities with a
$20,885,000 loan. Proceeds of $20,202,000 were distributed to the partners in
September 1987 and are included in the 1987 distribution. At December 31, 1996,
the outstanding balance of the mortgage note was $14,317,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Financial Statements and Financial Statement
Schedules in Item 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
---------------------------------------------------------------
None.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
----------------------------------------------------
The Partnership has no directors or executive officers.
The Partnership's general partners are PSI and B. Wayne Hughes. PSI, acting
through its directors and executive officers and Mr. Hughes manage and make
investment decisions for the Partnership.
The names of all directors and executive officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the past
five years are as follows:
Name Positions with PSI
- ------------------------------ -------------------------------------------------
B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
John Reyes Senior Vice President and Chief Financial Officer
Hugh W. Horne Senior Vice President
Obren B. Gerich Senior Vice President
Marvin M. Lotz Senior Vice President
David Goldberg Senior Vice President and General Counsel
A. Timothy Scott Senior Vice President and Tax Counsel
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Uri P. Harkham Director
B. Wayne Hughes, age 63, a general partner of the Partnership, has been a
director of PSI since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Mr. Hughes was an officer and director
of affiliates of PSMI and a director of PSMI until November 1995. Mr. Hughes has
been Chairman of the Board and Chief Executive Officer since 1990 of Public
Storage Properties XI, Inc., Public Storage Properties XIV, Inc., Public Storage
Properties XV, Inc., Public Storage Properties XVI, Inc., Public Storage
Properties XVII, Inc., Public Storage Properties XVIII, Inc., Public Storage
Properties XIX, Inc. and Public Storage Properties XX, Inc. (collectively , the
"Public Storage REITs"), REITs that were organized by affiliates of PSMI. From
1989-90 until the respective dates of merger, he was Chairman of the Board and
Chief Executive Officer of Public Storage Properties VI, Inc., Public Storage
Properties VII, Inc., Public Storage Properties VIII, Inc., Public Storage
Properties IX, Inc., Public Storage Properties X, Inc., Public Storage
Properties XII Inc., PS Business Parks, Inc., Partners Preferred Yield, Inc.,
Partners Preferred Yield II, Inc., Partners Preferred Yield III, Inc., and
Storage Properties, Inc. ("SPI") (collectively, the "Merged Public Storage
REITs"), affiliated REITs that were merged into PSI between September 1994 and
December 1996. Mr. Hughes has been active in the real estate investment field
for over 25 years.
Harvey Lenkin, age 60, became President and a director of PSI in November
1991. Mr. Lenkin was an officer and director of PSMI and its affiliates until
November 1995. He has been President of the Public Storage REITs since 1990. He
was President of the Merged Public Storage REITs from 1989-90 until the
respective dates of merger and was also a director of SPI from 1989 until June
1996.
John Reyes, age 36, a certified public accountant, joined PSMI in 1990 and
was Controller of PSI from 1992 until December 1996 when he became Chief
Financial Officer. He became a Vice President of PSI in November 1995 and a
Senior Vice President of PSI in December 1996. From 1983 to 1990, Mr. Reyes was
employed by Ernst & Young.
Hugh W. Horne, age 52, has been a Vice President of PSI since 1980 and was
Secretary of PSI from 1980 until February 1992 and became Senior Vice President
of PSI in November 1995. He was an officer of PSMI from 1973 to November 1995.
Mr. Horne has been a Vice President of the Public Storage REITs since 1993. He
was a Vice President of SPI from 1989 until June 1996 and of the other Merged
Public Storage REITs from 1993 until the respective dates of merger. He is
responsible for managing all aspects of property acquisition for PSI.
11
<PAGE>
Obren B. Gerich, age 58, a certified public accountant and certified
financial planner, has been a Vice President of PSI since 1980 and became Senior
Vice President of PSI in November 1995. He was Chief Financial Officer of PSI
until November 1991. Mr. Gerich was an officer of PSMI from 1975 to November
1995. He has been Vice President and Secretary of the Public Storage REITs since
1990 and was Chief Financial Officer until November 1995. Mr. Gerich was Vice
President and Secretary of the Merged Public Storage REITs from 1989-90 until
the respective dates of merger.
Marvin M. Lotz, age 54, has had overall responsibility for Public Storage's
mini-warehouse operations since 1988. He became a Senior Vice President of PSI
in November 1995. Mr. Lotz was an officer of PSMI with responsibility for
property acquisitions from 1983 until 1988.
David Goldberg, age 47, joined PSMI's legal staff in June 1991, rendering
services on behalf of the PSI and PSMI. He became a Senior Vice President and
General Counsel of PSI in November 1995 and Vice President and General Counsel
of the Public Storage REITs in December 1995. From December 1982 until May 1991,
he was a partner in the law firm of Sachs & Phelps, then counsel to PSI and
PSMI.
A. Timothy Scott, age 45, became a Senior Vice President and Tax Counsel of
PSI and Vice President and Tax Counsel of the Public Storage REITs in November
1996. From June 1991 until joining PSI, Mr. Scott practiced tax law as a
shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to PSI
and PSMI. Prior to June 1991, his professional corporation was a partner in the
law firm of Sachs & Phelps, then counsel to PSI and PSMI.
Sarah Hass, age 41, became Secretary of PSI in February 1992. She became a
Vice President of PSI in November 1995. She joined PSMI's legal department in
June 1991, rendering services on behalf of PSI and PSMI. From 1987 until May
1991, her professional corporation was a partner in the law firm of Sachs &
Phelps, then counsel to PSI and PSMI, and from April 1986 until June 1987, she
was associated with that firm, practicing in the area of securities law. From
September 1979 until September 1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.
Robert J. Abernethy, age 57, is President of American Standard Development
Company and of Self-Storage Management Company, which develop and operate
mini-warehouses. Mr. Abernethy has been a director of PSI since its organization
in 1980. He is a member of the board of directors of Johns Hopkins University
and of the Los Angeles County Metropolitan Transportation Authority, and a
former member of the board of directors of the Metropolitan Water District of
Southern California.
Dann V. Angeloff, age 61, is President of the Angeloff Company, a corporate
financial advisory firm. The Angeloff Company has rendered, and is expected to
continue to render, financial advisory and securities brokerage services for
PSI. Mr. Angeloff is the general partner of a limited partnership that owns a
mini-warehouse operated by PSI and which secures a note owned by PSI. Mr.
Angeloff has been a director of PSI since its organization in 1980. He is a
director of Bonded Motors Inc., Compensation Resource Group, Datametrics
Corporation, Nicholas/Applegate Growth Equity Fund, Nicholas/Applegate
Investment Trust, Ready Pac Produce, Inc., Royce Medical Company and Seda
Specialty Packaging Corp. He was a director of SPI from 1989 until June 1996.
William C. Baker, age 63, became a director of PSI in November 1991. Since
April 1996, Mr. Baker has been Chairman of the Board of Santa Anita Realty
Enterprises, Inc., a REIT that owns the Santa Anita Racetrack and other real
estate assets. In August 1996, he became Chairman of the Board and Chief
Executive Officer of Santa Anita Operating Company, which operates the Santa
Anita Racetrack through its subsidiary the Los Angeles Turf Club, Incorporated.
From April 1993 through May 1995, Mr. Baker was President of Red Robin
International, Inc., an operator and franchiser of casual dining restaurants in
the United States and Canada. Since January 1992, he has been Chairman and Chief
Executive Officer of Carolina Restaurant Enterprises, Inc., a franchisee of Red
Robin International, Inc. From 1976 to 1988, he was a principal shareholder and
Chairman and Chief Executive Officer of Del Taco, Inc., an operator and
franchiser of fast food restaurants in California. Mr. Baker is a director of
Callaway Golf Company.
Uri P. Harkham, age 48, became a director of PSI in March 1993. Mr. Harkham
has been the President and Chief Executive Officer of the Jonathan Martin
Fashion Group, which specializes in designing, manufacturing and marketing
women's clothing, since its organization in 1976. Since 1978, Mr. Harkham has
been the Chairman of the Board of Harkham Properties, a real estate firm
specializing in buying and managing fashion warehouses in Los Angeles and
Australia.
Pursuant to Articles 16 and 22 of the Partnership's Certificate and
Agreement of Limited Partnership, a copy of which is included in the
12
<PAGE>
Partnership's prospectus included in the Partnership's Registration Statement
File No. 2-57750, each of the General Partners continues to serve until (i)
retirement, withdrawal, adjudication of bankruptcy, insolvency or dissolution,
or (ii) removal by a majority vote of the limited partners.
Each director of PSI serves until he resigns or is removed from office by
the shareholders of PSI, and may resign or be removed from office at any time
with or without cause. Each officer of PSI serves until he resigns or is removed
by the Board of Directors of PSI. Any such officer may resign or be removed from
office with or without cause.
There have been no events under any bankruptcy act, no criminal
proceedings, and no judgments or injunctions material to the evaluation of the
ability of any director or executive officer of PSI during the past five years.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The Partnership has no subsidiaries, directors or officers. See Item 13 for
a description of certain transactions between the Partnership and its General
Partners and their affiliates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
(a) At February 28, 1997, the following persons beneficially owned more
than 5% of the Units:
<TABLE>
<CAPTION>
Title Name and Address Percent
of Class of Beneficial Owner Beneficial Ownership of Class
- --------------------- ------------------------------- --------------------- ------------
<S> <C> <C> <C>
Units of Limited Public Storage, Inc. 7,658 Units (1) 38.3%
Partnership Interest 701 Western Ave.
Glendale, California 91201
Units of Limited B. Wayne Hughes 6,010 Units (2) 30.0%
Partnership Interest 701 Western Ave.
Glendale, California 91201
</TABLE>
(1) Includes (i) 1,658 Units owned by PSI as to which PSI has sole voting and
dispositive power and (ii) 6,000 Units which PSI has an option to acquire
(together with other securities) BWH Marina Corporation II (a corporation
wholly-owned by Hughes) and as to which PSI has sole voting power (pursuant
to an irrevocable proxy) and no dispositive power.
(2) Includes (i) 10 Units owned by BWH Marina Corporation II, a corporation
wholly-owned by Hughes, as to which Hughes has sole voting and dispositive
power and (ii) 6,000 Units owned by BWH Marina Corporation II as to which
Hughes has sole dispositive power and no voting power; PSI has an option to
acquire these Units and an irrevocable proxy to vote these Units (see
footnote 1 above).
(b) The Partnership has no officers and directors.
The General Partners (or their predecessor-in-interest) have contributed
$101,010 to the capital of the Partnership and as a result participates in the
distributions to the limited partners and in the Partnership's profits and
losses in the same proportion that the General Partners' capital contribution
bears to the total capital contribution. Information regarding ownership of
Units by PSI and Hughes, the General Partners, is set forth under section (a)
above. Dann V. Angeloff, a director of PSI, beneficially owns 41 Units (0.2% of
the Units). The directors and executive officers of PSI (including Hughes), as a
group (13 persons), own an aggregate of 6,051 Units, representing 30.3% of the
Units (including the 6,010 Units beneficially owned by Hughes as set forth
above).
(c) The Partnership knows of no contractual arrangements, the operation of
the terms of which may at a subsequent date result in a change in control of the
Partnership, except for articles 16, 17 and 21.1 of the Partnership's Amended
Certificate and Agreement of Limited Partnership (the "Partnership Agreement"),
a copy of which is included in the Partnership's prospectus included in the
Partnership's Registration Statement File No. 2-57750. Those articles provide,
in substance, that the limited partners shall have the right, by majority vote,
to remove a general partner and that a general partner may designate a successor
with the consent of the other general partner and a majority of the limited
partners.
13
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
The Partnership Agreement provides that the General Partners will be
entitled to cash incentive distributions in an amount equal to (i) 8% of
distributions of cash flow from operations until the distributions to all
partners from all sources equal their capital contributions; thereafter, 25% of
distributions of cash flow from operations, and (ii) 25% of distributions from
net proceeds from sale and financing of the Partnership's properties remaining
after distribution to all partners of any portion thereof required to cause
distributions to partners from all sources to equal their capital contributions.
During 1985, the partners received cumulative distributions equal to their
capital contributions. During 1996, there were no incentive distributions paid
by the Partnership.
The Partnership has a Management Agreement with PSI (as
successor-in-interest to PSMI). Under the Management Agreement, the Partnership
pays PSI a fee of 6% of the gross revenues of the mini-warehouse properties
operated for the Partnership. During 1996, the Partnership paid fees of $82,000
to PSI pursuant to the Management Agreement.
In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership agreed
to prepay (within 15 days after such demand) up to 12 months of management fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996 management fees at a cost of $138,000. The amount has been
amortized as management fees paid to affiliate during 1996.
PART IV
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) List of Documents filed as part of the Report.
1. Financial Statements. See Index to Financial Statements and
Financial Statement Schedule.
2. Financial Statement Schedules. See Index to Financial Statements
and Financial Statement Schedule.
3. Exhibits: See Exhibit Index contained below.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
last quarter of fiscal 1996.
(c) Exhibits: See Exhibit Index contained below.
14
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
EXHIBIT INDEX
(Item 14(c))
3.1 Amended Certificate and Agreement of Limited Partnership. Previously
filed with the Securities and Exchange Commission as Exhibit A to the
Partnership's Prospectus included in Registration Statement No.
2-57750 and incorporated herein by reference.
10.1 Second Amended and Restated Management Agreement dated November 16,
1995 between the Partnership and Public Storage, Inc. Previously filed
with the Securities and Exchange Commission as an exhibit to PS
Partners, Ltd.'s Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference.
10.2 Loan documents dated August 28, 1987 between the Partnership and The
Travelers Insurance Company. Previously filed with the Securities and
Exchange Commission as an exhibit to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference.
10.3 Modified loan documents dated September 1, 1993 between the
Partnership and The Travelers Insurance Company. Previously filed with
the Securities and Exchange Commission as an exhibit to the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
10.4 Loan documents dated June 30, 1994 between the Partnership and Wells
Fargo Bank. Previously filed with the Securities and Exchange
Commission as an exhibit to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein by
reference.
10.5 Loan documents dated January 26, 1996 between the Partnership and
Public Storage, Inc. Previously filed with the Securities and Exchange
Commission as an exhibit to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference.
10.6 Loan documents dated January 27, 1997 between the Partnership and
Public Storage, Inc. Filed herewith.
27 Financial Data Schedule. Filed herewith.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE PROPERTIES, LTD.
a California Limited Partnership
Dated: March 26, 1997 By: Public Storage, Inc., General Partner
By: /s/ B. Wayne Hughes
---------------------------------------
B. Wayne Hughes, Chairman of the Board
/s/ B. Wayne Hughes
---------------------------------------
B. Wayne Hughes, General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Partnership in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- -------------------------------- ---------------------------------------------------- ------------------
<S> <C> <C>
/s/ B. Wayne Hughes Chairman of the Board and March 26, 1997
- -------------------------------- Chief Executive Officer of Public Storage, Inc.
B. Wayne Hughes (principal executive officer)
/s/ Harvey Lenkin President and Director March 26, 1997
- -------------------------------- of Public Storage, Inc.
Harvey Lenkin
/s/ John Reyes Senior Vice President and Chief Financial March 26, 1997
- -------------------------------- Officer of Public Storage, Inc.
John Reyes (principal financial officer and principal
accounting officer)
/s/ Robert J. Abernethy Director of Public Storage, Inc. March 26, 1997
- --------------------------------
Robert J. Abernethy
Dann V. Angeloff Director of Public Storage, Inc. March 26, 1997
- --------------------------------
Dann V. Angeloff
/s/ William C. Baker Director of Public Storage, Inc. March 26, 1997
- ---------------------------------
William C. Baker
/s/ Uri P. Harkham Director of Public Storage, Inc. March 26, 1997
- ---------------------------------
Uri P. Harkham
</TABLE>
16
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
INDEX TO
FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
(Item 14 (a))
Page
References
----------
Report of Independent Auditors F-1
Financial Statements and Schedule:
Balance Sheets as of December 31, 1996 and 1995 F-2
For the years ended December 31, 1996, 1995 and 1994:
Statements of Income F-3
Statements of Partners' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-9
Schedule for the years ended December 31, 1996, 1995, and 1994:
III - Real Estate and Accumulated Depreciation F-10 - F11
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
<PAGE>
Report of Independent Auditors
The Partners
Public Storage Properties, Ltd.
We have audited the accompanying balance sheets of Public Storage Properties,
Ltd. as of December 31, 1996 and 1995, and the related statements of income,
partners' deficit and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the schedule listed in the index at
item 14(a). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and 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 audit 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
management, 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 Public Storage Properties, Ltd.
at December 31, 1996 and 1995, 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. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
March 24, 1997
Los Angeles, California
F-1
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE PROPERTIES, LTD.
BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
---------- ----------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 69,000 $ 89,000
Rent and other receivables 48,000 42,000
Real estate facilities:
Building, land improvements and equipment 7,721,000 7,493,000
Land 2,511,000 2,511,000
---------- ----------
10,232,000 10,004,000
Less accumulated depreciation (5,046,000) (4,644,000)
---------- ----------
5,186,000 5,360,000
---------- ----------
Other assets 200,000 354,000
---------- ----------
Total assets $5,503,000 $5,845,000
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Accounts payable $ 5,000 $ 77,000
Deferred revenue 118,000 132,000
Due to affiliate - 130,000
Notes payable 15,217,000 16,351,000
Partners' deficit:
Limited partners' deficit, $500 per unit, 20,000 units
authorized, issued and outstanding (7,304,000) (8,052,000)
General partners' deficit (2,533,000) (2,793,000)
---------- ----------
Total partners' deficit (9,837,000) (10,845,000)
---------- ----------
Total liabilities and partners' deficit $5,503,000 $5,845,000
========== ==========
</TABLE>
See Accompanying Notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF INCOME
For each of the three years in the
period ended December 31, 1996
1996 1995 1994
---------- ---------- ----------
REVENUES:
<S> <C> <C> <C>
Rental income $4,002,000 $3,848,000 $3,611,000
Gain on sale of marketable securities of affiliate - 361,000 479,000
Other income 5,000 26,000 91,000
---------- ---------- ----------
4,007,000 4,235,000 4,181,000
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of operations 967,000 932,000 862,000
Management fees paid to affiliate 220,000 231,000 217,000
Depreciation 402,000 356,000 296,000
Administrative 52,000 49,000 73,000
Environmental cost - 22,000 -
Interest expense 1,358,000 1,520,000 1,658,000
---------- ---------- ----------
2,999,000 3,110,000 3,106,000
---------- ---------- ----------
NET INCOME $1,008,000 $1,125,000 $1,075,000
---------- ---------- ----------
Limited partners' share of net income ($49.90 per
unit in 1996, $55.70 per unit in 1995, and
$53.20 per unit in 1994) $ 998,000 $ 1,114,000 $ 1,064,000
General partners' share of net income 10,000 11,000 11,000
---------- ---------- ----------
$1,008,000 $1,125,000 $1,075,000
========== ========== ==========
</TABLE>
See Accompanying Notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For each of the three years in the
period ended December 31, 1996
Unrealized Gain
Limited General on Marketable Total Partners'
Partners Partners Securities Deficit
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ (9,686,000) $ (3,359,000) $ - $(13,045,000)
Unrealized gain on marketable securities - - 227,000 227,000
Net income 1,064,000 11,000 - 1,075,000
Equity transfer (266,000) 266,000 - -
------------- -------------- ------------- --------------
Balance at December 31, 1994 (8,888,000) (3,082,000) 227,000 (11,743,000)
Sale of marketable securities - - (227,000) (227,000)
Net income 1,114,000 11,000 - 1,125,000
Equity transfer (278,000) 278,000 - -
------------- -------------- ------------- --------------
Balance at December 31, 1995 (8,052,000) (2,793,000) - (10,845,000)
Net income 998,000 10,000 - 1,008,000
Equity transfer (250,000) 250,000 - -
------------- -------------- ------------- --------------
Balance at December 31, 1996 $(7,304,000) $(2,533,000) $ - $ (9,837,000)
============= ============== ============== ==============
</TABLE>
See Accompanying Notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS
For each of the three years in the
period ended December 31, 1996
1996 1995 1994
---------- ---------- ----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $1,008,000 $1,125,000 $1,075,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 402,000 356,000 296,000
Gain on sale of marketable securities - (361,000) (479,000)
(Increase) decrease in rent and other receivables (6,000) 21,000 (6,000)
Amortization (payment) of prepaid management fees 138,000 (138,000) -
Amortization of prepaid loan fees 33,000 33,000 33,000
Increase in other assets (17,000) (2,000) (7,000)
(Decrease) increase in accounts payable (72,000) 47,000 1,000
(Decrease) increase in deferred revenue (14,000) (4,000) 8,000
---------- ---------- ----------
Total adjustments 464,000 (48,000) (154,000)
---------- ---------- ----------
Net cash provided by operating activities 1,472,000 1,077,000 921,000
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of marketable securities - 708,000 1,265,000
Additions to real estate facilities (228,000) (344,000) (150,000)
---------- ---------- ----------
Net cash (used in) provided by investing activities (228,000) 364,000 1,115,000
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from note payable to bank - - 3,000,000
Principal (payments) proceeds on note payable to affiliate (130,000) 130,000 1,250,000
Principal payments on note payable (1,134,000) (1,644,000) (6,260,000)
---------- ---------- ----------
Net cash used in financing activities (1,264,000) (1,514,000) (2,010,000)
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (20,000) (73,000) 26,000
Cash and cash equivalents at the beginning of the year 89,000 162,000 136,000
---------- ---------- ----------
Cash and cash equivalents at the end of the year $ 69,000 $ 89,000 $ 162,000
========== ========== ==========
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities of affiliate $ - $ - $ (227,000)
---------- ---------- ----------
Unrealized gain on marketable securities of affiliate $ - $ - $ 227,000
---------- ---------- ----------
</TABLE>
See Accompanying Notes.
F-5
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. DESCRIPTION OF PARTNERSHIP
Public Storage Properties, Ltd. (the "Partnership") was formed
with the proceeds of a public offering. The general partners in the
Partnership are Public Storage, Inc., formerly known as Storage
Equities, Inc. and B. Wayne Hughes ("Hughes"). In 1995, there were a
series of mergers among Public Storage Management, Inc. (which was the
Partnership's mini-warehouse property operator), Public Storage, Inc.
(which was one of the Partnership's general partners) and their
affiliates (collectively, "PSMI"), culminating in the November 16,
1995 merger of PSMI into Storage Equities, Inc., a real estate
investment trust listed on the New York Stock Exchange. In the PSMI
merger, Storage Equities, Inc.'s name was changed to Public Storage,
Inc. ("PSI") and PSI became a co-general partner of the Partnership
and the operator of the Partnership's mini-warehouse properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
Basis of Presentation:
----------------------
Certain prior year amounts have been reclassified to conform with
1996 presentation.
Mini-Warehouse Facilities:
--------------------------
Cost of land includes appraisal fees and legal fees related to
acquisition and closing costs. Buildings, land improvements and
equipment reflect costs incurred through December 31, 1996 and 1995 to
develop mini-warehouse facilities which provide self-service storage
spaces for lease, usually on a month-to-month basis, to the general
public. The buildings and equipment are depreciated on a straight-line
basis over estimated useful lives of 25 and 5 years, respectively.
In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("Statement 121"). Statement 121 requires impairment
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Partnership
adopted Statement 121 in 1996 and the adoption had no effect on the
Partnership's financial statements.
Allocation of Net Income:
-------------------------
The general partners' share of net income consists of amounts
attributable to their 1% capital contribution and an additional
percentage of cash flow (as defined) which relates to the general
partners' share of cash distributions as set forth in the Partnership
Agreement (Note 4). All remaining net income is allocated to the
limited partners.
Per unit data is based on the weighted average number of the
limited partnership units (20,000) outstanding during the period.
Cash and Cash Equivalents:
--------------------------
For financial statement purposes, the Partnership considers all
highly liquid investments purchased with a maturity of three months or
less to be cash equivalents.
F-6
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
(CONTINUED)
Gain on Sale of Marketable Securities:
--------------------------------------
The Partnership held marketable Securities in PSI. In September
1994, the Partnership sold 85,000 of the shares of common stock of PSI
and recognized a gain totaling $479,000 on the sale. In November 1995,
the Partnership sold all its remaining 39,911 shares of PSI common
stock, and recognized a gain totaling $361,000 on the sale. The
Partnership recognized $26,000 and $87,000 in dividends in 1995 and
1994, respectively.
Other Assets:
-------------
Included in other assets are deferred financing costs. In 1993,
the Partnership incurred deferred financing costs of approximately
$246,000 in connection with the modification of its mortgage note
payable (Note 7). In addition, amortization of, deferred financing
costs totaled approximately $33,000, $33,000 and $33,000 relating to
the pre-modified mortgage loan during 1996, 1995 and 1994,
respectively, and is included in interest expense.
Use of Estimates:
-----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
Environmental Cost:
-------------------
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 1995,
the Partnership completed environmental assessments of its properties
to evaluate the environmental condition of, and potential
environmental liabilities of such properties. These assessments were
performed by an independent environmental consulting firm. Based on
the assessments, the Partnership expensed $22,000 in 1995 for known
environmental remediation requirements. Although there can be no
assurance, the Partnership is not aware of any environmental
contamination of any of its property sites which individually or in
the aggregate would be material to the Partnership's overall business,
financial condition or results of operations.
3. CASH DISTRIBUTIONS
The Partnership Agreement requires that cash available for
distribution (cash flow from all sources less cash necessary for any
obligations or capital improvement needs) be distributed at least
quarterly. Cash distributions have been suspended since the fourth
quarter of 1990 for debt service payments.
4. PARTNERS' EQUITY
The general partners have a 1% interest in the Partnership. In
addition, the general partners have an 8% interest in cash
distributions attributable to operations (exclusive of distributions
attributable to sale and financing proceeds until the limited partners
recover all of their initial investment). Thereafter, the general
partners have a 25% interest in all cash distributions (including sale
and financing proceeds). In 1985, the limited partners recovered all
of their initial investment. All subsequent cash distributions are
being made 25.75% (including the 1% interest) to the general partners
and 74.25% to the limited partners. Transfers of equity are made
periodically to conform the partners' equity accounts to the
provisions of the Partnership Agreement. These transfers have no
effect on the results of operations or distributions to partners.
F-7
<PAGE>
4. PARTNERS' EQUITY (CONTINUED)
Concurrent with the financing of the Partnership's properties in
1987 (Note 7), the Partnership made a special distribution totaling
$20,202,000 to the partners. This special distribution had no effect
on the Partnership's taxable income, however, resulted in a deficit in
the limited and general partners' equity accounts.
5. RELATED PARTY TRANSACTIONS
The Partnership has a Management Agreement with PSI (as
successor-in-interest to PSMI). Under the terms of the agreement, PSI
operates the mini-warehouse facilities for a fee equal to 6% of the
facilities' monthly gross revenue (as defined).
In November 1995, the Management Agreement was amended to provide
that upon demand from PSI or PSMI made prior to December 15, 1995, the
Partnership agreed to prepay (within 15 days after such demand) up to
12 months of management fees (based on the management fees for the
comparable period during the calendar year immediately preceding such
prepayment) discounted at the rate of 14% per year to compensate for
early payment. In December 1995, the Partnership prepaid, to PSI, 8
months of 1996 management fees at a cost of $138,000. The amount is
included in other assets in the Balance Sheet at December 31, 1995.
The amount has been amortized as management fees paid to affiliate
during 1996.
See footnote 7, on related party note payable.
6. TAXES BASED ON INCOME
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's financial statements do
not reflect a provision for such taxes.
Taxable net income was $1,122,000, $1,209,000 and $1,114,000 for
the years ended December 31, 1996, 1995 and 1994, respectively. The
difference between taxable net income and net income is primarily
related to depreciation expense resulting from difference in
depreciation methods.
7. NOTES PAYABLE
Notes payable at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
8.25% mortgage note payable to an
insurance company with principal and
interest of $141,000 due monthly; remaining
principal due September, 2001. $14,317,000 $14,801,000
Unsecured note payable to affiliate, bearing
interest at the prime rate plus 1%,
payable monthly, and requiring
50,000 principal payments; remaining
principal due July 1, 1998.
900,000 1,550,000
------------- ------------
$15,217,000 $16,351,000
============== ============
</TABLE>
F-8
<PAGE>
7. NOTES PAYABLE (CONTINUED)
During 1987, the Partnership financed all of its properties with
a $20,885,000, nonrecourse note secured by the Partnership's
properties which was scheduled to mature in 1994. In September 1993,
the Partnership and the lender modified the terms of the note whereby
(i) the Partnership was required to make a $5,000,000 principal
repayment, (ii) the interest rate was reduced from 10.25% to 8.25% per
annum, and (iii) the maturity date was extended from September 1, 1994
to September 1, 2001.
The unsecured note at December 31, 1995 was payable to Wells
Fargo Bank. In January 1996 the Partnership obtained a $1,510,000 loan
from PSI to repay and terminate the unsecured note payable to Wells
Fargo Bank. The PSI loan bears interest at the prime rate plus 1%,
payable monthly, in addition to monthly principal payments of $50,000.
The Partnership believes that it is not practical to estimate the
fair value of its long-term fixed rate debt at December 31, 1996,
because there is no public market for such debt and although interest
rates at December 31, 1996 are lower than when such debt was incurred,
the Partnership does not believe it could obtain financing currently
on such favorable terms. This is in part due to the reduced sources of
real estate financing resulting from a variety of factors, including
the present condition of financial institutions.
The principal repayment schedule of the above notes payable as of
December 31, 1996, is as follows:
1997 $ 1,124,000
1998 869,000
1999 618,000
2000 671,000
2001 11,935,000
-----------
$15,217,000
===========
Interest paid on the notes was $1,325,000, $1,488,000 and
$1,626,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-9
<PAGE>
<TABLE>
<CAPTION>
Public Storage Properties, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
Initial Cost
----------------------- Costs Subsequent
Building, to construction
Land Imp & construction
Description Encumbrances Land Equipment (Improvements)
- ----------------------- --------------- ----------- ------------- ----------------
<S> <C> <C> <C>
Corona - $155,000 $757,000 $134,000
Fremont - 112,000 741,000 206,000
Milpitas - 198,000 649,000 122,000
Norco - 95,000 456,000 58,000
North Hollywood - 314,000 553,000 75,000
Pasadena - 327,000 515,000 156,000
Sun Valley - 329,000 611,000 219,000
Wilmington - 815,000 1,336,000 294,000
Whittier - El Monte - 166,000 763,000 76,000
--------------- ----------- ------------- ----------------
$14,317,000(1) $2,511,000 $6,381,000 $1,340,000
================ =========== ============= ================
</TABLE>
<TABLE>
<CAPTION>
Public Storage Properties, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
Gross Carrying Amount
at December 31, 1996
-----------------------------------
Building,
Land Imp & Accumulated Date
Description Land Equipment Total Depreciation Completed
- ----------------------------- --------- ----------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Corona $155,000 $891,000 $1,046,000 $570,000 12/78
Fremont 112,000 947,000 1,059,000 633,000 11/78
Milpitas 198,000 771,000 969,000 488,000 11/78
Norco 95,000 514,000 609,000 346,000 12/78
North Hollywood 314,000 628,000 942,000 397,000 12/79
Pasadena 327,000 671,000 998,000 427,000 08/78
Sun Valley 329,000 830,000 1,159,000 530,000 10/78
Wilmington 815,000 1,630,000 2,445,000 1,062,000 08/78
Whittier - El Monte 166,000 839,000 1,005,000 593,000 07/78
--------- ----------- ------------ ------------- ---------
$2,511,000 $7,721,000 $10,232,000 $5,046,000
========== =========== ============ =============
</TABLE>
(1) All nine properties are encumbered by a promissory note. The $14,317,000
listed above is the principal balance remaining on the note at December 31,
1996.
F-10
<PAGE>
<TABLE>
<CAPTION>
Public Storage Properties, Ltd.
Real Estate Reconciliation
Schedule III (continued)
(a) The following is a reconciliation of costs and related accumulated
depreciation:
COST
----------- ---------- -----------
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Balance at the beginning of the period $10,004,000 $9,660,000 $9,510,000
Additions during the period
Improvements 228,000 344,000 150,000
Deductions during the period - - -
----------- ---------- -----------
Balance at the close of the period $10,232,000 $10,004,000 $9,660,000
=========== =========== ===========
ACCUMULATED DEPRECIATION RECONCILIATION
1996 1995 1994
----------- ---------- -----------
Balance at the beginning of the period $4,644,000 $4,288,000 $3,992,000
Additions during the period
Depreciation 402,000 356,000 296,000
Deductions during the period - - -
----------- ---------- -----------
Balance at the close of the period $5,046,000 $4,644,000 $4,288,000
=========== =========== ===========
</TABLE>
F-11
$849,909.03 Glendale, California
January 27, 1997
FOR VALUE RECEIVED, the undersigned PUBLIC STORAGE PROPERTIES, LTD.
("Borrower") promises to pay to the order of PUBLIC STORAGE, INC. ("Lender") at
its offices at 701 Western Avenue, Glendale, California 91201 or at such other
place as the holder hereof may designate, in lawful money of the United States
of America and in immediately available funds, the principal sum of $849,909.03
with interest thereon at a rate per annum (computed on the basis of a 360-day
year, actual days elapsed) 1.0% above the Prime Rate in effect from time to
time. The "Prime Rate" is a base rate that Wells Fargo Bank, National
Association ("Bank"), from time to time establishes and which serves as the
basis upon which effective rates of interest are calculated for those loans by
Bank matching reference thereto. Each change in the rate of interest hereunder
shall become effective on the date each Prime Rate change is announced within
Bank.
Interest accrued on this Note shall be payable on the 1st day of each
month, commencing February 1, 1997 and on January 27, 1998. Principal shall be
payable on the 1st day of each month in installments of $50,000.00 each,
commencing February 1, 1997 and continuing up to and including January 1, 1998,
with a final installment consisting of all remaining unpaid principal due and
payable in full on January 27, 1998. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All prepayments of principal on this Note shall be
applied on the most remote principal installment or installments then unpaid.
From and after the maturity date of this Note, or such earlier date as all
principal owing hereunder becomes due and payable by acceleration or otherwise,
the outstanding principal balance of this Note shall bear interest until paid in
full at an increased rate per annum (computed on the basis of a 360-day year,
actual days elapsed) equal to 4% above the rate of interest from time to time
applicable to this Note.
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
1. The failure to pay any principal or interest, or other amount, when due
hereunder or under any contract, instrument or document executed in connection
with this Note.
2. The filing of a petition by or against any Borrower, or any general
partner in Borrower (with each such general partner referred to herein as a
"Third Party Obligor") under any provisions of the Bankruptcy Reform Act Title
11 of the United States Code, as amended or recodified from time to time, or
under any similar or other law relating to bankruptcy, insolvency,
reorganization or other relief for debtors: the appointment of a receiver,
trustee, custodian or liquidator of or for any part of the assets or property of
Borrower or any Third Party Obligor; Borrower or any Third Party Obligor becomes
insolvent, makes a general assignment for the benefit of creditors or is
generally not paying its debts as they become due; or any attachment or like
levy on any property of Borrower or any Third Party Obligor.
3. The dissolution or liquidation of Borrower or any Third Party Obligor
which is a corporation.
4. Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which Borrower has incurred any obligation for borrowed
money, any purchase obligation, or any other liability of any kind to any person
or entity, including the holder.
5. Any sale or transfer of all of a substantial or material part of the
assets of Borrower.
6. Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust or other document executed in connection with
or securing this Note.
<PAGE>
Soon the occurrence of any Event of Default, the holder of this Note, at
the holder's option, may declare the sums of principal and interest outstanding
hereunder to be immediately due and payable. Borrower shall pay to Lender the
amount of any expenses, including legal fees, incurred as a result of an Event
of Default and any such amount not paid upon demand by Lender, shall be added
to, and thereafter bear interest as herein provided as part of, principal.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
PUBLIC STORAGE PROPERTIES, LTD.
By: Public Storage, Inc.
General Partner
By: /s/ John Reyes
-------------------------
John Reyes
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000202953
<NAME> PUBLIC STORAGE PROPERTIES, LTD.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 69,000
<SECURITIES> 0
<RECEIVABLES> 48,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 317,000
<PP&E> 10,232,000
<DEPRECIATION> (5,046,000)
<TOTAL-ASSETS> 5,503,000
<CURRENT-LIABILITIES> 123,000
<BONDS> 15,217,000
0
0
<COMMON> 0
<OTHER-SE> (9,837,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,503,000
<SALES> 0
<TOTAL-REVENUES> 4,007,000
<CGS> 0
<TOTAL-COSTS> 1,187,000
<OTHER-EXPENSES> 454,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,358,000
<INCOME-PRETAX> 1,008,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,008,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008,000
<EPS-PRIMARY> 49.90
<EPS-DILUTED> 49.90
</TABLE>
